Dear Leffingwell:
Had aI a small regiment of stenographers with me and an ample supply of time I could write you volumes of interest about things over here and many amusing stories and I had already prepared an unsatisfactory cable which I am not sending, partly because I have reason to believe that even cables in code are scrutinized and partly because no cable could be much better than misleading.
This will be a most disjointed statement of my impressions at the moment, with a distinct warning that they are liable to change as I travel about and pick up information and gather new impressions here and there.
I did cable you through the Embassy at London about the debt, because I found such a very strong feeling of uneasiness, and with some justification, that I felt you should know my impressions. The English bankers and business men want to know where they stand financially with America and whether they will be expected to add to their present difficulties in exchange by being obliged to take out large amounts of dollar credits for interest in addition to taking care of maturities of loans other than governmental, and, over it all, with no certainty but what we might impose severe terms of payment of the principal which would imperil their position. Most of the really levelheaded able men that I met, like Cokayne and Norman in the Bank of England, Sir Charles Addis and the Chancelor, Mr. Austin Chamberlain, do not expect forgiveness of the debt. Kindersley, who is a director of the Bank, is the only man who positively stated that America would vastly gain in prestige by forgiving the debt of the Allies, and he admitted that the sentiment sprang from his heart and that while it would be sentimentally a good thing for America and add to our prestige, it would be a bad thing for England and the Continent. Norman frankly said, “Pay no attention to Kindersley; his heart rules his head”. The Chancelor, with whom I spent an hour and a half at his invitation, never mentioned the subject until I was about to leave and then confined himself to the statement that he thought that suggestions on the subject of the debt should originate with the creditor. In general it is fair to say that Englishmen whom you and I would likely meet in our daily talks feel that England, both rich and poor, should work, economize and pay their debts, but English business men say that the government is making it hard for them by clumsy treatment of the labor situation and particularly by unemployment wages, which promote idleness. Almost without exception they say that England will stagger out of her difficulties if they escape serious labor troubles, and the Chancelor frankly said that he thought the time was shortly coming when they would have to have a real test of strength with strikers who were striking for unreasonable demands. He referred, I believe, to the effort being made by the “Triple Alliance”
Englishmen are all concerned about American competition and the air is filled with rumors of American bankers opening credits and American manufacturers making contracts abroad in markets which England considers her own. There is much discussion as to whether England should incur further foreign debt in order to extend credit in turn to purchasers of England's manufactured products in foreign countries.
There is also among business men a thorough distrust of the government in its proposed war policies, which they say are extravagant and visionary and largely subservient to the laboring classes. Naturally a letter like this contains reports of disagreeable things. My own impression from it all is that England, while having considerable labor troubles ahead and a tremendous curtailment at the moment of her export trade, will nevertheless in the long run make the best showing of any of these European countries, possibly barring Belgium. I do not believe they will need much in the way of credit from us, with the possible exception of some special treatment of cotton and a fairly generous treatment of their debt to us. They have immense troubles ahead of them, the housing problem alone being most perplexing as they claim to have had a shortgegeage of adequate workmen's dwellings of at least 300,000 before the war started, which has been increased to 525,000 in the last five years, but on the whole I do not worry about England.
The Continent, however, is a different story and it is quite impossible to begin to give you even such impressions as I have formed in the four or five days I have been in Paris, talking principally with our own people but to some extent with Englishmen and a few Frenchmen. Undoubtedly the latent impression in England, which is only expressed by one's closest friends, is here very strong although people voice it rather gracefully: that the United States made vast fortunes out of the war and very small sacrifices of men or treasure compared to Europe, and that now in Europe's hour of real need the United States gives evidence of an intention to abandon Europe to its fate.
This feeling is so strong that even the general exodus from the special organization here when the President returned created a very bad impression. With our great wealth of resources still hardly touched, they look at us with envy and I think that many Frenchmen, as doubtless do others on the Continent, believe that we should forgive their debts.
I have some ideas in my mind of a way to deal with this situation, but am not yet ready to express them, certainly not in writing, which always has a look of finality of opinion.We have discussed the European situation geographically so frequently that I think I shall follow the course of our former discussions. The real key to the political situation, I am sure is just what we agreed, namely, the new countries created between the Baltic and the Black Sea. I gather in talking with Englishmen, with Mr. HooverHerbert C. Hoover, Mr. Stettinius and, in fact, a good many capable people, that the difficulties there are much more lmore largely political, governmental and social rather than economic. Mr. Balfour said at the luncheon yesterday that he was not sure whether there were 22 or 23 wars in progress in that part of the country and the situation is so complicated with racial antagonisms and ambitions and with the interplay of all sorts of political considerations that I shall not attempt to describe it in detail. The main underlying fact is that probably by next year, and to some extent this year, a large section of that country will have a surplus of food products for export which could be delivered in exchange for needed manufactures were it not that race antagonisms, local fighting, interrupted transportation, completely disorganized currency and banking and a discredited credit position have to a great extent reduced trade to barter. I can illustrate this by some stories that Mr. Hoover told me of his trades. In one case he sent a cargo of miscellaneous goods — ploughs, stoves, cooking utensils, cloth, thread and needles which cost him $500,000 and which he purchased principally from the army, to the Black Sea ports and actually sent it inland with his own people and got in exchange $3,000,000 worth of wheat which he sold in western Europe. In another instance he traded two half brokendown locomotives for 2,000,000 eggs, and in still another instance he arranged a trade between the German-Austrians and the Serbs, the latter furnishing 50,000 tons of grain in exchange for a steel bridge and 80,000,000 kronen of paper money which was specially printed for the purpose and was probably of little value, but which immediately it was shipped into Serbia was promptly stamped and put into circulation! These are just samples of what is going on in that part of the country. Mr. Hoover admitted to me last night, in response to a series of questions, that if they could once get political stability and stop fighting and settle down to putting their houses in order their surplus production of foodstuffs, and, in the case of Roumania, of oil, would give them a good opportunity to develop buying power abroad. They do, however, need some essential things promptly and would need long credit. I gather in general that Mr. Hoover has a very poor idea of the governments of most of those countries except Finland which he says is strong and developing very well.
Pursuing our old line of discussion, my general impression about the Russian situation is that everyone, in a political sense, would like to wish it on someone else and that there is no really constructive definite policy about the Russians over here that would justify believing that Russian trade or Russian needs in the way of foodstuffs, etc., or manufactured goods counld be considered at this time. When the bolshevists get through with Russia both inside and out there may be nothing left of her to do some business with, but just now it is a pretty bad picture and will need political and other kinds of disinfection. One curious thing about the currencies here seems to be that there was a good deal of imitation stuff put in circulation all the way around, but that is a long and complicated story.
Next, as to Germany: I find a good many people expressing the opinion that Germany is getting along pretty well in holding the population together and under control, keeping their civil service going and making plans for a reconstruction of industry, etc. They have an appalling debt and neutral creditors for about two and a half billion marks who are most anxious lest the reparation clauses of the Treaty will render their debt uncollectible. There is no dissent in any quarter to the effect that the I hear statements made that the morale and energy of the people is vastly impaired. The Germans themselves admit that it has affected their nervous systems and their ability to work, both physically and mentally. Some very ridiculous stories are about as to the effect of semi-starvation, but I am inclined to the opinion that a few months of good feeding is about all they need, but that it will take a very large amount to make up the deficiency. The German herds of cattle have not been as much reduced as one would imagine, according to their last census, but they have not enough fodder for their cattle and the production of milk and butter fats has been tremendously reduced. Both some of our people and the English as well have stated to me that the Germans will start trading to the east and that the exchange of commodities and German manufactured goods for foodstuffs will doubtless help to stabilize matters along Germany's eastern frontier, but Germany has had an immense reduction in her coal areas and in her actual coal production at home which affects her manufactured output and, besides that, she is pretty well denuded of raw materials. I should say that as Germany will be in the hands of the League of Nations and the Reparations Commission, if those bodies come into existence in the near future, she will be specially dealt with in the matter of providing food and other necessary things and it will be most difficult to arrange credits with her on a business basis; but help has got to be extended and should be very soon for political, if no other, reasons.
As to France, I must say the crops look pretty well in the country that we passed through on the way to Paris and I can tell better still after reaching Belgium next Monday, as I expect to make the trip by auto. In Paris one suffers no lack of things to eat, but the prices are tremendous, and I should say that in places of corresponding character in New York a dinner would cost not much more than one-half as much as here. France needs food, but even more than that in the near future coal, and even more than that government economy and a sound tax system. I think most Frenchmen s of getting people to work. I should say that, considering the government's weak financial policy, lack of coal, the enormous destruction in the north, loss of credit, high prices and probably some idleness or lassitude combine in presenting a very gloomy picture, I do not feel nearly as pessimistic as this bare reckoning of troubles would seem to justify. Many people say, and probably correctly, that there is a great untouched wealth in France, part of which should be taken by taxation and part employed to relieve the government's embarrassments and reduce the inflated condition of the currency and a part promptly directed to industrial development. The burden of the debt of the government will, I feel, give them a serious time, but there are all sorts of schemes being considered over here for dealing with it, and I presume that after one or two finance ministers have made attempts, failed and resigned, public opinion will probably prepare for a severe treatment of the matter and some strong man will see it through. At any rate that would seem to be the most likely political development in that connection. In the case of France our help is undoubtedly needed and deserved and must be given freely to avert a period of great depression and poverty among the poorer people. I refer to that particularly because of the absence of a sound system of direct taxation, the indirect taxation of course being of little relief to the poor.
I cannot say much about Italy and shall not go there. They all tell me it is a very gloomy picture. The general impression seems to be that the people are aroused on the subject of the territorial expansion on the Adriatic to such an extent that economic questions are overshadowed. One encouraging feature of the Italian situation is that the people are reported to be going back to work better than in other parts of Europe. They say that they immediately grasped the problem of reconstruction in the devastated regions with considerable success and are far ahead of France in that respect. Those with whom I have talked seem to feel that the Italian situation is probably the most critical of any in Western Europe.
Estimates are being prepared of what Europe needs. I saw some figures the other day indicating that Italy figures an immediate need of about $650,000,000. This was to a considerable extent for coal, where the situation in Italy is undoubtedly most critical; even their public service corporation is running from hand to mouth with but a few days reserves, and this of course is made worse by the English coal strike and practically no exports for the moment from England. The French estimate varies greatly, but is something over $700,000,000 and some figures are a billion dollars. These I believe are both from official sources and I think can be completely disregarded. Mr. Hoover says that $3,000,000,000 will take care of the European situation and I think his figure can be disregarded. The fact is that no one can possibly state a figure, which, in the case of food for instance, can be altered by probably hundreds of millions according to the extent to which political unrest and incapacity to trade develops between eastern and western Europe and the extent to which the neutral countries like Holland will open credits for the sale of food products, etc. I have rather come to the conclusion that the immediate pressing necessities of Europe, somewhat in the order named, consist of fats, that is packinghouse products, grains, cotton, copper, sugar and coal. The last named everyone seems to agree cannot be furnished from America without the withdrawal of shipping to such an extent as to menace the transport of necessary food supplies, and further that we haven't the loading facilities at our ports to ship coal in anything like the quantity required. There is, however, no doubt that as to the first five named, some steps should be taken very promptly to get things moving and open credits that are long enough to avoid subsequent embarassments when pay day arrives. I am not yet prepared to say that I have any particular program in mind, although I am beginning to get some ideas that I will either bring home with me, or, if I am delayed, will send tentatively and with the usual reservation of the right to change my opinion, but there is no doubt whatever that immediate aid is needed, that the credits must be fairly long and that the amount required is very large. If political conditions in eastern Europe quiet down, the amount will be reduced; if they do not, they will be much larger, but these five articles should be on their way over here before very long.
I cannot help feeling that a part of the problem can be dealt with on a business basis and a part of it must be dealt with on an eleemosynary basis. I am also convinced that we will do better in the long run by settling all disputed questions and all open accounts between Great Britain and ourselves and then tackle the job in partnership. The reasons for this I will explain when I return.
Just as an indication of what is going through my mind I would like to ask you to consider a few points: 1st, will the United States government adopt an affirmative constructive policy toward the restoration of Europe and its productive capacity and will its policy justify our assuming some political responsibilities as to the new countries in eastern Europe as well as economic responsibilities for the whole of Europe, or only the latter; 2d, will our government give any direct aid out of its own treasury or will it give only affirmative support to efforts made by our citizens to restore trade with Europe and extend credits, or will it not even do the latter (if our government does neither I fear some parts of Europe will starve as has been prophesied); 3d, will our government authorize a generous adjustment of our present loans so that immediate payments are not required for interest and a very light burden of amortization adopted; 4th, will our government consent to a readjustment of debt so that we may accept in payment of at least some part of the debt of England and France some of the debt which the other Allies now owe to them; 5th, will the United States consent to have the finance ministers or at least equally responsible representatives of the four principal nations come to Washington and negotiate the adjustment of the existing debt and arrange a policy for the future, or at any rate give it a clear picture on the ground of their needs; 6th, would our government join hands with the British in a reconstruction policy?
What I am driving at in asking you to consider these points is to impress upon you what has become quite clear to me, and that is, that our government must take an affirmative or a negative position on some of these questions very shortly. Without any desire whatever to embarrass, I want to illustrate my doubts about our own government's attitude in some of these matters. I was told by a responsible man in our army here that, subject to ratification by the French Chamber, I believe, they had concluded a trade for the sale of all the army plant in France to the French government for about $400,000,000. The terms of the trade, so far as I heard them, impressed me as admirable, although I have no no knowledge of what the property cost or is worth. It adds $400,000,000, however, to what France owes us, and I presume they will give a fairly longtime obligation if the transaction is concluded.
Now I learn (this is most confidential) that Mr. Hare has come to Europe representing the War Department, with a commission to sell something like two and a half billion dollars of material owned by the Department which has never been sent to France. Some of this stuff is probably food and maybe other things which are urgently needed, but if any such sale were made over here just now I should think it would be little short of a calamity. These people cannot afford to buy more than their bare necessities for the present until they develop production. With this I am enclosing a memorandum on that subject which Mr. Hoover handed me which has had some vogue in private circulation among government officers, and which, frankly, impressed me most favorably. This leads to a little discussion of Mr. Hoover, whom I have seen twice for quite long discussions. Last night I was at his house at dinner when we had a nice quiet talk. I hope I shall not do him an injustice. He has undoubtedly done a magnificent piece of work over here and I know of no one who could have accomplished what he has. His relief organization comprises about 900 people scattered all over Europe and he has plunged at the job with an energy that is magnificent. On the other hand I can see for myself, and he frankly admits to me, that he bhas taken some very long chances if one considers the money involved, but I believe it is literally a fact that he more than anyone else saved this part of the world from a breakdown immediately after the armistice. Now the trouble with Mr. Hoover is that he develops a state of mind, particularly under resistance, which might be dangerous to the development of sound plans. His head is filled with a mass of figures and statistics, the reliability of which I am inclined to doubt. He personally states, and I have no doubt thoroughly believes when letting off steam so to speak, that unless the United States steps in with some magnificent scheme of immediate aid, political and social disaster will break out all over Europe, bolshevism will spread, and that a complete collapse of credit, banking machinery and transportation, with consequent curtailment of production will ensue. He also seems to think that if we do not market our own surplus production in Europe to meet this situation promptly, we will have a breakdown in prices at home that will be equally disastrous to us. On the other hand, when I came to question him in detail as I did last night, I do not think he was able to substantiate his beliefs. I could give you a list of statements which he made which were most encouraging as to various parts of Europe. Furthermore, in five minutes he took out his pencil and showed me that the total required of the five articles I have named amounted to $3,350,000,000, and that I positively cannot believe and do not think it can be substantiated by our own experience of his estimates and of what Germany needed in the way of foodstuffs. One cannot help but admire his energy and courage and his ability to get things done under pressure. It has been simply amazing over here and he is entitled to a vast amount of credit, but when it comes to coldblooded delivberate judgment of what Europe needs, I think he expresses in over strong terms an impression which he gathers from a great mass of misleading statistical material gathered from sources which in many cases are quite unreliable. And yet with it all he is the man that has done the trick and I have a much greater respect for his ability than I had before learning of what he had done and before meeting him intimately.
In conclusion let me say that aside from any material or other advantage that we may gain from stepping in or getting out of this situation, I think we at home must recognize that if we withdraw politically and take no risks financially in connection with the restoration of Europe, we are going to be thoroughly despised abroad and will do ourselves needless harm. So my hope is that some method may be found by which those things which we can do will be done at once and the things which might be most difficult to do under our present political conditions will at least be attempted in part and possibly accomplished in part. I only wish you were here yourself.
Hotel Ritz, Paris, August 17, 1919.
Since the first part of this letter was written we have traveled over the devastated regions of France, visited Brussels and Amsterdam and returned to Paris, a trip of absorbing interest and developing a further knowledge of this situation that cannot be obtained in any other way.
First, let me say as to Mr. Hare's work that Mr. Kent has written you fully, and I believe cabled you as well, and I sincerely trust that it will be arranged that these sales of army material will be confined to those things which are essential and adequate time be given for payment, and that as much as possible a market be found where payment is easier than it is at present in either France or Belgium.
I want to give you a brief further review of the situation as Mr. Kent and I see it, which may in some respects modify what I have already written.
The crops throughout all of France (except the immediate devastated region), Belgium and Holland are magnificent. The wheat, and to some extent, the oats, are in course of harvesting, but a very large amount of this work is being done by the women, both in France and Belgium. You would be impressed as I was at seeing the women working in the fields as long as daylight lasted, up to 9 o'clock at night. Certainly the women of France deserve every praise that can be given them for their magnificent response to the need of this terrible situation.
Mr. Hoover was under the impression that Holland had a large surplus supply of cattle. This I find is not the case. In the early part of the war they did, but cattle are a part of the crop rotation in Holland. When the war broke out they much increased their herds and introduced a good many hogs. Later imported fodder could not be obtained, the herds had to be reduced and the hogs practically all slaughtered, so that Holland is practically without hogs now and the herds only slightly above normal. During a part of the war fodder was so deficient that animals were producing only 25 per cent. of the normal supply of milk. They have now been restored to condition and the herds look in magnificent shape, but they will still need to import fodder and they have not a large amount of cattle for export and practically no hogs.
Belgium in normal times has only produced about one–third of the food requirements of the nation, France slightly more than that proportion, and Holland somewhat more. Outside of Holland the food production has been impaired by the war and all three countries will need to import foodstuffs: France and Belgium fats, Holland grain and fodder. The amount of grain required for France and Belgium cannot possibly be determined now with any accuracy, but in general a large amount will be needed.
One depressing sight in all three countries is the large number of men still in uniform. The French are discharging their men as are the Belgians, as rapidly they claim as possible, but I doubt if they are doing it anywhere rapidly enough. Every town we visited in the devastated area was filled with soldiers, some of them working on reparation, and in one city I noticed French soldiers, German prisoners, African troops, Chinese, Japanese and British. In general, it is my impression that there are altogether too many men in uniform at the present time, and that while in uniform they are not inclined to hard work as they would be if restored to civilian duty.
My picture of the situation, which can only be briefly summed up here, is about as follows: Draw a belt through the war area wide enough to cover the whole fiedld occupied by the Germans throughout the war. Through the center of this belt draw a line representing actual battle areas, including such places as Verdun, Chateau Thierry, St. Mihiel, Rheims, the whole territory of the Somme, the Chemin des Dames district, and so on north through Lens and into Flanders. Where resistence was strong and battles were fought the devastation is complete. As one leaves this center line he finds the cultivation encroaching in some cases right into the ground which has been torn apart by shells and trenches but already restored. The evidence of restoration of the soil is the most encouraging thing I saw, but there are nevertheless vast belts where the ground is so torn up that it will take another year or two to get it back in cultivation and the effort to work over such land filled with shell craters six and eight feet deep is too greart for the peasant owner and must be undertaken by organized labor and engineering; but the most depressing spectacle in this area of destruction is the condition of cities,towns and industries. Most of the small towns are flat and the large cities destroyed or so damaged as to be useless for a long time as centers of population. I think we must have driven by automobile through 500 miles of the ground over which fighting occurred, and in northern France I saw smoke coming out of only two chimneys and two other plants in operation. They were two cement plants and two brickyards. Everything else was dead in France, so far as we could see. A few plants were being repaired, but many of them are utterly beyond repair. We saw etvidence in many places where there had been no fighting, of a destructive character but where, nevertheless, plants were completely destroyed by bombs or fire or the contents had been removed. Sugar mills, foundries, etc., were quite useless. In Lens, the center of a valuable coal area, I believe not one pound of coal is being produced. Many of these cities and towns of from a few thousand to 108,000 inhabitants in the case of Rheims have a small scattered population of hardy natives who have returned to repair their homes—in the case of Rheims about 8,000—the balance being the soldiers clearing up the rubbish.
So you may consider that throughout this area of France the losses have been tremendous. The agricultural recovery will be fairly prompt, but the industrial recovery and the recovery of civil losses very slow indeed. In Belgium the period of occupation permitted a great deal of repair work to be done, and I was delighted to see what had been accomplished. The Belgians we saw assured us that the industrial recovery was now making good progress. I should say the agricultural recovery is well nigh complete. To complete the picture I should say that while the industrial and civil losses in the devastated area are shocking and almost irrecoverable, outside of that in both France and Belgium therde is great evidence of prosperity. The farmers have made a great deal of money; many war profits have been realized, and the real problem is the actual area of devastation and the restoration of their industries.
What Europe needs is production of goods of all kinds and as much as possible for export. To bring this about credits must in some way be arranged to feed the people for this winter, to give them raw materials for their plants, and to get their plants in operation again.
One of the greatest difficulties that has been reported to us many times is the exchange. At present rates it is possible for the French and Belgians to buy machinery and other requirements in Germany very much cheaper than in America, and they are most insistent that the provision limiting the application of the proceeds of loans to purchases in America is most burdensome and impossible to comply with.
Simply to illustrate this, the Belgian Prime Minister, Monsieur Delacroix, told me that of the $50,000,000 credit arranged for Belgium $14,000,000 only had been drawn and I think only three or four million actually used, that the credit is a great expense to them and without benefit because it is not long enough and cannot be expended outside of America. They want a loan of $100,000,000 at once, and they have handed me the enclosed memorandum of what they would like. They say their requirements are covered into September but thereafter the government alone must buy $5,000,000 a month in the United States and they should be in position to buy foodstuffs in Argentine and machinery in Germany and England.I spoke above of the possibility of suggesting some program. I should think that this must be very sketchy and a policy rather than a program, but my present thought is something like this:
1. Capitalize the interest on loans made by our government to the Allies for a period of three to five years, preferably five.
2. Graduate the amortization so that the earlier amortization payments are small and increase with the later payments.
3. Work out some plan to furnish England with cotton on long credits, say three years, and certainly two. I believe no other credit will be needed there.
4. Ensure that Belgium gets a credit right away of $100,000,000, with the provision that some part of it may be spent outside of the United States.
5. Require the French to state their minimum requirements. They are all figuring now on maximum requirements. At first, it seems to me, somewhere from $250,000,000 to $500,000,000 applied carefully to things absolutely required would give an assurance that would make subsequent business much easier.
6. Arrange some cooperation with Holland, I should say preferably between their bankers and ours, for credits for fodder and for some credits to buy grain either in the YUnited States or in the Argentine. These need not be very long credits, as Holland's colonial exports should enable her to pay promptly.
7. I can say nothing of Italy, not having visited there.
8. With some reluctance and only because I know it is in your mind I suggest still another important matter. I think we should arrange with England and France to accept in settlement of some part of their debt the obligations now owing to them by other governments. I know the difficulty of working out any such plan, but it will go a very long way toward restoring peace of mind, confidence in the future and the willingness to get back to work. It will indicate a sympathetic attitude by our country which will be of inestimable value, as just now the thing we are dealing with is only in part material. As we have frequently said, the whole situation here is neurasthenic; they are worn out with anxiety and work; they are worried about labor; the production of coal is so short as to be a menace, and in a word a large part of Europe needs more than anything else to be sent to a hospital for a rest cure.
9. One most important item of the program is to ensure that such credits as are extended shall not be wasted on luxuries. That matter we cannot control by restricting our exports, and it should be insisted that these governments effect the control by an embargo on imports. I say this with great emphasis, because I know that in both France and Belgium there is extravagance beyond anything heretofore known, by those classes which have profited by the war. In two garages in Brussels the man who drove us was told that they could buy at once 45 new Cadillac cars, for which they had customers. One of them had just purchased a secondhand Cadillac worth 23,000 francs. In other words, this is another case where the rich have grown richer out of the war, and that very fact, including their extravagances, results in the poor being poorer, and the poor to whom I refer are the industrial classes rather than the agricultural. Those are the people to look after and to look out for. If, directly or indirectly,, those who have made fortunes out of the war are permitted to buy at will, those who have lost money in the war cannot get back to work.
10. In connection with this whole lprogram I think our government must assume a definite and constructive attitude in regard to the situation in the new countries of central eastern Europe. Not having been there I cannot speak except by hearsay, principally of people in London and Paris, but I am sure conditions will not be restored for a long time unless some sort of fraternal intervention is effected rather promptly, and it is undoubtedly a fact that they are willing and ready to trust us and probably no one else.
11. Now, as a practical means of dealing with these matters, I have already suggested in a previous letter a conference of finance ministers at Washington to restore the center of financial gravity where it belongs, and where a program can be developed to cover the whole situation and not a piecemeal treatment of it. If Davison makes progress with his plan I hope it will be in general in conformity with the above suggestions. I am satisfied that the amount of money which can be spent promptly is limited, as we have frequently discussed, but I am equally satisfied that the amount to be furnished for foodstuffs must be furnished promptly this fall. A vfurther practical suggestion that I have had much in mind and discussed with Dr. Vissering is to have a meeting of the heads of the state banks very privately, unofficially and informally. Cokayne, of the Bank of England, and Vissering, of the Nederlandsche Bank, are both men of great ability, and an exchange of views at such a meeting without any expectation of making a program would be of great value. Possibly I can arrange it before returning.
In concluding this part of my letter let me repeat that no one can understand the situation without coming over here. It is not as desperate as has been represented, but it is serious and prompt action, particularly in the matter of food, is now needed—particularly promptness—and for that result I believe our government must take a pretty affirmative position. Once the wheels are started I am sure recovery will be more prompt than anybody has been willing to forecast.
Another consideration with me is the general attitude over here towards America. We are not popular and unless we do something now we are going to be regarded as selfish, even inhuman, in abandoning Europe to her fate after the war is won.
Now, as to my trip to the East. People here have urged me very strongly to go with General Harbord to Constantinople and Tiflis and possibly a little further. The men in the State Department can tell you all about the objects of the trip. I have been led to do it, first to meet their emergency, which was very urgent for they needed a practical banker with them, and, second, to give me some opportunity to complete the picture of the situation. This Commission will have an unexampled opportunity to get information, and I believe it means that to miss the chance woild be to throw away an important benefit from my visit. We will learn a good deal there about central eastern Europe. It will detain me until along toward the first of October, or, if a cable from the Bank makes it seem possible, I shall stay a little longer. You must not feel concerned about my leaving. I am proposing to write you again from the steamer, supplementing this letter and filling in the gaps after I have read it over and studied it. For your information please ask Governor Harding to let you see a copy of my letter to Mr. Treman about the handling of the gold matter, which I believe is in very good shape. I cabled about the possibility of a renewal of the September maturity, as Mr. Hare might be able, within the period of another renewal, to make some sales in Spain which would ovbviate the necessity of buying pesetas, which just now seems unfortunate.
Hoping that this letter will be helpful and that I may be able to give you still further help on my return, with best regards,
Sincerely yours,
Benjamin Strong, Jr.
Hon. Russell C. Leffingwell,
Assistant Secretary of the Treasury,
Washington, D. C.
