923. D. Stephens to Harrod , [circa 10 August 1939] [a]

[Follows on from 913 ]

as from Treasury, Whitehall, [London] SW1. [b]

[circa 10 August 1939] [1]

Dear Roy

I promised you a reasoned answer about a month ago to your memorandum on using the gold in the Exch[ange]. Eq[ualisation]. Ac[count]. to buy Essential Commodities, and I'm afraid have given you further reason to complain of "bureaucratic inertia".

But I have been deterred by several things--

1. exceptional rush of work, which I had hoped would slacken towards the end of July, but didn't. I never seem now to get away from the Tr[easury]. till about 8. p.m. But this is the least of my excuses.

2. Hawtrey said that he w[oul]d. write to you himself. I wonder if he has done so? If not, would you care to jog his memory by writing him a line yourself? He has, of course, a copy of your memorandum. It would be much more satisfactory to us all three if you could get into direct touch with him than correspond, so to speak, triangularly through me.

3. (which is really part of 2). I found your arguments compelling & Hawtrey's objections not specially convincing, so far as I understand them (but please don't tell him I said so!). I am therefore all the more unsatisfactory person to represent his point of view, which I don't feel I either fully understand or agree with. I would much rather he fought his own battles, but sh[oul]d. be interested, as a spectator, to see how he does it.

4. This particular subject has recently been much discussed in high places. In fact it has become a matter of high policy, which it would not be at all proper for me to discuss in anything like an official capacity. And in a personal capacity I'm not much good to you either, as I am far too junior to know what they really think in the stratosphere (Phillips, Hopkins, [c] etc... [2] ).

All I can do is to try & retail as faithfully as possible Hawtrey's views but these, as we all know, are not necessarily the Treasury's. How you are to get the "Treasury view" I simply don't know--I don't think it is ever disclosed.

But even though you may never get a satisfactory answer out of the Treasury, I think it was well worth while to have put those views on paper & sent them along. I did my best to put them round--I know that several high-ups saw your memorandum & expressed approval of the arguments. It undoubtedly added weight to the general pressure that has recently been exerted on the govt. to increase stocks of Ess. Commodities. I say this, because I know you are more interested in getting something done than in getting a satisfactory reply.

I'll try now to put some of Hawtrey's points but with every reservation that I may be misrepresenting him.

1. There is no such thing as a trade cycle, or means of foretelling when or why prices are going to rise or fall. \ holding vast stocks of commodities may be extremely expensive. Gold is possibly [d] a more convenient form of reserve of wealth.

2. There is no simple way of getting rid of the gold that we have got. The only effective way is to produce monetary expansion. The revival of America opened way for monetary expansion here--but the question will soon be that of providing safeguards against inflation.

But do write to him yourself & get his views at first-hand. [3]

I showed your memorandum to Dennis [e] Robertson who said he agreed in general but wrote the following note on it:--"Is H. suggesting direct barter deals of gold for commodities? These might be difficult to arrange, for the same sort of reason for which he anticipates difficulty in getting rid of the gold in war.

Or does he envisage purchase over the exchanges in the ordinary way--the EEA stepping in to support the exchanges, so far as is necessary, by sale of gold? I should have thought that this w[oul]d. be a much better course, esp. as many of the purchases could be made from Empire & other sterling countries, which might be glad to use a considerable part of the purchases in buying Br. goods, or adding to their sterling balances, & hence wd. cause no strain on the Sterling Exchange

I don't see any point in making the EEA itself the holder of the commodities, which wd. only start irrelevant hares about gold v. commodity standards: etc. ... The existing mechanism is adequate to implement the policy of large-scale purchases, if it is decided to adopt it--as I think it ought to be.


Some of this letter is indiscreet, so will you please treat it as confidential.

I shall be at the Treasury until about 23 rd August & then hope to take 10 days leave, but shall be there the whole of September from 4 th onwards. Would there be any chance of seeing you in London?

Yours ever

David Stephens

  1. 1. Not dated. The conjecture is based on Stephen's reference to the time elapsed since his last letter ( 913 ) and on the date of Harrod's further letter to Hawtrey on this subject ( 924 ).

    2. Sir Frederick Phillips (1884-1943, knighted 1933), Under-Secretary to the Treasury; Richard V. N. Hopkins (1880-1955, knighted 1920), Second Secretary to the Treasury (1932-42), then Permanent Secretary (1942-45).

    3. Harrod wrote to Hawtrey in this connection on 14 August: see letter 924 .

    1. a. ALS, eight pages on four leaves (numbered, except the first), in HP IV-1178.

      b. Letterhead: Longparish House, Longparish. Hampshire.

      c. Commas added.

      d. Ms: «Gold possibly».

      e. Ms: «Denis».

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