800.0146/43
The Secretary of State to the Secretary of the Treasury (Morgenthau)
Dear Mr. Secretary: By your letter of July 20, 19421 you have raised the question of provision for a currency that United Nations armed forces would need within a few days or weeks after invasion of any enemy occupied territory; and also the problem of provision for a sound monetary, banking and fiscal order in any such areas, which the occupation authorities would have to administer behind the advancing armies. You enclosed an able memorandum on the subject,1 which has been carefully considered.
I shall, of course, be glad to sit down with you, or anyone you designate, as well as with a representative of the War Department, to discuss a recommendation to the President in respect of these very important problems. I have designated Assistant Secretary Adolf A. Berle, Dr. Herbert Feis,2 and Dr. Leo Pasvolsky,3 of this Department, who will be available at your convenience.
It may be useful for me to put before you certain tentative lines of thought which have developed in our own talk on the subject and which I submit for your consideration.
- (1)
- An agreement between ourselves and the British to assure either joint or completely coordinated action in this field would appear to be essential. In any re-occupied territory it must be contemplated that there may be both British and American troops. The pay of these troops, and any cash outlays that may be made by the several occupying forces would at once become a large element in the currency circulation of the region. It would seem clearly desirable to avoid all possibility either of divergent policy or of conflicting policy, and clearly desirable that there should either be a coordinated policy agreed upon in advance or a joint policy.
- The agreed-on arrangement could obviously take one of various forms and I assume this is one of the first matters to be discussed between the three Departments.
- (2)
- It seems to me that despite certain possible advantages it would be on the whole undesirable to issue special dollar or pound sterling occupation currencies for such regions as distinguished from regular dollar and pound sterling currencies. This view rests on various considerations which I presume you will want to review carefully in discussion. Among them I may cite the opinion that any special currency of this character would be less acceptable to the fighting forces and less likely to win over local populations than would a regular currency.
- (3)
- I am in agreement that it would be essential, as soon as practicable after the occupation of any region, to provide that region with a satisfactory currency of its own in substitution for the local currency in circulation at the moment of occupation. The best ways and means of achieving this I recognize also will require much further consideration. The suggestions and alternatives contained in the Treasury memorandum seem to be a helpful starting point for such discussions. I assume that payment to the troops would continue to be in dollars and pounds, with option of or ample opportunity for exchange into these new local currencies.
- (4)
- The second broad question raised, namely, that of providing a sound banking and monetary system for such regions, can probably be more satisfactorily settled after conclusions have been reached on the foregoing matters. They would, also, very considerably depend on circumstances. If, for example, the United Nations were to occupy an entire country, and thereby fully control its banking and central banking system and its currency mechanisms, the problem would be different than that which would exist if only a segment of a country were occupied. Further, as the Treasury memorandum indicates, the situation would differ as between the reoccupation of countries friendly to the United Nations and invasion and occupation of Axis homelands. I shall wait to hear when you wish these discussions to be carried forward further.
Sincerely yours,