Foreign Relations of the United States, 1947, The Near East and Africa, Volume V

868.515/10–1847: Telegram

The Acting Secretary of State to the American Mission for Aid to Greece

confidential
us urgent

Washington, October 18, 1947—noon.

Gama No. 341. From State and Treasury. 1. Concur fully in firm position AMAG has taken against gold sales in conferences with Greek Govt as outlined Amag 337, Oct. 9.¹

2. Gold sales even on limited basis proposed by Patterson and Gregory contrary to US gold policy as indicated by following:

(a) US has opposed internal gold sales as anti-inflation mechanism in Greece, China and other countries.

(b) Program recommended by Patterson and Gregory is inconsistent with general principles of International Monetary Fund’s efforts to do away with international transactions in gold at premium prices. US has announced it will fully support these efforts and is currently tightening US gold regulations to implement this policy. UK and Canada taking similar action.

(c) Treas in view of US gold policy has refused (in a letter of Oct 6, 1947, to Sec Army) to furnish gold coins to Army for sale to official Greek banking institutions.

3. Wide experience in various countries indicates internal gold sales, although ineffective as inflation control, result in accumulation of private fortunes while dissipating much needed exchange resources. Knowledge that US Govt has sanctioned use by Greek authorities of limited gold and foreign exchange resources for sale of gold to private Greek individuals who would use it for hoarding and speculative purposes would create highly unfavorable impression on US people and Congress and in Treasury’s view might weaken Congressional support of Greek and European aid programs.

4. While force of your arguments fully appreciated, we are not convinced that Greek situation warrants departure from US gold policy or risks outlined para 3. Please inform us of:

(a) Weekly developments in sterling and dollar exchange rates and gold price.

(b) Monthly Govt expenditures and receipts.

(c) Price developments.

(d) Monthly exports.

(e) Significant changes in regulations and laws pertaining to above items.

Lovett

1. Not printed; it stated that the “Prime Minister and other members of Greek Government urgently request approval of AMAG for occasional sale of gold on the domestic market to meet short-term crises and the assistance of AMAG in obtaining additional gold sovereigns. … The government urges that gold coin stocks of bank be increased to at least 1,000,000 sovereigns” as a stabilizing factor. AMAG advised the Greek Government that it could not approve the program. It informed the Department that the firm position on gold sales would be continued. At the same time, it was convinced that “inflexible refusal of gold sales in face of possible serious speculative crises might well prove short-sighted and far more costly than immediate saving in gold. If crisis situation should develop because of sharply rising gold rate, which would seriously prejudice program, consider AMAG would be justified in approving limited sale of gold on basis recommended by Gregory and Patterson.” (868.51/10–947)