The Secretary of State to President Roosevelt

Dear Mr. President: Referring further to demand of Panama Government for payment of the Canal annuity of $250,000 by the United States Government “in gold coin of the United States”, the Panama Minister here presented this demand to Mr. Edwin Wilson, head of the Latin American division here in the Department.

It occurred to me that it would emphasize the matter much less to let Wilson rather casually send for the Minister and make reply to him, in substance as set out in the attached manuscript, by doing so orally and making no written record.

I wish you would read this over and offer any comment or suggestions, and return as soon as convenient.35

Cordell Hull

I have given full consideration to the request of the Panama Government that the United States Government pay its Canal annuity of $250,000 “in gold coin of the United States”. The suggestion that the United States Government as the result of an official conversation more than four months ago should make this February payment in gold, has received my careful consideration. It will be recalled that at the time of the official conversations referred to, a considerable list of complaints by the Government of Panama was receiving both sympathetic and favorable consideration and action. I think the full nature and extent of the complaints by Panama were understood by the United States Government, were reduced to a memorandum36 or other instrument of writing, and their solution in a way favorable to the desires of the Panama Government to the fullest extent deemed at all consistent by the United States has been and is being gradually brought about.

Evidently any oral references to future canal annuity payments in gold were not deemed of a sufficiently binding or contractual nature as to be reduced to writing. The conversation apparently went no further than the expression of a hope or a disposition which did not and could not foresee the completely revolutionary financial and monetary changes which soon took place.

The devaluation by the United States of the gold content of the dollar, for example, operates in a large sense to reduce by 40 per cent [Page 617] external debts due and payable in the United States. The gold standard in most parts of the world has broken down; currencies everywhere have been dislocated; currency devaluations have taken place in most important countries. Nations generally recognize now that the use of gold as a currency should be permanently abandoned and the gold standard, for the present at least, abandoned both for internal and external purposes, in most parts of the world.

Financial and monetary conditions, therefore, are entirely different today, compared with what they were some months ago. For example, when the British Government went off gold, great losses resulted abroad, such as the virtual wiping out of the capital of the Netherlands Bank and that of the Bank of France, to say nothing of losses to English creditors throughout the world. American creditors are experiencing similar effects.

There is still another phase which would seem to be conclusive against the suggestion of the Government of Panama, which is the terms of payment in the United States to the fiscal agent of Panama and by him in turn to the chief holders of the Panama bonds who reside in the United States. From the location and the expressed terms of the payment and disposition of the entire canal annuity of $250,000 under the most definite and irrevocable instructions of the Panama Government, it is difficult to conclude that the Panama Government would very seriously suggest that a gold bonus be handed over to it to be by that Government added to the 40 per cent reduction it has already potentially received on its indebtedness payable in this country by reason of the devaluation of the gold content of the dollar. If, in the light of the foregoing, you have any suggestions to make, I should be glad to meet with you at any time and talk them over.

  1. A photostatic copy of the original of this document bears the notation: “C. H. Yes, grand idea. FDR.”
  2. Foreign Relations, 1933, vol. v, p. 863.