Mr. HARRY D. WHITE. One billion six hundred million dollars is Mr. SMITH. The figures of outstanding are, I think, $1,560,000,000. Mr. SMITH. The claim has been made that devaluation and the Secretary MORGENTHAU. The objective of the stabilization fund has Mr. SMITH. I wish to insert in the record some figures I myself The CHAIRMAN. The gentleman wishes to submit some figures that Mr. SMITH. Yes. The CHAIRMAN. Is there objection. (After a pause.) The chair Mr. SMITH. They are as follows and show clearly the fallacy that WHOLESALE INDEX-ALL COMMODITIES March 1933, 60.2; January 1934, 72.2. A gain of 12 points or 20 percent in January 1934, 72.2 (at begining of devaluation); April 1937, 88.0 (highest April 1937, 88.0; December 1938, 77.0. A loss of 11.0 points or 12 percent in United States Department of Labor, Bureau of Labor Statistics, Washington. INDEX NUMBERS, WHOLESALE PRICES ALL FARM PRODUCTS March 1933, 42.8; January 1934, 58.7. A gain of 15.9 points, or 37 percent January 1934, 58.7 (beginning of devaluation); March 1937, 94.1 (highest March 1937, 94.1; January 1939, 67.2. A loss of 26.90 points, or 28 percent January 1934, 58.7; January 1939, 67.2. A net gain of 8.5 points, or 14 United States Department of Labor, Bureau of Labor Statistics, Washington. GRAINS-WHOLESALE INDEX March 1933, 36.0; January 1934, 63.7. 27.7 points gain. or 77-percent gain January 1934 63.7; April 1937, 119.2 (highest point). 55.5 points gain, or 85 January 1934, 63.7; December 1938, 54.4. A net loss of 9.3 points through Compare other 5-year period through 1922 depression: No devaluation-gain of 83 percent from low of 1922 to 1925. United States Department of Labor, Bureau of Labor Statistics, Washington. Did devaluation stabilize prices or raise prices? Comparison of index of prices—Agricultural implements and farm products INDEX NUMBER OF PRODUCTION Mr. SMITH. Did devaluation of the dollar stabilize production? October 1933, 78. Enforced devaluation by gold buying policy. January 1934, 77; May 1934, 89, November 1935, 98, November 1936, 115; May 1938, 77. One point below October 1933 when enforced devaluation began. COMPARISON April 1921, 64; April 1923, 107. No devaluation. eral Reserve System.) (Board of Governors of the Fed- Mr. SHEPPARD. I withdraw my objection to the admission of the The CHAIRMAN. In the absence of objection, they will be included Mr. SMITH. They are as follows: SILVER-PURCHASING PROGRAM [Released for morning newspapers of October 17] Following is a paraphrase of a message from Dr. H. H. Kung, Chinese Min- "China's representative signed the London silver agreement of July 1933, and "Under the Silver Purchase Act of 1934 it would now appear that the interests Following is the reply of the American consul general at Shanghai, September "The United States Government welcomes the opportunity to state its policy "The Policy of the United States in the Purchase of Silver will be guided by reasonable and most advantageous to the public interest. By such an increase in the monetary use of silver, the Government of the United States believes that it is furthering the purposes of the Resolution unanimously adopted on Thursday, July 20, 1933, at the meeting of Sub-Commission II (Permanent Measures) of the Monetary and Financial Commission of the Monetary and Economic Conference. "In such Resolution, it was recommended to all the Governments parties to the Conference that they should substitute silver coins for low-valued paper currency insofar as the budgetary and local conditions of each country would permit. While the Government of the United States will probably issue a relatively small amount of silver coins from the silyer purchased, it is in effect putting silver to the same monetary use by pledging it to secure silver certificates issued in an amount not less than the cost of the silver. "The Government of the United States appreciates that the greatest care must be exercised in carrying out the policy declared in the Silver Purchase Act of 1934. It recognizes the unfortunate effects on its own currency and that of other nations which an excessively high price of silver would have.. This was recognized also in the Resolution referred to in the provision that 'Governments may take any action relative to their silver coinage that they may deem necessary to prevent the flight or destruction of their silver coinage by reason of a rise in the bullion price of the silver content of their coin above the nominal or parity value of such silver coin.' "In making purchases under the authority contained in the Silver Purchase Act of 1934, the United States is desirous of avoiding any action which would hamper the action which any other government might take relative to its silver coinage to prevent the flight or destruction thereof. Should the Government of China at any time find it necessary, in order to protect its coinage, to adopt a policy of discouraging the export of silver, this Government will be glad to receive the views of the Chinese Government of the manner in which the purchasing program may be carried forward in coordination with such policy of the Chinese Government." Following is the text of a note from the Chinese Minister, Mr. Sao-Ke Alfred Sze, dated September 24, 1934, to the Secretary of State, Mr. Cordell Hull, transmitting a message from Dr. H. H. Kung, Minister of Finance at Nanking,. dated September 23, 1934: Hon. CORDELL HULL, Secretary of State. CHINESE LEGATION, Washington, September 24, 1934. MY DEAR MR. SECRETARY: I beg to enclose herewith the following cable mes-sage from Dr. H. H. Kung, Minister of Finance at Nanking, which I am requested to deliver to you: "China, as a leading silver standard country, considers silver has much more vital concern to it than any other country, and in view of the American silver purchase act presents to the American Government the following views supplementing previous informal communications. Since 1931 the rising of silver value in terms of foreign currency has involved severe deflation and economic losses to China and has disclocated China's balance of payments in part at least by hampering exports. Recently the stimulation of silver prices abroad to which exchange has not fully responded, has caused serious drain of silver creating great alarm. Silver exports of this year to date are over three times greater than any previous full year. Further material silver price increase would cause very serious injury to China, possibly severe panics. Although influential American circles advocate higher silver prices the Chinese Government of course makes no assumption concerning the American policy in this regard. "China is certain that the American Government desires to avoid any action that may aggravate present conditions and therefore would appreciate an assurance that the American Government would refrain from any action that might cause a continuation of the present silver drain from China and accordingly would cooperate to prevent further rise and to maintain the stability of silver which the London agreement contemplates. Indeed from China's viewpoint the stabilization level should be somewhat lower than the present price. "The National Government feels obliged actively to seek means of avoiding further hardships of silver fluctuations. It considers that China should not alone maintain the silver standard and is considering the gradual introduction of a gold basis currency which will necessitate he acquiring of gold. Since the American Government desires an increased proportion of silver in its monetary reserve the National Government desires also to ascertain in principle whether the American Government is willing to exchange with the Chinese Government gold for silver." I am [etc.] SAO-KE ALFRED SZE. Following is the text of a note from the Chinese Minister, Mr. Sao-Ke Alfred Sze, to the Secretary of State, Mr. Cordell Hull: Hon. CORDELL HULL, Secretary of State. CHINESE LEGATION, Washington, October 2, 1934. MY DEAR MR. SECRETARY: I beg to inform you that I have received a cablegram from Dr. H. H. Kung, Minister of Finance at Nanking, with the request that it be communicated to you. It reads as follows: "The message of September 22 received today through the American Consulate is understood to have been delayed by mutilations which necessitate several repetitions. Please at once reply that China is gratified that the American Government recognizes the unfortunate effects excessive price of silver would have and would appreciate the earliest practicable reply to our telegram of September 23 in order to assist China in deciding on a policy to meet a potentially serious monetary situation resulting from the present rise in price and drain of silver. American cooperation to prevent further rise in the price of silver and to maintain stability as contemplated in the London Agreement is particularly vital to China. In this connection it may be pointed out that the rise of silver discourages the export of commodities and thereby impairs China's purchasing power for imports. Also a reply is desired to our inquiry regarding the exchange of silver for gold. With respect to discouraging the export of silver from China it may be explained that this condition results largely from artificial stimulation of the price of silver abroad and that restrictive measures would create difficulty here which the Government has striven to avoid particularly because restrictions would probably create severe breaks in exchange detrimental to trade and, it is feared, would aggravate the present difficulty in the local financial market. Could not the American Government for the present restrict its purchases to silver already in America to avoid further promoting the drain from China?" I am [etc.] SAO-KE ALFRED SZE. Following is the text of the reply of the Secretary of State to the above note from the Chinese Minister: October 12, 1984. SIR: I wish to acknowledge the cablegram from Dr. H. H. Kung, Minister of Finance at Nanking, transmitted by you to the Department on October 2, 1934, and request that you be kind enough to transmit the following reply: I regret the delay in the delivery of my message of September 22, I have endeavored in conversation with the Chinese Minister at Washington to state fully the attitude of this Government in regard to the preoccupations and suggestions put forward by the Chinese Government in your two messages, in connection with the execution of the American program of silver purchases. In my discussion with the Minister, I have tried to indicate the purposes animating this Government in its silver purchasing program. This program is embodied in an act of Congress which is mandatory, as to its general objective upon the Executive. The ways and means to be used for carrying out this objective are left within the discretion of the Executive but of course must be consistent with the achievement of that objective. This Government is desirous of so carrying out the program as to produce the general benefit that would result from the enhancement and stabilization of the price of silver, and to avoid so far as may be possible disturbances to the economy and public finances of China. Therefore in conducting operations under the Silver Purchase Act this Government while necessarily keeping within the general purposes of enactment, will give the closest possible attention to the possibilities of so arranging the time, the place, and the quantity of its purchases as will keep in view the considerations put forward by the Chinese Government in its communication. Free markets in which gold or silver could be acquired by purchasers are now open to all nations, and therefore direct intergovernmental transactions have not been undertaken. The availability of such markets in the future is open |