893.515/850
Memorandum by the Under Secretary of State (Phillips)
Secretary Morgenthau telephoned me this morning from his farm in New York State and told me more in detail the substance of his conversation with the Chinese Ambassador on Saturday evening.42a
He said that the Ambassador spent two or three hours with him and, at the end, the Ambassador wrote out in his own hand a memorandum of the conversation, which Morgenthau agreed to. The following is the substance of it:
- 1.
- The United States proposes to buy on shipboard 100,000,000 ounces of silver and, if the arrangement is satisfactory, to consider further purchases.
- 2.
- All the proceeds of these sales are exclusively for the stabilization of Chinese currency.
- 3.
- The Chinese propose to set up a stabilization committee of three experts; under a gentleman’s agreement, it was understood that one member of this committee would be from the Chase Bank and the second member from the National City Bank.
- 4.
- The funds secured from the sale of silver were to be kept on deposit in New York with agents of the Central Bank of China and it was understood that this would be in an American bank.
- 5.
- It was understood that, if this proposal is mutually agreed
to, the yuan will be redeemable at the election of the Chinese
Government in any of the following ways:
[Page 633]
- a)
- A fixed number of yuan to the American dollar, this ratio to be fixed at the outset by the Chinese Government;
- b)
- A fixed weight of gold at $35 per ounce—a fixed weight of silver at $1.29 per ounce.
Mr. Morgenthau said that he had this morning received an answer from the Chinese Ambassador and that the only thing the Chinese Government agreed to do was to keep the money in New York; the Ambassador had explained that his Government was forced, by circumstances, to proceed without waiting for a complete understanding with the United States; Mr. Morgenthau expressed the opinion that the Chinese have “gone off half cocked”; that already they have a very bad press; that they were playing us for “suckers” in the belief that they could get our money with which to put their plans through.
The Ambassador had also sounded out Mr. Morgenthau on a straight loan and Mr. Morgenthau said he discouraged him.
Mr. Morgenthau added that the Chinese have not agreed to anything and that, apparently, they have no “ammunition” with which to put their plans through.
In conclusion Mr. Morgenthau informed me that the Ambassador had requested an interview with him in New York this afternoon but that he (Morgenthau) had replied that he would be happy to see him instead in Washington at the Treasury Department tomorrow, Wednesday, morning at 10 o’clock.
- November 2.↩