868.00/11–1847: Telegram
The Acting Secretary of State to the American Mission for Aid to Greece
Gama 475. From State and Treas. 1. Bank of Greece has cabled FRB NY requesting swap of 330,000 Napoleons for sovereigns.
2. Treas in position effect exchange Napoleons but Dept not prepared to recommend any action which would facilitate further dissipation Greek exchange resources in gold sales while Greek exchange deficit being covered by funds appropriated by US Congress. Therefore, action on Bank of Greece’s request deferred.
3. Our position outlined Gama 341.1 We remain unconvinced that by manipulating of gold price, commodity price-level can be held below level dictated by available supplies and purchasing power. From such info as we possess, rise in commodity and gold prices has not exceeded what might be expected as initial reaction plan railroad and new taxes.
[Page 415]4. Dept notes from Amag 454 Nov. 11,2 fourth section, that mission feels concern over necessity heavy expenditures AMAG funds during next few months and fears Greek exchange earnings will be insufficient to pay for essential imports next spring and summer. Dissipation now Greek gold will add to real crisis then if Mission fears realized. Thus, despite analysis Amag 454 and in view fact that at best gold sales can have only temporary psychological effect, we doubt wisdom gold sales this juncture.
5. We should like to point out further that Dept does not believe it will be feasible to permit use of AMAG funds or current Greek exchange earnings for acquisition new gold if present stocks exhausted. Therefore attempt to hold gold price now may only result in more difficult situation later. Only net result may be that Greek resources represented by present stocks will be in hoards of Greek profiteers instead of being available for purchase commodities needed by general Greek public. This has been history of Greek gold operations and we are unconvinced circumstances are different at present.
[Here follow paragraphs numbered 6 and 7 requesting AMAG to cable detailed economic and financial data.]