711.1928/2064/6
The Secretary of State to
President Roosevelt
Washington, February 21, 1934.
Dear Mr. President: Referring further to demand
of Panama Government for payment of the Canal annuity of $250,000 by the
United States Government “in gold coin of the United States”, the Panama
Minister here presented this demand to Mr. Edwin Wilson, head of the
Latin American division here in the Department.
It occurred to me that it would emphasize the matter much less to let
Wilson rather casually send for the Minister and make reply to him, in
substance as set out in the attached manuscript, by doing so orally and
making no written record.
I wish you would read this over and offer any comment or suggestions, and
return as soon as convenient.35
[Enclosure]
I have given full consideration to the request of the Panama
Government that the United States Government pay its Canal annuity
of $250,000 “in gold coin of the United States”. The suggestion that
the United States Government as the result of an official
conversation more than four months ago should make this February
payment in gold, has received my careful consideration. It will be
recalled that at the time of the official conversations referred to,
a considerable list of complaints by the Government of Panama was
receiving both sympathetic and favorable consideration and action. I
think the full nature and extent of the complaints by Panama were
understood by the United States Government, were reduced to a
memorandum36 or other instrument of writing, and
their solution in a way favorable to the desires of the Panama
Government to the fullest extent deemed at all consistent by the
United States has been and is being gradually brought about.
Evidently any oral references to future canal annuity payments in
gold were not deemed of a sufficiently binding or contractual nature
as to be reduced to writing. The conversation apparently went no
further than the expression of a hope or a disposition which did not
and could not foresee the completely revolutionary financial and
monetary changes which soon took place.
The devaluation by the United States of the gold content of the
dollar, for example, operates in a large sense to reduce by 40 per
cent [Page 617] external debts due
and payable in the United States. The gold standard in most parts of
the world has broken down; currencies everywhere have been
dislocated; currency devaluations have taken place in most important
countries. Nations generally recognize now that the use of gold as a
currency should be permanently abandoned and the gold standard, for
the present at least, abandoned both for internal and external
purposes, in most parts of the world.
Financial and monetary conditions, therefore, are entirely different
today, compared with what they were some months ago. For example,
when the British Government went off gold, great losses resulted
abroad, such as the virtual wiping out of the capital of the
Netherlands Bank and that of the Bank of France, to say nothing of
losses to English creditors throughout the world. American creditors
are experiencing similar effects.
There is still another phase which would seem to be conclusive
against the suggestion of the Government of Panama, which is the
terms of payment in the United States to the fiscal agent of Panama
and by him in turn to the chief holders of the Panama bonds who
reside in the United States. From the location and the expressed
terms of the payment and disposition of the entire canal annuity of
$250,000 under the most definite and irrevocable instructions of the
Panama Government, it is difficult to conclude that the Panama
Government would very seriously suggest that a gold bonus be handed
over to it to be by that Government added to the 40 per cent
reduction it has already potentially received on its indebtedness
payable in this country by reason of the devaluation of the gold
content of the dollar. If, in the light of the foregoing, you have
any suggestions to make, I should be glad to meet with you at any
time and talk them over.
