811.515 Silver/30

Memorandum by the Secretary of State

The Chinese Minister called at my request and, after thanking him, I referred to the latest message received from the Chinese Minister of [Page 444] Finance, under date of September 24, in which some inquiry was made as to an exchange of a given amount of silver from China for a given amount of gold from the United States. I then stated that it was not exactly a normal procedure for governments to take up the question of specific exchanges of given amounts of money, such as an exchange of gold and silver; that there were three [free?] world markets where gold could be purchased in the usual and normal way,—at London and at other points,—and that this would be the natural and desirable manner for China to acquire gold if she desired to do so; that nations ordinarily exchanged goods and services and only utilized money for the settlement of unfavorable balances; and that it might disrupt the normal flow of international finance and commerce to a more or less extent should China and the United States depart from the usual commercial and trade policies and methods in connection with the suggested exchange of gold and silver. I then, in effect, stated (my entire conversation with the Chinese Minister was oral) two paragraphs from the President’s message to Congress of May 22, 1934, which paragraphs are as follows:

“We can proceed with this program of increasing our store of silver for use as a part of the metallic reserves for our paper currency without seriously disturbing adjustments in world trade. However, because of the great world supply of silver and its use in varying forms by the world’s population, concerted action by all nations, or at least a large group of nations, is necessary if a permanent measure of value, including both gold and silver, is eventually to be made a world standard. To arrive at that point, we must seek every possibility for world agreement, although it may turn out that this Nation will ultimately have to take such independent action on this phase of the matter as its interests require.

“The success of the London Conference in consummating an international agreement on silver, which has now been ratified by all the governments concerned, makes such further agreement worth seeking. The ebb and flow of values in almost all parts of the world have created many points of pressure for readjustments of internal and international standards. At no time since the efforts of this Nation to secure international agreement on silver began in 1878 have conditions been more favorable for making progress along this line.”

I thereupon told the Minister that my Government would be disposed to talk in a purely informal way with representatives of the Chinese Government in regard to the use of both silver and gold, preferably on a coordinated basis, as a standard of monetary value, such a proposed agreement being considered an important step toward a monetary unit of value more equitable and stable in its purchasing and debt paying power. I added that similar casual and wholly informal talks had been participated in with such countries as Canada and Mexico. The Chinese Minister made no definite comment on what I said to him.

[Page 445]

Dr. Sze said that he must propound a question to me, although he had an idea in advance as to what my reply would be. His question was whether the United States Government contemplates any change of policy with reference to the non-recognition of Manchukuo. I replied that all I cared to state at the time was that I had nothing further to say; that there was nothing new to be said on this subject so far as I knew.

The Minister then returned to our original subject of silver and inquired if my Government would not be willing to agree to restrict its purchases for a time at least to silver within the United States. I replied that the Executive Department of the Government has a mandate from Congress in the form of certain well known legislation under which it is performing the duty of making certain purchases of silver and that it really would be a violation to limit these purchases to our own country. I added that I thought not more than five hundred thousand ounces of silver thus far had been purchased direct from China.

I concluded with a statement, to the effect that naturally my Government in making such purchases was specially concerned to avoid to every feasible extent any undue interference with the stability of silver prices or with monetary conditions elsewhere; and that the spirit in which the United States Government would continue to proceed in this regard was well set forth in the message of this Government to the Chinese Government in reply to the latter’s message dated August 20th.

The Minister at the end of the conversation handed me what he said was a translation of a cable from Dr. Kung, received on October 1, 1934, a copy of which is hereto attached.27 As it is heretofore indicated in this statement, I made oral reply to the extent called for to the questions contained in this translated message.

C[ordell] H[ull]
  1. See infra.