Memorandum of Conversation, by the Under Secretary of State (Welles)

Participants: Dr. A. Loudon, Netherlands Ambassador;
Mr. van den Broek, Netherlands Finance Minister;
Mr. Welles, Under Secretary.

The Ambassador of the Netherlands called this morning at his request in order to present to me the Netherlands Minister of Finance whom I had known before when he was Purchasing Agent for the Netherlands Government.

The Minister of Finance made a brief statement to me which is accurately set forth in the memorandum attached herewith which he gave me. The Minister said that he was not questioning the wisdom or unwisdom of the policy which his Government had previously followed, namely, of paying cash for all of their requirements, but the moment had now come when they could not continue the policy in question. He said that in all probability the small amount of revenue which they had been able to derive from the sale of bauxite from Dutch Guiana to the United States would soon be cut off in view of the decision of this Government to utilize the Arkansas sources in order to save tonnage. From now on, consequently, Dutch Guiana would be a drain on their resources rather than an asset. He added that of course individual Netherlands subjects had resources in this country which had been frozen which might be taken over by the Netherlands Government, but in any event compensation would have to be made by the Netherlands Government should such step be taken and the burden upon the Government would be the same.

I told the Minister that the question involved of course was one of major policy which the President himself had to pass upon. I told him consequently that as soon as I could have some indication of the President’s desires in the matter or of the desires of the Secretary [Page 447]of the Treasury1 acting for the President, I would inform the Ambassador and suggest to him the authorities of this Government with whom the Minister of Finance should speak.

The Minister of Finance said that both his own Government and the Belgian Government favored the so-called White currency stabilization plan2 although they had a few suggestions to make which he himself would offer to Secretary Morgenthau next week when the latter returned to Washington. He emphasized however his conviction that such a plan, however technically perfect it might be, could not be of any real service unless a practical working international organization were created after the war in which all powers would take part.

S[umner] W[elles]

Memorandum by the Netherlands Finance Minister (Van den Broeh) to the Under Secretary of State (Welles)

Financially the Kingdom of the Netherlands is in a difficult position. Whereas we still have our fighting forces, may they be small, in the field, we have no resources to meet their expenses.

Unfortunately, since our country is occupied, we are no more in a position to collect by taxation the necessary funds to meet the expenditure. Even if only our currency were accepted, then our position would be more similar to some other of the United Nations, like the United States of America, or Great Britain, where public debts are increasing.

However, this is not the case, which means that since the fall of Java we have had to finance our forces exclusively out of the foreign exchange and gold still in our possession. To make our position quite clear, I am giving the following general figures: The total yearly expenditure of our Government at the moment amounts to approximately $100,000,000, of which over 85 percent is used up by our navy, army and air forces.

We are very near to the exhaustion of our foreign exchange reserves, and it will be necessary for us, if we want to keep our forces in the field, to come to some arrangement regarding further financing. So far, with the exception of very few goods acquired under lend-lease, we have paid cash for all our outlays, with the result that our free reserves at the moment amount to only about $50,000,000 in gold and a small amount of sterling. We still collect from time to time sterling [Page 448]from insurance on ships sunk by the enemy and we are using even those funds, although the Government has to pay back in due time those funds to the original owners.

We therefore want to discuss possible means by which we can acquire the necessary funds to keep our fighting forces active, before we have completely exhausted our available cash.

  1. Henry Morgenthau, Jr.
  2. For correspondence on this subject, see vol. i, pp. 1054 ff., passim.