851.5151/1052: Telegram

The Ambassador in France (Bullitt) to the Secretary of State

970. For the Secretary of the Treasury from Cochran. In two conversations by telephone last night you mentioned the probable issuance by you of a statement on gold and the possibility of simultaneous declarations by the French and British. In accordance with your instructions I am now at 9:30 going to the Ministry of Finance to sound out Auriol as to whether France may care to make a statement. I shall telephone you around noon if I have an answer by that time.

[You] asked my opinion [on the] matter of declarations. I told you that I hoped [you would] follow as generous a policy as possible. With the breakdown of the gold bloc practically no nation outside of Belgium is really eligible to receive gold from us under the existing rules. Unless we desire to freeze a good part of the world’s supply or move further towards cornering it we must revise our rules about yielding gold. This is necessary if the three-power monetary arrangement is to work. In thus implementing this arrangement we have at the same time an occasion for a grand gesture which will not cost us much. I respectfully recommend that the only declaration necessary at this moment is one on your part and that this should merely be an amendment to your statement of January 31, 1934, to the effect that hereafter until further notice you will “sell gold for immediate export to, or earmark for the account of, foreign monetary authorities”. The remainder of the statement of January 31 needs no alteration. By “monetary authorities” I include central banks, the B. I. S.,40 stabilization and equalization funds, monetary commissions, et cetera.

There is no scarcity of gold. We have far more than our share. At London in 193341 even the United States subscribed to the principle that gold should be used in settling international balances. Although we do not let gold circulate internally it is surely to our advantage to help in its circulation internationally. The more use that can be gotten out of it for this purpose the greater the benefits that will accrue to us.

Why should we restrict the use of gold in settling balances between our own and other countries? We go to great effort to get trade treaties and then we contradict this policy by making it difficult for our customers to keep balances in our markets. We force our customers [Page 563] to operate over London where they are willing to risk fluctuating currency because they know that they can get gold for it if they desire. Every extra banking operation costs and diminishes interest in and capacity for trade with us.

If we are seriously striving for international monetary stability we should facilitate such countries as Yugoslavia and Austria in getting gold to build up their resources. We do not want dinars or crowns so why should we seek gold reciprocity from those countries? We prefer that our trade be carried in dollars and we have at this moment an opportunity to make the dollar really an international currency.

I have always doubted the efficacy of our gold as a weapon to force the British to stabilize. Even if it may have constituted some potential threat toward this end in the past we have now obtained from the British as binding a pledge toward stability as we can ever hope to have before they decide of their own free will to return definitely to a fixed gold parity so this threat is no longer valid. We still have access to the London free gold market without any demand upon us for reciprocity. France yesterday bought two and a half tons of gold from Belgium without any formality other than to indicate to the National Bank of Belgium the day’s price that the Bank of France was ready to pay therefor.

With the greatest respect and loyalty I venture therefore the opinion that the proposed Treasury statement as contained in the Department’s 367 September 23 midnight is narrow and shortsighted. Our part in the triangular monetary arrangement has reacted to our credit. I feel that a statement from us now involving a “24 hour” policy, a day to day certificate of eligibility and demanding reciprocity from England which already has a free gold market, from the gold bloc, which yielded gold to us until exhausted, and from Italy and the vast number of other nations whose gold resources have almost disappeared would go far toward disappointing a hopeful world and incidentally toward diminishing the esteem which our monetary policy is beginning to command. [Cochran.]

  1. Telegram in three sections.
  2. Bank for International Settlements, Basel, Switzerland.
  3. i. e., at the Monetary and Economic Conference, held at London, June 12–July 27, 1933; for correspondence, see Foreign Relations, 1933, vol. i, pp. 452 ff.