Full text of William McChesney Martin, Jr., Papers : British Loan Data : 1945-1950, Box 18, Folder 2

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

r t J . 1 1 J. cull

Box 18/Folder 2


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Jr., Papers

Series IV, Subseries D
British Loan Data, 1949-1950

DOCUMENTS
1. Statement by the President of the United States
and the Prime Minister of Great Britain.
2. Joint Statement on Commercial Policy.
3. joint Statement on Settlement for Lend-Lease and
Reciprocal Aid, Surplus War Property, and Claims.
4. Financial Agreement.


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

DECEMBER

1945

DEPARTMENT OF STATE
PUBLICATION 2439
Commercial Policy Series 80

For sale by the Superintendent of Documents, U. S. Government Printing Office, Washington 25, D. C.
Price 5 cents


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

STATEMENT BY PRESIDENT
TRUMAN AND PRIME MINISTER
ATTLEE1
DECEMBER 6, 1945

The economic and financial discussions between officials of the
United States and United Kingdom Governments meeting in Washington have now been completed.
These discussions have been concerned with the major problems
affecting the basic economic and financial relations between the two
countries, in the light of the provisions of article VII of the mutualaid agreement between their Governments signed February 23, 1942.
They have covered the questions of financial assistance from the
United States to the United Kingdom, the demobilization of wartime
trade and monetary restrictions, the settlement of lend-lease, the disposal of surplus war property in the United Kingdom owned by the
United States, and, finally, long-range commercial policies in the
broad sense, embracing the fields of trade barriers and discriminations, policies in respect of commodities in world surplus, cartels,
an international trade organization, and international aspects of
domestic measures to maintain employment.
The purpose of the discussions has been to arrive at mutually
advantageous solutions of these problems which the two Governments
would commend to the peoples and legislatures of the two countries
and to the world as a whole.
Both sides have been fully conscious of the significance to other
countries, as well as their own, of the outcome of these discussions,
and they have from the beginning had continuously in view the common interest of their Governments in establishing a world trading
and monetary system from which the trade of all countries can benefit
and within which the trade of all countries can be conducted on a
multilateral, non-discriminatory basis.
The discussions have been successful.
Agreement has been reached, subject to the approval of the legislatures of both countries, for the extension by the United States to
1

Release^ simultaneously in Washington and London.
678978°—46
(1)


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

the United Kingdom of a line of credit of $3,750,000,000 on the terms
stated in the financial agreement signed this day, for the following
purposes: to facilitate purchases by the United Kingdom of goods
and services from the United States, to assist the United Kingdom
to meet transitional post-war deficits in its current balance of payments, to help the United Kingdom to maintain adequate reserves of
gold and dollars, and to assist the United Kingdom to assume the
obligations of multilateral trade. This credit would make it possible
for the United Kingdom to relax import and exchange controls, including exchange arrangements affecting the sterling area, and generally to move forward with the United States and other countries
toward the common objective of expanded multilateral trade.
Agreement has been reached for the final settlement of lend-lease
and reciprocal aid, the disposal of surplus war property in the United
Kingdom owned by the United States, and the final settlement of the
claims of each Government against the other arising out of the conduct of the war.
Agreement has been reached on the broad principles of commercial
policy for which the two Governments will seek general international
support.
These arrangements, if carried out, will put an end to the fear of
an economically divided world; will make possible, throughout the
world, the expansion of employment and of the production, exchange,
and consumption of goods; and will bring into being, for the first time,
a common code of equitable rules for the conduct of international trade
policies and relations.
The realization of these proposals will depend upon the support
given them by the peoples and legislatures of the United States and
the United Kingdom, and where they envisage measures requiring
broad international collaboration, the support of other countries.
The following documents resulting from these discussions are being
issued by the two Governments:
Financial agreement.
Joint statement regarding the understanding reached on commercial policy.
Joint statement regarding settlement for lend-lease and reciprocal aid, surplus war property, and claims.


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

UNDERSTANDING REACHED ON
COMMERCIAL POLICY
JOINT STATEMENT BY THE UNITED STATES AND THE
UNITED KINGDOM

The Secretary of State of the United States has made public today
a document setting forth certain "Proposals for Consideration by an
International Conference on Trade and Employment". These proposals have the endorsement of the Executive branch of the Government of the United States and have been submitted to other Governments as a basis for discussion preliminary to the holding of such
a conference.
Equally, the Government of the United Kingdom is in full agreement on all important points in these proposals and accepts them as
a basis for international discussion; and it will, in common with the
United States Government, use its best endeavors to bring such discussions to a successful conclusion, in the light of the views expressed
by other countries.
The two Governments have also agreed upon the procedures for
the international negotiation and implementation of these proposals.
To this end they have undertaken to begin preliminary negotiations at
an early date between themselves and with other countries for the
purpose of developing concrete arrangements to carry out these
proposals, including definitive measures for the relaxation of trade
barriers of all kinds.
These negotiations will relate to tariffs and preferences, quantitative restrictions, subsidies, state trading, cartels, and other types of
trade barriers treated in the document published by the United States
and referred to above. The negotiations will proceed in accordance
with the principles laid down in that document.


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

(3)

SETTLEMENT FOR LEND-LEASE
AND RECIPROCAL AID, SURPLUS
WAR PROPERTY, AND CLAIMS
JOINT STATEMENT BY THE UNITED STATES AND THE
UNITED KINGDOM

1. The Governments of the United States and the United Kingdom have reached an understanding for the settlement of lend-lease
and reciprocal aid, for the acquisition of United States Army and
Navy surplus property, and the United States interest in installations, located in the United Kingdom, and for the final settlement
of the financial claims of each Government against the other arising
out of the conduct of the war. Specific agreements necessary to
implement these understandings, setting forth the terms in detail,
and consistent herewith, are in the course of preparation and will
shortly be completed.
2. This settlement for lend-lease and reciprocal aid will be complete and final. In arriving at this settlement both Governments
have taken full cognizance of the benefits already received by them
in the defeat of their common enemies. They have also taken full
cognizance of the general obligations assumed by them in article
VII of the mutual-aid agreement of February 23, 1942, and the
understandings agreed upon this day with regard to commercial
policy. Pursuant to this settlement, both Governments will continue to discuss arrangements for agreed action for the attainment
of the economic objectives referred to in article VII of the mutualaid agreement. The Governments expect in these discussions to
reach specific conclusions at an early date with respect to urgent
problems such as those in the field of telecommunications and civil
aviation. In the light of all the foregoing, both Governments agree
that no further benefits will be sought as consideration for lendlease and reciprocal aid.
3. The net sum due from the United Kingdom to the United
States for the settlement of lend-lease and reciprocal aid, for the
acquisition of surplus property, and the United States interest in
installations, located in the United Kingdom, and for the settlement


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

(4)

of claims shall be $650,000,000 subject to the accounting adjustment
referred to below. This amount consists of (a) a net sum of
$118,000,000 representing the difference between the amount of the
services and supplies furnished or to be furnished by each Government to the other Government after V-J Day through lend-leaso
and reciprocal-aid channels, less the net sum due to the United
Kingdom under the claims settlement, and (b) a net sum of
$532,000,000 for all other leijd-lease and reciprocal-aid items, and
for surplus property, and the United States interest in installations,
located in the United Kingdom and owned by the United States
Government. The actual amounts due to the respective Governments for items included in (a) above other than claims will, however, be ascertained by accounting in due course, and the total sum
of $650,000,000 will be adjusted for any difference between the sum
of $118,000,000 mentioned above and the actual sum found to be
due. All new transactions between the two Governments after
December 31,1945, will be settled by cash payment.
4. The total liability found to be due to the Government of the
United States will be discharged on the same terms as those specified
in the Financial Agreement concluded this day for the discharge of
the credit provided therein.
5. In addition to the financial payments referred to above, the two
Governments have agreed upon the following:
(a) Appropriate non-discriminatory treatment will be extended
to United States nationals in the use and disposition of installations in which there is a United States interest;
(5) Appropriate settlements for the lend-lease interest in installations other than in the United Kingdom and the colonial
dependencies will be made on disposal of the installations;
(<?) The United States reserves its right of recapture of any lendlease articles held by United Kingdom armed forces, but the
United States has indicated that it does not intend to exercise
generally this right of recapture;
(d) Disposals for military use to forces other than the United
Kingdom armed forces of lend-lease articles held by the
United Kingdom armed forces at V-J Day, and disposals for
civilian use other than in the United Kingdom and the colonial dependencies of such lend-lease articles, will be made only
with the consent of the United States Government, and any
net proceeds will be paid to the United States Government.
The United Kingdom Government agrees that except to a
very limited extent it will not release for civilian use in, or
export from, the United Kingdom and the colonial dependencies lend-lease articles held by the United Kingdom armed
forces.


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

(e) The Government of the United Kingdom will use its best endeavors to prevent the export to the United States of any surplus property transferred in accordance with this understanding.
6. The Government of the United Kingdom agrees that, when
requested by the Government of the United States from time to time
prior to December 31,1951, it will transfer, in cash, pounds sterling to
an aggregate dollar value not in excess of $50,000,000, at the exchange
rates prevailing at the times of transfer, to be credited against the
dollar payments due to the Government of the United States as principal under this settlement. The Government of the United States
will use these pounds sterling exclusively to acquire land or to acquire
or construct buildings in the United Kingdom and the colonial dependencies for the use of the Government of the United States, and
for carrying out educational programs in accordance with agreements
to be concluded between the two Governments.
7. The arrangements set out in this statement are without prejudice
to any settlements concerning lend-lease and reciprocal aid which may
be negotiated between the Government of the United States and the
Governments of Australia, New Zealand, the Union of South Africa,
and India.


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

FINANCIAL AGREEMENT
BETWEEN THE GOVERNMENTS OF THE UNITED STATES
AND THE UNITED KINGDOM

It is hereby agreed between the Government of the United States
of America and the Government of the United Kingdom of Great
Britain and Northern Ireland as follows:
1. Effective date of the Agreement. The effective date of this
Agreement shall be the date on which the Government of the United
States notifies the Government of the United Kingdom that the
Congress of the United States has made available the funds necessary to extend to the Government of the United Kingdom the line
of credit in accordance with the provisions of this Agreement.
2. Line of credit. The Government of the United States will extend to the Government of the United Kingdom a line of credit of
$3,750,000,000 which may be drawn upon at any time between the
effective date of this Agreement and December 31, 1951, inclusive.
3. Purpose of the line of credit. The purpose of the line of credit
is to facilitate purchases by the United Kingdom of goods and services in the United States, to assist the United Kingdom to meet transitional postwar deficits in its current balance of payments, to help
the United Kingdom to maintain adequate reserves of gold and dollars, and to assist the Government of the United Kingdom to assume
the obligations of multilateral trade, as defined in this and other
agreements.
4. Amortization and interest.
(i) The amount of the line of credit drawn by December 31, 1951,
shall be repaid in 50 annual installments beginning on December 31,
1951, with interest at the rate of 2 percent per annum. Interest for
the year 1951 shall be computed on the amount outstanding on December 31, 1951, and for each year thereafter, interest shall be computed on the amount outstanding on January 1 of each such year.
Forty-nine annual installments of principal repayments and interest shall be equal, calculated at the rate of $31,823,000 for each
$1,000,000,000 of the line of credit drawn by December 31, 1951, and


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

(7)

8

the fiftieth annual installment shall be at the rate of $31,840,736.65
for each such $1,000,000,000. Each installment shall consist of the
full amount of the interest due and the remainder of the installment
shall be the principal to be repaid in that year. Payments required
by this section are subject to the provisions of section 5.
(ii) The Government of the United Kingdom may accelerate repayment of the amount drawn under this line of credit.
5. Waiver of interest payments. In any year in which the Government of the United Kingdom requests the Government of the
United States to waive the amount of the interest due in the installment of that year, the Government of the United States will grant
the waiver if:
(a) the Government of the United Kingdom finds that a waiver is
necessary in view of the present and prospective conditions
of international exchange and the level of its gold and foreign exchange reserves and
(5) the International Monetary Fund certifies that the income of
the United Kingdom from home-produced exports plus its
net income from invisible current transactions in its balance of payments was on the average over the five preceding
calendar years less than the average annual amount of United
Kingdom imports during 1936-8, fixed at £866 million, as
such figure may be adjusted for changes in the price level
of these imports. Any amount in excess of £4-3,750,000 released or paid in any year on account of sterling balances
accumulated to the credit of overseas governments, monetary authorities and banks before the effective date of this
Agreement shall be regarded as a capital transaction and
therefore shall not be included in the above calculation of
the net income from invisible current transactions for that
year. If waiver is requested for an interest payment prior
to that due in 1955, the average income shall be computed
for the calendar years from 1950 through the year preceding
that in which the request is made.
6. Relation of this line of credit to other obligations.
(i) It is understood that any amounts required to discharge obligations of the United Kingdom to third countries outstanding on
the effective date of this Agreement will be found from resources
other than this line of credit.
(ii) The Government of the United Kingdom will not arrange
any long-term loans from governments within the British Commonwealth after December 6, 1945, and before the end of 1951 on terms
more favorable to the lender than the terms of this line of credit.


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

9
(iii) Waiver of interest will not be requested or allowed under
section 5 in any year unless the aggregate of the releases or payments
in that year of sterling balances accumulated to the credit of over-seas governments, monetary authorities and banks (except in the
case of colonial dependencies) before the effective date of this Agreement is reduced proportionately, and unless interest payments due
in that year on loans referred to in (ii) above are waived. The proportionate reduction of the releases or payments of sterling balances
shall be calculated in relation to the aggregate released and paid in
the most recent year in which waiver of interest was not requested.
(iv) The application of the principles set forth in this section
shall be the subject of full consultation between the two governments
as occasion may arise.
7. Sterling area exchange arrangements. The Government of the
United Kingdom will complete arrangements as early as practicable
and in any case not later than one year after the effective date of this
Agreement, unless in exceptional cases a later date is agreed upon after
consultation, under which immediately after the completion of such
•arrangements the sterling receipts from current transactions of all
sterling area countries (apart from any receipts arising out of military
expenditure by the Government of the United Kingdom prior to
December 31,1948, to the extent to which they are treated by agreement
with the countries concerned on the same basis as the balances accumulated during the war) will be freely available for current transactions
in any currency area without discrimination; with the result that any
discrimination arising from the so-called sterling area dollar pool will
be entirely removed and that each member of the sterling area will have
its current sterling and dollar receipts at its free disposition for
current transactions anywhere.
8. Other exchange arrangements.
(i) The Government of the United Kingdom agrees that after the
effective date of this Agreement it will not apply exchange controls in
such a manner as to restrict («) payments or transfers in respect of
products of the United States permitted to be imported into the United
Kingdom or other current transactions between the two countries or
(b) the use of sterling balances to the credit of residents of the United
States arising out of current transactions. Nothing in this paragraph
(i) shall affect the provisions of Article VII of the Articles of Agreement of the International Monetary Fund when those Articles have
come into force.
(ii) The Governments of the United States and the United Kingdom
agree that not later than one year after the effective date of this Agreement, unless in exceptional cases a later date is agreed upon after consultation, they will impose no restrictions on payments and transfers


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

10
for current transactions. The obligations of this paragraph (ii) shall
not apply:
(a) to balances of third countries and their nationals accumulated
before this paragraph (ii) becomes effective; or
(5) to restrictions imposed in conformity with the Articles of
Agreement of the International Monetary Fund, provided
that the Governments of the United Kingdom and the United
States will not continue to invoke the provisions of Article
XIV, Section 2 of those Articles after this paragraph (ii)
becomes effective, unless in exceptional cases after consultation they agree otherwise; or
(c) to restrictions imposed in connection with measures designed to
uncover and dispose of assets of Germany and Japan.
(iii) This section and section 9, which are in anticipation of more
comprehensive arrangements by multilateral agreement, shall operate
until December 31, 1951.
9. Import arrangements. If either the Government of the United
States or the Government of the United Kingdom imposes or main-.
tains quantitative import restrictions, such restrictions shall be administered on a basis which does not discriminate against imports from the
other country in respect of any product; provided that this undertaking shall not apply in cases in which (a) its application would have
the effect of preventing the country imposing such restrictions from
utilizing, for the purchase of needed imports, inconvertible currencies
accumulated up to December 31, 1946, or (b] there may be special
necessity for the country imposing such restrictions to assist, by measures not involving a substantial departure from the general rule of
non-discrimination, a country whose economy has been disrupted by
war, or (c) either government imposes quantitative restrictions having equivalent effect to any exchange restrictions which that government is authorized to impose in conformity with Article VII of the
Articles of Agreement of the International Monetary Fund. The
provisions of this section shall become effective as soon as practicable
but not later than December 31, 1946.
10. Accumulated sterling balances.
(i) The Government of the United Kingdom intends to make agreements with the countries concerned, varying according to the circumstances of each case, for an early settlement covering the sterling
balances accumulated by sterling area and other countries prior to
such settlement (together with any future receipts arising out of
military expenditure by the Government of the United Kingdom to
the extent to which they are treated on the same basis by agreement
with the countries concerned). The settlements with the sterling area


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

11
countries will be on the basis of dividing these accumulated balances
into three categories (a) balances to be released at once and convertible
into any currency for current transactions, (5) balances to be similarly
released by installments over a period of years beginning in 1951, and
(c) balances to be adjusted as a contribution to the settlement of war
and postwar indebtedness and in recognition of the benefits which the
countries concerned might be expected to gain from such a settlement.
The Government of the United Kingdom will make every endeavor to
secure the early completion of these arrangements.
(ii) In consideration of the fact that an important purpose of the
present line of credit is to promote the development of multilateral
trade and facilitate its early resumption on a non-discriminatory basis,
the Government of the United Kingdom agrees that any sterling balances released or otherwise available for current payments will, not
later than one year after the effective date of this Agreement unless in
special cases a later date is agreed upon after consultation, be freely
available for current transactions in any currency area without discrimination.
11. Definitions.
For the purposes of this Agreement:
(i) The term "current transactions" shall have the meaning prescribed in Article XIX (i) of the Articles of Agreement of the International Monetary Fund.
(ii) The term "sterling area" means the United Kingdom and the
other territories declared by the Defence (Finance) (Definition of
Sterling Area) (No. 2) Order, 1944, to be included in the sterling area,
namely "the following territories excluding Canada and Newfoundland, that is to say—
(a) any Dominion,
(b) any other part of His Majesty's dominions,
(c) any territory in respect of which a mandate on behalf of
the League of Nations has been accepted by His Majesty and is being exercised by His Majesty's Government in the United Kingdom or in any Dominion,
(d) any British protectorate or protected State,
(e) Egypt, the Anglo-Egyptian Sudan and Iraq,
(/) Iceland and the Faroe Islands."
12. Consultation on Agreement. Either government shall be entitled to approach the other for a reconsideration of any of the provisions of this Agreement, if in its opinion the prevailing conditions of
international exchange justify such reconsideration, with a view to
agreeing upon modifications for presentation to their respective legislatures.


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Signed in duplicate at Washington, District of Columbia, this 6th
day of December, 1945.
For the Government of the United States of America:
FRED M. VINSON
Secretary of the Treasury
of the United States of America
For the Government of the United Kingdom
of Great Britain and Northern Ireland:
HALIFAX
His Majesty's Ambassador Extraordinary and
Plenipotentiary at Washington.


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

II. S. G O V E R N M E N T ?R1«T'.N5 OFF'.SE: 1946

STATISTICAL MATERIAL
PRESENTED DURING THE
WASHINGTON NEGOTIATIONS

TEXT OF A WHITE PAPER (Cmd. 6707)
PRESENTED BY THE CHANCELLOR
OF THE EXCHEQUER TO PARLIAMENT, December, 1945.

Reprinted in Washington, D. C.
December, 1945

BRITISH INFORMATION
SERVICES
An Agency of the British Government
.Additional copies of this paper may be obtained from the offices of the Agency
at 30 Rockefeller Plaza, New York; 1336 New York Avenue, N.W., Washington;
360 North Michigan Avenue, Chicago; 391 Sutter Street, San Francisco;
448 South Hill Street, Los Angeles.

http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Statistical Material Presented During the Washington
Negotiations
I. THE NATURE OF THE PROBLEM

1. In the Anglo-American discussions on commercial and financial
questions much study has been devoted to the factual material which
is available, in order to ascertain the magnitude of the problem and
the best and fairest means of solving it in the light of all the relevant
circumstances. The data which have been furnished are set out in
detail in the appendices which follow. The significance of these may
be made clearer by some preliminary observations.
2. The problem facing the U.K. has two aspects, both of them
directly arising out of the role undertaken by the U.K. in the
combined war effort. The first of these arises out of the deficit in
the external balance of payments of the U.K. which seems certain
to develop during the period of uncertain duration, but provisionally
estimated at from three to five years, before internal and external
adjustments can be made in the British economy adequate to restore
equilibrium.
3. The second arises out of the indebtedness of the U.K. to overseas countries in the shape of sterling balances and other liabilities
accumulated during the war. The causes leading to the growth of
these liabilities are briefly set out in this Paper, together with
statistics of their present magnitude.
II. THE CAUSES OF THE PROSPECTIVE OVERSEAS DEFICIT
OF THE U. K. IN THE TRANSITIONAL PERIOD

4. The immediate problem is the direct legacy of the U.K. effort
in the war. The foundations of the U.K.'s normal economic life are
a high degree of industrial specialization, a substantial dependence
upon imported foodstuffs and raw materials, and the maintenance
of a volume of export trade and of other sources of foreign exchange
earnings adequate to pay for those imports. Before the war the
U.K. was dependent on imports for two-thirds of the food consumed
by its people and, apart from coal, for the bulk of the raw materials
used by its industries. But the U.K. paid for such requirements by
the proceeds of its exports and by the earnings of its shipping and
other services rendered to overseas countries and of its investments
abroad.
5. The effect of the war was to bring about a severe dislocation
of the U.K. position in several respects, which will inevitably take
some years to remedy; namely, loss of exports, loss of shipping, loss
of overseas investments, increase of overseas debt, and loss of
reserves.
6. Loss OF EXPORTS. The loss of U.K. export trade during the
war was to a large extent the consequence of a deliberate act of
p_ojicy. An attempt to maintain U.K. export trade at a high level


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

3

would have stood in the way of the full degree mobilisation of manpower, production, and materials for the direct war effort which the
situation of the U.K. required as being the base of operations nearest,
to Germany. But food, munitions, and raw materials still had to be
imported. The operation of Lend-Lease from the U.S., Mutual Aid
and other contributions from Canada, and sterling credits from other
countries, made this compatible with the deliberate abandonment of
the export trade. The decision, that the U.K. should in effect disregard the maintenance of export trade in favour of the maximum
concentration of resources on the armed forces and war industry,
undoubtedly constituted a rational and proper allocation of effort
between the Allies which was willingly accepted by the U.K. in the
interests of winning the war. But the outcome has been that British
export trade shrank to less than one-third of its pre-war volume,
and, despite some recovery, may be expected to cover in 1946 not
more than one-half of the essential expenditure of the country on
the purchase of a minimum volume of imports and on other necessary
payments overseas. Thus with the end of the war and the termination of Lend-Lease and Mutual Aid a period of acute difficulty
must be faced until the reconversion of industry, the release
of manpower and the recovery and expansion of export markets have
begun to result in a substantial flow of exports. (See Appendix /.)
7. Loss OF SHIPPING. More than half of the pre-war tonnage of
British merchant shipping was lost during the war. Allowing for
new building in the war, U.K.-owned tonnage is now less than threequarters of the pre-war figure. Until the fleet has been expanded
and carrying trades abandoned in the war have been recovered, the
net income available from shipping services to supplement U.K.
purchasing power abroad will be greatly below pre-war level. (See
Appendix 77.)
8. Loss OF OVERSEAS INVESTMENTS. It is estimated that the net
income from overseas investments^ in 1945 will be less than half that
received in 1938. This reflects the extensive liquidation of foreign
securities, the repatriation of loans by overseas debtors, and the
increased interest payments to holders of sterling debts caused by
the heavy war expenditure which the U.K. has had to incur overseas.
Thus nearly all the marketable U.S. dollar securities of U.K. nationals
were compulsorily acquired for sale or pledging in order to finance
the purchase of munitions and the construction of war plants in the
U.S.A. before the operation of the Lend-Lease Act. (See Appendix
III.)
9. THE INCREASE OF OVERSEAS DEBT. The interval of time which
must inevitably elapse, before the export trade can be recovered and
the loss of income from investments and shipping can be made good,
would have brought about a position of serious difficulty for the U.K.,
even if overseas expenditure had remained at pre-war levels. But
the exigencies of the war involved the U.K. in enormous cash expenditure overseas. Large military forces had to be maintained in the
Middle East to engage the Germans there: even larger forces operated against the Japanese in Burma and the Far East. Supplies on
an immense scale had to be acquired in addition to those furnished
under Lend-Lease and Mutual Aid to sustain these forces. All this
involved a great outpouring of expenditure in local currencies, particularly in India, Egypt and Palestine, whether on troop pay, the


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

—-

*

building of aerodromes, railways or roads, or the payment of local
labour, or on the acquisition of supplies. Such expenditure could be
covered only to a limited extent by exports or by the liquidation of
investments: the result has been that the U.K. has incurred huge
debts in the form of accumulated sterling balances. (See Appendix
IV.) Nor can this substantial burden of overseas payments be
brought to an end with the day of victory. There will inevitably
remain heavy commitments to be met overseas before all British
troops can be withdrawn from the distant fronts on which they have
been engaged. Thus apart altogether from the repayment of the
war debts a further substantial, though temporary, burden of current
expenditure abroad has to be sustained at a time when British exports
and other sources of overseas income are quite insufficient to finance
even an import programme on the barest minimum level.
10. Loss OF RESERVES. Nor has the U.K. sufficient reserves from
which to fill the gap. The gold and dollar holdings of the U.K. and
of the other countries inlhe Sterling Area were mobilised and freely
spent in the early critical days of 1939-1941 mainly for the purchase
of vital war supplies from the U.S.A. During April, 1941, soon
after the passage of the Lend-Lease Act, but before its effects could
be felt, the reserves fell to only $12 million. They have now to some
extent been built up again largely because the pay of U.S. forces in
the Sterling Area brought considerable dollar sums into the country,
a state of affairs which of course ceases with, or soon after, the end of
hostilities. But they are still below the pre-war level, and are manifestly inadequate in relation to the immediate needs of the U.K. itself
and to the problem of releasing the accumulated sterling balances
which is discussed below.
III. THE MAGNITUDE OF THE OVERSEAS DEFICIT LIKELY
TO ARISE BEFORE EQUILIBRIUM IS RESTORED
11. LtJs^estimated that the increase in the Yohiine^jQ:L,£xpoii!S
over the pre-war level which will be necessary to pay for the pre-war
volume of imports, after allowing for the decline in other sources of
external earnings, is of the order of 50 per cent. Something more
than this will, however, be necessary to reach and maintain full
equilibrium. For the above calculation makes no allowance for the
following factors:—
(i) By the end of the transitional period more than 10 to
15 years will have elapsed since the dates taken as the pre-war
standard of reference. During this period the number of
adults and separate families in the U.K. will have increased
appreciably. Moreover, it is expected that the standard of
output and efficiency which will have been reached should
bring some improvement in the standard of life, and some
increase in the level of industrial production, with a consequent increase in the demand for imports of all kinds. Thus,
in the absence of restrictive measures of the type which it is
hoped to avoid, it is likely, and indeed obviously desirable,
that the volume of imports will tend to exceed the pre-war level,
(ii) No provision has been included for the repayment of
war and post-war debts.

http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

(iii) No provision has been included for the working capital
to allow credit to foreign purchasers or for other expenditure,
overseas inevitably required in the course of building up a
great volume of new trade.
12. It may be, therefore, that the full restoration of a reliable
equilibrium, which can persist without measures of restriction or
the other defensive mechanisms of the type with which it is hoped
to dispense, may require a volume of exports nearer 75 per cent,
than 50 per cent, in excess of the pre-war level.
13. It is the aim of the U.K. Government to attain this target
at the earliest possible date and to undertake, with the same energy
as in time of war, whatever measure of industrial and marketing
re-organisation and reconstruction may be necessary. But it is
impossible to guess with any precision the date at which sufficient
success will have been achieved. It is hoped that work on export
orders will have attained the pre-war level by the second half
of 1946, but the period of production and the time lag in payment
mean that actual cash receipts will not attain the corresponding
level until after the end of the year. This, moreover, represents so
rapid a reconversion from the very low level of export activity
existing in 1945 that it must be regarded as optimistic.
14. Other factors affecting the future balance of payments have
been discussed above; in particular, loss of investment income and
loss of shipping earnings. A further factor of considerable importance in the immediate future is Government expenditure overseas.
Before the war, such expenditure was only an insignificant figure.
During the war, as explained above, it has risen to a very large
figure; and although it will fall rapidly with the end of the war, it
cannot be abruptly and completely terminated. A period must
elapse before troops, due for demobilisation, can be brought home;
and some time will be needed for all commitments incurred during
the war to be brought to account. Moreover, the necessity to maintain occupation forces abroad for the maintenance of world order
will constitute a continuing commitment, although not, of course, on
a scale anywhere comparable with that of war expenditure. But in
any case a substantial outgoing on account of Government expenditure overseas must be foreseen in the immediate future.
15. Any estimate of the balance of payments in 1946 \ould be so
precarious, in view of the large uncertainties affecting many of the
factors discussed above, that it is useless to attempt to provide detailed estimates. But a study of the position indicates, on the
assumption that the price level both of exports (f.o.b.) and imports
(c.i.f.) will be approximately double the pre-war level in terms of
sterling, that the order of magnitude of the deficit, with a fairly large
measure of uncertainty, may be $3 billion. This figure is accordingly
adopted as the starting-point of any calculations as to the future
position. (Note: For convenience of reference, estimates of the
balance of payments in 1936-38 are given in Appendix VII.)
16. It is even more difficult to foresee the rate of further expansion
of exports in 1947 and 1948. On the basis, however, of a $3 billion
deficit in 1946, it would not be safe to base policy on the assumption
of a further deficit of less than two billion dollars to provide for

http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

6

_>
the two years 1947 and 1948 taken together and for some more
* modest deficiency in 1949 and 1950 before the attainment of stable
equilibrium.
17. This leaves us with a cumulative deficit, which may well be |
$5 billion or even higher. It must be emphasized once again that
these estimates are very precarious. They are fully as optimistic as
any prudent person would adopt as the basis of a decision, in view
of the extreme uncertainty of the conditions which will prevail in
Europe and elsewhere in the years immediately ahead of us; in view
also of the international obligations and responsibilities which the
Government of the U.K. may have to assume in the pacification and
restoration of the shattered world. Admittedly, if all goes extremely
well, if no unforeseen contingencies arise, and if the uncertain factors
mostly turn out on the favourable side, the ultimate figure to be
provided should work out at less than the above. To meet this
deficit, and at the same time to release some part of the accumulated
sterling balances, the U.K. has to rely on its own reserves, and, in
the main, further external credits.
In face of the uncertain outlook of 1946 and the doubtful
prospects of trade in Europe and the Far East in the early post-war
years, in addition to the uncertainties inevitably arising out of a
reconversion on so large a scale as is involved in increasing the
volume of a country's exports by more than 50 per cent, (see
Appendix VIII) any kind of exact estimation covering three to five
years ahead is obviously impossible. But if difficult commitments
are to be undertaken and onerous responsibilities accepted, it is
necessary to set out on a basis sufficient to give some measure of
confidence, without which all would fail, and to set at rest undue
financial pre-occupation, which would be sure to interfere with any
confident sharing of responsibilities.
The appendices which follow provide the relevant factual data
without attempting any precarious forecasts for the future.
APPENDIX I
Loss of Exports

1. Diversion of Manpower to the Forces and War Production.

During the war every effort was concentrated upon building up the
largest possible Armed Forces and war production consistent with
maintenance of minimum civilian needs. This was achieved in a
number of ways—by conscripting both men and women to increase
the labour force, including a substantial number of women, who will
not remain in industry, by increasing substantially average weekly
working hours and by cutting to an absolute minimum production of
every kind other than for direct war purposes or essential minimum
civilian needs. The export industries were stripped of manpower;
civilian supplies and services of all kinds were reduced to the greatest
possible extent. The following table (excluding Northern Ireland—
and excluding men over the age of 64 and women over the age of 59)
shows changes in the distribution of the British labour force between
1939 and 1944 and the extent to which export industries and the
distributive trades were affected.

http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

TABLE 1
DISTRIBUTION OF LABOUR FORCE IN GREAT BRITAIN
Millions
Mid 1939

Mid 1944

Mid 1945

0.6
1.4
1.3

12.3

2.9
1.3

5.2
5.0
0.3
9.5
1.9
0.1

5.2
4.0
0.4
9.8
2.0
0.1

19.8

22.0

21.5

Armed Forces and Civil Defence
War Industries (!) __. „
Direct Export Industries
Other Industry (2 )„
Distributive Trades
Unemployed
Total ... . .. __

(!) Munitions and other military stores. Excluding Government Service
and the contribution to the war effort of transport, food, public
utilities, etc.
( 2 ) Includes all occupations (including Government Service and Professions) not otherwise classified.

2. Wartime Export Trade. (Produce and manufactures of the
United Kingdom.)
The vital role of exports in the United Kingdom Balance of Payments has been referred to in the Paper, and pre-war figures appear
in Appendix VII. However, there should be noted here, in the
context of the concentration of manpower and productive resources
upon war needs, the extent to which normal export trade has had
to be sacrificed. The following table shows the income derived from
exports and, since the later receipts reflect increases in world prices,
the amount of exports by volume before and during the war.
TABLE 2
UNITED KINGDOM COMMERCIAL EXPORTS
Index of
£ millions
Volume
1938
471
100
1939
440
94
1940
411
73
1941
365
56
1942
270
36
1943
233
29
1944
258
30
1945 Jan./Sept.
272
42(i)
(!) Increase of exports in 1945 is partly due to exports for relief
purposes.

APPENDIX II
Shipping Losses

The United Kingdom entered the war with a merchant fleet of
some 22 million deadweight tons. In the course of the war more
than half this tonnage has been lost as the result of enemy action.
Part of the loss has been made good by new building and acquisitions;
but, excluding 31/2 million tons of Dominion and foreign-owned vessels
now operating under charter, the United Kingdom merchant fleet
at 30th June 1945 amounted to less than three-quarters of the pre-war
fleet. The following table summarises the position:—

http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

8

.

TABLE 8
U.K. AND COLONIES MERCHANT SHIPPING POSITION(i)
(1600 gross tons and over)
Million deadweight tons
Dry Cargo
Tankers
Total

Position at 3rd Sept. 1939
Add: Gains—
New Building
Captures
Acquisitions (not returnable)
Acquisitions (returnable)

17.7

7.0
0.6
, 1.1
4.4

Total Gains
Less: Losses—
Pre-war tonnage
Tonnage acquired during war

22.1

4.4

8.7
0.7
1.8
4.6

1.7
0.1
0.2
0.2

13.1

2.2

15.3

30.8

6.6

37.4

10.7
4.5

13.0
5.0

2.3
0.5

15.2

2.8

18.0

Position at 30th June, 1945_
Less: Returnable _

15.6
3.4

3.8
0.1

19.4
3.5

Position after return of returnable tonnage ( 2 ) _ _ _ _

12.2

3.7

Total Losses

15.9
(!) It is not possible to prepare an analysis on this basis of U.K. shipping
alone (i.e. excluding vessels on Colonial registers) but the fact that
the figures are not appreciably affected by the inclusion of vessels on
Colonial registers is seen from the fact that at 3rd September, 1939,
these totalled 0.5 million tons and at 30th June, 1945, 0.2 million tons.
2
( ) Subject to losses and gains after 30th June, 1945.

APPENDIX III
Loss of Overseas Investments
1. Repatriations and Realisations During the War.

The proceeds realised from the sale overseas of U.K.-owned investments requisitioned or otherwise repatriated during the war (i.e.
September 1939 to June 1945 inclusive), so far as known, were as
follows:—
TABLE 4
PROCEEDS OF SALE OR REPATRIATION OF OVERSEAS INVESTMENTS DURING THE WAR
Sterling Area
$ millions
Dominions (Australia, New Zealand, South Africa
and Eire)
810
India, Burma and Middle East
1,400
Colonies and other Sterling Area Countries
60
Total Sterling Area
North America

U.S.A.
Canada _

Total North America
South America

2,270
820(1)
905
1,725
385

Europe

55

Rest of World ..

65

Total All Countries

. 4,500

Does not include collateral for Reconstruction Finance Corporation Loan.

http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

2. Remaining Overseas Holdings.

While in Section (1) above it was possible to show receipts from
securities realised during the war it would not be possible to give
an estimate in terms of capital value of the residue to which any
real significance could be attached, in view of the technical difficulties of arriving at any satisfactory basis of valuation.
An approach can, however, be made in terms of income, and this
leads to results of significance for the present purposes. For the
figures of net income, that is of income receipts arising out of capital
investments overseas, less income payments arising out of overseas
holdings of sterling securities, represents the contribution to the
United Kingdom balance of current payments on account of capital
assets and liabilities. The following figures show dividends and
interest payments on all types of investment other than shipping
and insurance.
TABLE 5

U.K. OVERSEAS RECEIPTS AND PAYMENTS OF DIVIDENDS, INTEREST, ETC., IN 1945
(Partly estimated)
($ millions)
Gross U.K.
Receipts (1)
Sterling Area
Dominions (Australia, New Zealand,
S. Africa and Eire)
185
India, Burma and Middle East
45
Colonies and Other Sterling Area Countries 65
Unallocated Sterling Area
90
Total Sterling Area

385

North America
U.S.A.
Canada .
Total North America _
South America _____

185

95

65

30

5

105

25

20

5£

Total All Countries .

200

125
-45
15
90

55(4)
10

45 ( B )

Rest of World and Unallocated

60
90
50
-(2)

Net U.K.
Receipts

35(3)
60
_ 110

Europe

Gross U.K.
Payments (!)

085

__ -(2)
295

_2Q
50

50_
390

( 1 ) Gross receipts and payments include certain collections of interest on
external securities remitted to holders overseas. This does not, of
course, affect the figures of net receipts.
( 2 ) Less than $5 million.
( 3 ) Includes income on investments (other than insurance holdings)
pledged to R.F.C.
( 4 ) Includes interest charges on R.F.C. Loan.
( 5 ) Includes non-recurring payments of arrears arising from the war years.

Apart from the immediate balance of payments deficit referred to
in paragraph 15 above, the U.K. is faced with problems arising put
of the deterioration in her overseas financial position on capital

http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

10

account. This has taken the form partly of a reduction in overseas
capital assets through sales and repatriations during the war, partly
of a reduction in available reserves, but mainly of the accumulation
of very large external liabilities.
The following table shows the growth of external liabilities:—
TABLE 6
EXTERNAL LIABILITIES OF THE UNITED KINGDOM
($ millions)
Net quick
TOTAL
External
Overseas
External 2
Loans
Liabilities
Liabilities ( )
3,685
31st August
1938(1)3,685
1,920
1939 (i)
1,920
do.
2,240
31st December 1939(1)
2,240
2,960
do.
10
1940(1)
2,950
1941
4,800
435
5,235
do.
1,220
7,325
1942
6,105
do.
9,930
1,235
1943
8,695
do.
1,210
12,385
do.
1944
11,175
1,225
, 13,525
1945
12,300
30th June
(Conversion of sterling into U. S. dollars from 31st DecembeV- 1939 to
30th June 1945 is at £1=$4.03. For the sake of comparability a similar rate
has been used for 31st August 1939 although the rate then operative was
£1=$4.33. Conversion for August 1938 is at £1=$4.85, the rate then current.)
(!) Figures for earlier years are subject to a greater degree of uncertainty
in estimating than those for later years.
( 2 ) Comprising banking liabilities less assets, and funds held in the United
Kingdom as cover for overseas currencies, etc.

The following table gives a geographical analysis of overseas
liabilities:—
TABLE 7
EXTERNAL LIABILITIES OF THE UNITED KINGDOM BY AREAS
($ millions converted at £1=$4.03)
Outstanding on:
31 Dec. 31 Dec. 31 Dec. 31 Dec. 30 June
1941
1942
1943
1944
1945
Sterling Area—
1,550
950
1,380
765
Dominions
560
6,980
2,800
4,595
India, Burma and Middle East 1,605
6,195
Other Sterling Area Countries
1,285
2,235
1,910
1,560
2,445
Total Sterling Area
N. and S. America
Europe (i)
_
Rest of World .

1

3,450
965
725
95

5,125
1,030
975
195

7,455
1,120
1,130
225

TOTAL
5,235
7,325
9,930
Including dependencies of European countries.

9,810
1,130
1,205
240

10,975
1,225
1,075
250

12,385 | 13,525

APPENDIX V
Loss of Reserves

The following table shows the movement of United Kingdom
reserves during the war. It will be seen that they have been restored
to some extent, largely due to the pay of U.S. Forces in the U.K.,
but they are still considerably below pre-war levels. The figures are
shown after deduction of outstanding liabilities to provide gold
against sterling liabilities and of liabilities to convert U.S.A. holdings

http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

11

^)

of sterling into dollars on demand (these liabilities are not included
in the figures in Table 6). Gold is valued throughout Table 8 at
$35 an ounce; and liabilities to convert sterling holdings into dollars,
at £1=|4.03.
TABLE 8
NET GOLD AND U.S. DOLLAR RESERVES OP THE UNITED KINGDOM
($ millions)
31st August
1938
4,220(1)
do.
1939
2,455 (i)
31st December 1939
2,225(1)
do.
1940- ...
. 300
do.
1941
.
395
do.
1942
700
do.
1943
1,300
do.
1944
1,710
30th June
1945
1,840
.
31st October 1945
,
(J.,840 (provisional)
(!) Including an estimate of private holdings of gold and dollars subsequently requisitioned.

APPENDIX VI
Overseas Disinvestment

Table 9 summarises, over the period from the outbreak of war
in Europe to 30th June 1945, the effect of the war upon the United
Kingdom in terms of capital loss in the overseas financial position.
This loss has taken the form of:—
(1) the realisation of investments (Appendix III) ;
(2) the incurring of debts in the form of sterling balances, etc.
(Appendix IV) ; and
(3) the running down of gold and dollar reserves (Appendix V).
The sum of these represents the loss of overseas wealth which Britain
has suffered in order to meet overseas military expenditure and the
cost of essential services and supplies from abroad.
TABLE 9
UNITED KINGDOM EXTERNAL DISINVESTMENT(')
(So far as recorded: probably an underestimate)
($ millions)
Decrease or
Realisation
Increase in Increase (—)
of External
External
in Gold and
Unallocated
U.S. Dollar
Period Camtal Assets Liabilities
Reserves (1)
70
320
230
Sep/Dec 1939
235
660
720
-35
1,925
Year
1940
2,275
- 95
20
"
1941 1,105
-305
15
1942 „ 915
2,090
10
-600
2,605
1943... 760
2,455
50
1944... . 575
-410
1,140
-130
Jan/Junl945-_ 250
65

Total
855

3,270
3,305

2,715

2,775
2,670
1,325
,

11,605
195
16.915
4,500
615
(!) Sterling converted at £1=$4.03 and Gold Reserves valued at $35 per
ounce fine.
APPENDIX VII

For convenience of reference Table 10 below shows an estimated
statement of the average U.K. Balance of Payments for the years
1936 to 1938. And while in other chapters of this paper values have
so far as possible been expressed in terms of dollars, Table 10 is

http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

12

expressed in sterling sinc?Tchanges in the dollar/sterling rate rei*_<,r
a comparison of converted figures taken at the current or past
exchange rate misleading:—
TABLE 10
ESTIMATED AVERAGE U.K. BALANCE OP PAYMENTS FIGURES IN THE
YEARS 1936 TO 1938 (i)
(£ millions)
Imports:—
Merchandise retained
866
Silver bullion and specie
18
Total

884

Exports:—
U.K. produce and manufacture
Silver bullion and specie
Total

- 496

Excess of Imports over Exports
Net Government payments overseas
Total
Estimated
Estimated
Estimated
Estimated

net
net
net
net

477
19

388
7
395

income from shipping
105
income from overseas investments .
203
receipts from commissions, insurances, etc. 37
receipts from other sources
7

Total -

352

Estimated Debit Balance

—43

(!) Re-exports and imports for re-export excluded.

APPENDIX VIII
General Conditions

The preceding Appendices have been concerned primarily with
the financial problems confronting the United Kingdom at the end
of the war, a major element being the need to restore and increase
the export trade. This Appendix records some of the physical factors—losses of internal capital, both industrial and domestic, restoration of civilian supplies and demands upon the labour force—which
compete with or complicate the production of goods for export.
1. Destruction and Depreciation of Industrial Resources and Other
Property.
War damage to property in the United Kingdom by bombing and
rocket attacks has, of course, been extensive.
Houses destroyed or damaged by enemy action in the United
Kingdom totalled 4,000,000. Of these 210,000 were totally destroyed,
and 250,000 were so badly damaged as to be rendered uninhabitable.
The amount already paid out for compensation by the War
Damage Commission is $1,084 million. The total damage to property
is estimated at $5,800 million at current replacement costs, equal to
$3,440 million at 1938 replacement costs.
Much of the property destroyed has consisted of industrial plants
which were naturally one of the enemy's main objectives. But over


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

13

above such losses, United Kingdom incTustrial capacity has been
run down by the deliberate policy of deferring all but the most vital
repair and maintenance. Thus during the war the United Kingdom
has not merely lived on its external capital. It has also suffered a
very considerable measure of domestic disinvestment. The amount
of this domestic disinvestment is shown in Table 11. The figures
shown represent simply the amount by which industrial and other
enterprises have been compelled, by shortage of materials and labour,
to allow arrears of normal depreciation and obsolescence to accumulate. They do not take account of destruction by the enemy. Nor do
they allow for the substantial running down of stocks of clothing and
household goods or of arrears of normal maintenance of private
residential property.
TABLE 11
DISINVESTMENT WITHIN THE UNITED KINGDOM
1940
1941
1942
1943
1944

($ millions)
391
1024
653
782
717

.

3567

The above figures do not take account of possible post-war values
of capital formation in the form of Government war expenditure.
While these assets may have some peacetime use, their value for
this purpose is not likely to be large.
Summarising the foregoing and including shipping losses already
referred to in Appendix II and Overseas Disinvestment referred to
in Appendix VI, total United Kingdom losses of national wealth
may be stated very approximately, to the extent that they can be
estimated, as follows:—
TABLE 12
Physical destruction—on land
shipping (including cargoes)
Internal disinvestment
External disinvestment

$ billions
6
3
3%
17

This omits any estimate of private (i.e. non-industrial) disinvestment—deterioration of dwellings, reduction of household inventories,
etc.—for which no estimate can be given. On the other hand, it also
fails to allow correction for any possible post-war value of wartime
capital work undertaken by the Government. But in any case, a
figure of $30 billion would appear to be of the right order. Pre-war
United Kingdom national wealth has been very roughly estimated
as of the order of $120 billion (at present prices), so that the loss of
national wealth over the war period is about 25 per cent.
2. Demands on Production and the Labour Force.

Appendix I has shown not only the diversion of manpower from the
export industries, but the manner in which the whole distribution of
the labour force as between civil production on the one hand and the


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

14

Armed Forces and direct munitions production on the other ii«3
been radically changed to meet war needs. The delays and difficulties of demobilisation and redistribution are in themselves formidable. They are rendered even more so by the special demands
which have accumulated during the war.
The building trade will make substantial demands for both direct
building labour and production. Immediate housing needs, to make
good destruction and the cessation of building during the war, are of
the order of a million and the long-term housing programme calls
for the building of 4,000,000 houses in all in 10-12 years. The labour
force in the building industry, which amounted to 400,000 at the end
of June, 1945, is to be increased to 905,000 by June, 1946, and is likely
to be around an average of 1,250,000 over the subsequent 12 years,
or about one-twelfth of the prospective total male population
aged 14-64.
Manpower has been depleted by military and civilian casualties.
The industrial population feels the inevitable after-effects of the
long period of overwork and overstrain in all the difficulties—blackout, queues, food shortages, raids, etc., of wartime Britain.
Domestic capital in all but the war industries has been allowed to
run down. There is an enormous backlog of renovation and reequipment to be tackled.
Stocks of clothing and household goods have been drastically cut
and for most families must now be approaching the point of exhaustion. Moreover, so far as textiles at least are concerned, the immediate outlook is worse, not better. People have been living on their
capital of such goods and even without reconstitution of that
capital, the mere replacement of wear and tear must call for a great
expansion in output. Extensive studies of comparative consumption levels in the U.S.A., U.K. and Canada have been made by the
Combined Production and Resources Board and published on 21st
October, 1945. It is not proposed here to go in detail over the ground
so fully covered by these studies. It will be sufficient to give the
following table, showing purchases per capita of consumer goods and
services in the United Kingdom.
TABLE 13
CONSUMER GOODS PURCHASED IN THE U.K. AT 1938 PRICES
PER HEAD OF POPULATION
1938
£87.9
1941--.
74.4
1942,.
74.1
194371.7
1944
73.9
Change from pre-war to 1941
—15%
Change from 1941 to 1944
- 1%
Change from pre-war to 1944
—16%

The following table shows also the proportions in which the United
Kingdom national income was spent in the years 1938, 1941 and 1944.


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

»
v^

TABLE 14 V
EXPENDITURE OF U.K. NATIONAL INCOME
Per cent of
national income
1938
1941
1944
War
8
53
53
Consumption
„ 87
62
57
Net non-war 'capital formation at home
a n d abroad _
5 — 1 5 — 1 0
Total National Income

100

100

100

Thus the difficulties to be overcome in restoring external financial
equilibrium and expanding exports which are formidable enough in
themselves, have to be faced at a time when there are no less pressing demands at home to make good war losses and deprivations alike
of industry and of a civilian population whose needs, beyond the
barest minimum, have for six years been subordinated to the demands of war.


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

16

KffY BRITISH FIGURES

!• Estimated Deficits in U.K. Balance of Payments

194,6 - 51

U.K. est. (White Paper) U. S. est. (Dept. of Commerce)
1946

3,000,000,000

1,700,000,000

1947)
1948)

2,000,000,000

steadily decreasing

1949)
1950)

modest deficiency before
equilibrium established

______4,250,000,000 deficit thru 1949

In excess of 5 billion for period 1946-51
2. Exports
a. Loss of exports during war - export trade down to less than 1/3
of pre-war volume
b. Br. est. that postwar level of exports should be as much as 75%
higher in

3«

Volume than *3&*tb Qnsvre

efwlibnvrvi

in ba-lancc. of

f>*<f nte *t*

Shipping
a. more than half of pre-war tonnage lost during war.
b. Tonnage now 3/4 of pre-war figure.
down 30$)

(Net income $300 million or

4* £988 of overseas inves.tfleiyt
TnCO**l

a. (U.K. est.J^Approx. |400 million or less than half
b.

1938 figure

(Commerce Dept. est.) Net income approx. 525 million or down 35$
from prewar figure.

5* Increase in external liabilities Approximately 14 billion
(Overseas disinvestment Sept. 39 - June 1945. Approx, 17 billion)
6. Go^d an^ dollar reserves


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Now approximately 2 billion.
(2.5 billion in August 39)

1.

U.K. Swp^rts &« percort of all other countrle*
exports

a* Perctnt of U.K. food i^orted llro® abroad
3* P«r««ftt of m»rld isporte accountod for by

for by

4* Fore«st of world
»t*

5. Foroent of

account »d for b

?* porottit of foroijB tacchatifo «amod ^ tacport*

18 percent

S. peretirjt of forotga axchango oarno^ by
V* r^re«fit of forelpi

oarnod by shipping
13 paroont

10* Foro«nt of

y ia*uranoo
bttrJang incoow, eto.

5 pereint

11* for«10i ijiv«fjtiaent« told to HBKIO* the nar

I 4*5 billion

12.

111.6 btliioa

'-stots contracted 1^ U.K. to £Lnano« tha

13* i:«or«a»o la fold «cd dollar


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

*T?

^^^

•MwiAvhAVMft

billion

15* 1945 export* *@ percent of 1936 (volwa*)
16* 1945 incowi fro® investments an p«re«nt of
1933 (pound* sterling)
17« 1945 ®»r«h*nt marine «• percent of 1933 (tonnage)

40 pereaot
72 perctant

18. Briti«h *«tl»t* of transitional bfelane* of
of

If *

19, li»ati«Hi wMwrxt tUK. MR draw
20,

L&st d«t« on whleh withdricwmls perwittwl

21,

B<drt«diilc^ int«r«0t yat« (p«r
(b^gtnuinjl to 1951)

22,


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

in

int«re«t rmi«» if ^qual sums sr«
ecenber of 1946, 1947, and

$3,750 alUioti
31, 1951

1*76 p«ro«it

of

1*44 pMNMBt
of

2*2 MUion

T

70ELD T£AB .1 DEBT OF THE UI'TIT3I) jqiTGDOK TO I ; UHITED STATES

(Sxcerpt from the Hearings "before the Committee
on Banking and .Currency, United States Senatef
March 6, 1946, pages 78-79)

The United States acquired United Kingdom obligations amounting to $4,277,000,000 between April 1917 and July 1919.
About 86 percent of this total was loaned before the armistice
and 14 percent after the armistice:
April 1917 - jov. 11, 1918
ITov. 11, 1918 - July 1919

S3,696,000,000
581,000,000

Total

4,277,000,000

<•
The debt was funded in June 1923. Before that date, Britain
had paid $202,181,641.56 on principal and 3357,896,657.11 on interest.
After funding, Britain met all payments on interest and amortisation on schedule, until the moratorium proposed by President Hoover
became effective on July 1, 1931. Payments 'under the funding agreement were as follows!
Principal
Interest
Total

.,,
,
,

3 232,000,000,00
1,232,770,518.42
1,464,770,518.42

It should be noted that Britain paid us, before and after funding, a total of $434,181,541.55 on principal, and $1,590,657,175.53
on interest, or a total of 32,024,848,817.09.
At the time of funding in 1923, the total obligation was fixed
at $4,600,000,000, This has been reduced by the principal repayments
shown in the preceding paragraph to $4,368,000,000,
Interest accrued since the moratorium year amounts at present
to $2,123,614,782.58.

,
The total present obligation, principal and accrued interest,
is therefore 35,491,514,782.58.
In evaluating Britain's record on repayment of its r:/orld T'/ar I
indebtedness to the United States, one must not forget the relation
of this debt to reparations payments from -ermany: it was indissolubly
linked to G-erman reparations. It was anticipated that Britain would
meet her payments to the TTnited States in large part by payments to
be exacted from Germany,
The Honorable Andre'-/ Mellon, Secretary of the Treasury at the
time of the funding of the world *rar I debts, acknowledged this
relationship when, in a letter to President Hibben of Princeton
University, dated March 15, 1927, he said;

http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

—

2 —

n

* * * it is obvious that your statement that the debt agreements which we have made impose a tremendous "burden of taxation for
the next two generations on friendly countries is not accurate,
since the sums paid us will not come from taxation "but will "be
more than met "by the payments to "be exacted from Germany.11
T

7hen reparations payments ceased, Britain's ability to continue
payments on her World War I debt was greatly diminished.
In view of this, and the fact that the years after 1929 brought
in their train a world-wide economic depression, diminishing trade,
military aggression in one quarter of the world after another and,
finally, a global conflict in which the freedom-loving nations fought
for their lives against Fascist aggressors, it is not surprising that
Britain's payments have been discontinued.
Furthermore, all but a small part of the World War I debt was used
by England, in its war effort. During this war, we have adopted the
policy of lend-lease, which is based upon the philosophy that the cost
of war materials consumed in fighting a common enemy should not be
charged against the user as a loan bearing a high rate of interest,
but should be allocated eouitably as part of the cost of the joint
effort. Had this philosophy prevailed during the First World War,
we should probably have held the United .Kingdom accountable only for
the $581,000,000 loaned after the armistice.
The United States has received from the United kingdom $434,181,641.56
as principal repayments on the loans made in connection with the First
World War. This is a repayment of almost four-fifths of the principal amount loaned after the armistice. In addition, we have
received $1,590,667,175.53 of interest. In other words, we have
received payments from the United I'lingdora aggregating more than
$2,000,000,000, or more than 300 percent of the sum available to
Britain for postwar purposes after World War I.
Under the terms of the financial agreement, Britain will be
required to pay only about 160 percent of the sum available for
postwar purposes this time. The financial burden which the agreement will place upon the Government of the United Zingdom is a much
more reasonable one than that imposed after the last war, and one
which it should be able to meet.
For these reasons, the failure of Britain to maintain payments
on the World War I debt provides no basis for believing that they
will default on the proposed credit.


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

I

Principal line of questioning in the Hearings so far.
1. Britain's ability to repay the loan (nearly always tied in with discussion on Britain's defaulting on World War I loan)
2. The U.S. foreign lending program - magnitude, including loans to
France and Russia, Export-Import Bank lending authority and role
of NAG.
3. U.S. ability to make the loan at this time:
a. National public debt
b. National income
c. Other requests(such as veterans)
d. Inflationary impact of loan - types of U.S. goods require4e. Total U.S. resources
4«

Meaning of sterling area, sterling bloc, bilateralism.

5. What are the specific concessions obtained by U.S. and what do
they mean.
6. Effect on Bretton Woods of a failure of the loan to go through.
7. Won't the loan promote British socialism?
8. The terms of the loan - especially interest waiver provision.
9. Movement towards freer v/orld trade and International Trade Organization
(Crawford harps on this). Won't latter organization infringe on
Congressional authority over tariffs, etc.? Won't it commit U.S. to
trade practices such as bulk purchasing, etc.?
10. Political line of questioning: won't the loan tie us in with Britain
in a partnership against Russia, won't it create friction if we lend
to Britain, then not lend to Russia, etc. etc.
11. Shouldn't we require as a condition to loan that the British hand over
bases permanently?
II Line Taken by certain Opponents of the loan.
Crawford
1. Importance of management of public debt, fiscal measures, and production measures in controlling inflation.
2. Role of International Trade Organization.
3. Tie-in of British loan, Bretton Woods, increased Export-Import Bank
lending authority.
Barry
1. Meaning of bilateralism, sterling bloc and question whether the British
loan will do any good.
2. Consequences of British withdrawal from Bretton Woods

http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

- 2-

Buffet
1. U.S. capacity to make the loan. Essential to keep budget balanced, etc
2. Won't loan further the British "national socialism"? (he keeps using
this term and I think he should be asked to explain what he means).
Smith
1.
2.
3.
4..

How can we afford to lend anything to any foreign power.
Does the loan imply stabilization of the pound.
Doesn't the loan imply aiding the socialization of Britain.
Will the British repayV (They defaulted on the World War 1 debt didn't
they '.')
5. Isn't the British goose already cooked?
6. Do you believe in God and the Gold Standard?

Miss Summers
1. Do you read the Times Herald and John O'Donnel? etc.


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Key Figures given by previous speakers before House Committee
Vinson
1.9 billion
(1) Net gold and dollar reserves as of January 1, 194-6
(as against 4 billion in 1937
Securities and other assets in
U. S.

895 million pledged
200 million unpledged
365 million direct investments

(2) Gross national production in 194-5 - i-i-97 billion
(3) Total national resources - $600 billion (guess)
(4-) Foreign holdings of U.S. balances - Treasury promised to supply figures
Clayton
(1) British Empire and Sterling Area - approx. 50$ of world trade
(2) 75$ of world trade in terms of dollars and sterling after war
(3) $orld War I debt
4.6 billion
of which only 600 million furnished subsequent to
end of war
(4-) Expenditure of line of credit 1/3 - 1/2 directly in U.S.
(5) Gold and dollar contribution, initial UK, to Fund and Bank
194- million to Fund
26 million to Bank
(6) USSR Area - less than 5% of international trade
Eccles
(1) US national debt
1.73 times 194-5 nat. income
UK
"
"
2.65 times 1945 nat. income
(2) Servicing of US public debt 2^> of 1945 national income (approx. 4 bill)
Servicing of UK public debt 5-09$ of 1945 national income
(3) UK capacity for production normally around 1/4- of US
(4) US national income 1945 - approximately 155 billion
UK national income 1945 - approximately 32 billion
(5) UK public debt 96 billion'in 1945


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

May 6, 1946

SUBJECT: Some possible consequences of Failure
of Congress to pass the Anglo-American
Financial Agreement.

The following comments are based largely on impressions gained
over the past year from casual reading of newspaper discussions of the
loan negotiations, a (very hasty) reading of the recent Senate Hearings,
and several discussions with not altogether unbiased participants in
the original negotiations.

I shall not bother attempting to support

the conclusions with any statistical data, since I have never had
access to any reliable information of that sort.
Basically I would argue that the Anglo-American financial agreement should be defended almost entirely on the grounds that it is
indispensable to carrying the whole U. 3. approach towards postwar
international, commercial and financial relations embodied in the
Bretton #oods Act and approved by Congress, and because of its vital
postwar
implications for/Anglo-U.S. relations. It seems to me that little
stress should be placed on the adverse impact on the British and U. S.
economies of a failure of the loan to go through. I have suspected
all along that proponents of the loan have painted the technical balance
of payments position of the United Kingdom in somewhat too somber colors,
with the inevitable deduction by critics that we are busy "saving" the
fimpire again. On the contrary, without questioning the balance of
payments figures used in the loan negotiations, or the British need
for the loan, I see no reason to doubt that the U. K. tide itself over
the ^S-'Sl period by means of a fairly drastic discriminatory commercial

http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

- 2-

policy and very possibly without quite the adverse effect to the UK
economy that is commonly assumed.*
It is my impression that the various conditions attached to the
loan have made it a somewhat unpopular measure and definitely touch-and-go
as far as British public opinion is concerned. Consequently, if the loan
falls through or if Congress adds unacceptable conditions to it, I believe
that immediate steps directed toward drastic reduction of the least
essential imports from the United States would be taken by the UK
authorities and would meet with general public support.

The general

pattern of the discriminatory trade measures that would probably be
adopted by the UK has been brought out by various of the proponents of
the loan, and I do not see how one could seriously quarrel with their
conclusions. In addition to taking immediate steps to reduce drastically
the least essential imports from the U.S., I believe that the UK Treasury
would take prompt steps to capitalize on the emotional reactions within
the Sterling area to a falling through of the loan by pressing measures to
strengthen the wartime Sterling area relationships.

Also, there would be strong

incentive to push through as quickly as possible bilateral trade agreements
with the Western European countries and members of the former Sterling bloc,
as well as undertake an active drive for markets throughout the world. I
think, in fact, that for good political reasons the tempo of the effort
would turn out to have been much faster and the measures adopted more drastic
than actually required by the situation.
The very harmful long-run economic consequences mt were also brought
out clearly by the proponents of the loan in the Senate hearings.

I am

inclined to place even more emphasis on the short run effects, which I

*T
http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

» •»

- 3-

think coald prove extraordinarily pernicious, both for the United States
in general and this Bank in particular.
On the assumption that the UK would immediately withdraw from
the International Fund and Bank as a result of a failure of the loan
to go through, the whole Bretton /foods program would be undermined at tts
very inception.

The rest of the world would have every reason for coming

to the conclusion that the United States at this stage is incapable of
pursuing in a sustained fashion a constructive |irmgram international
economic program.

I have always felt that the "prizes" of bretton #ood

rather than its broader objectives, were the major source of its appeal
outside this country and that bilateralism and exchange control still
have a tremendous appeal, particularly to governments with a serious
"transitional" balance of payments problem. Hence I believe that there
would be a fiTx&txpv&mati widespread tendency to follow promptly in the
Sterling area's footsteps and embark upon bilateral trade practices
with alacrity even.
In addition, the British measures would result almost immediately
in numerous points of friction between the UK and the U.S. The economic
impact of the measures would probably be selective rather than general.
»Vith the present abnormal relationship between

internal U.S. demand

relative to available supplies and the volume of unsatisfied non-British
foreign demands for U.S. goods, backed by dollar balances and available
credits, it should be several years before any relative decline in UK
demands (as compared with what they would have been if the loan went
through) would have any marked impact on the overall U. 3.
economy. In particular cases, however, especially in the case of tobacco
and motion pictures, the injury to U. S. interests would be severe

http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

- 4-

In the UK, on the other hand, there might well be a tendency on the
part of the general public to blame nearly all the hardships of the
transitional period on the U. S. and its failure to grant the loan.
In any event, the various frictions and mutual irritations would certainly
complicate the task of the State Department and Foreign office in a
critical period.
As far as this Bank is concerned, the gravest practical consequences
Oand Fvnd.

would arise from a withdrawal of the UK from the International Bank, if
A

such took place following a failure of the loan to go through. Unless
the USSR then entered both organizations, as I understand it, they would
have to suspend operations. As a result the Export-Import Bank and the
private U.S. money markets would be the principal, if not the only, source
of funds for reconstruction and development and exchange stabilization
purposes in this period. In effect the Export-Import Bank would be asked
to take the place of the World Bank and Fund, This would pose, for the
Bank in an acutely aggravated form, all the problems already raised by
the Chinese, French and Polish loans. The magnitude of the demand for reconstruction and development and short-term balance of payments adjustment loans
is obviously vastly in excess of any additional amount of funds that
Congress is likely to grant to the Export-Import Bank. Under these circumstances I do not see how the Bank could escape being subjected to complete
domination by the NAC and its loans made automatically on the basis of
a
their decisions. It would thus become in effect/ra passive adjunct of
the State and Treasury Departments and would be regarded as such. It seems
to me that this eventuality would bring the Board of the Bank face to face


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

* • 0

- 5/
with a fundamental issue — could the Bank yield completely to pressures
from the Executive Departments of the Government to using it as the means of
carrying out the aims of Bretton Woods System while the Sank and Fund are
dormant without a specific mandate for its use to such purpose from Congress,
Already in the case of the French loan, although I have no quarrel with the
general approach towards the French problem adopted by the Departments, I am
not satisfied that the Bank can provide funds in the amounts specified by
the NAG for the general purpose of modernizing the French economy without
approaching the borderline of inconsistency with the Export-Import Bank Act
of 194-5«

The pressure to use the Bank as a passive loan department of the

State and Treasury in pursuit of broad range economic and urgent short-run
political considerations is, I think, tolerable at this point only because
of the presumption that the International Bank will be in operation shortly
and will provide the bulk of the reconstruction and development loans required. Although no doubt that, as a broad matter of public policy, a good
case could be made for the argument that the Bank should become a passive
agent of the NAG if the International Bank falls by the wayside^

I do not

see how the use of the Export-Import Bank as a substitute for the Ti'orld Bank
and Fund could be fitted into the framework of the Act of 194-5 without specific
Congressional approval.


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

May 28, 1946,

REMARKS MADE BX WILLIAM McC. MARTIN, Jr.
CHAIRMAN, EXPORT-IMPORT BANK OF WASHINGTON
BEFORE THE HOUSE BANKING AND CURRENCY COMMITTEE

Gentlemen, in view of the testimony which you have already heard, I
will limit my remarks to stating in broadest outline the reasons why I am
unequivocally in favor of the British loan.

The loan is, I feel, basic in

a realization o f the full possibilities inherent in the Bretton Woods program.
Ever since the Bretton Woods meeting, I have been of the opinion that the
achievementof the International economic objectives of this Government as
embodied in the Bretton Woods legislation hinged upon whether or not a satisfactory solution was obtained to the British postwar balance of payments
problem.

inasmuch as I did not participate in any of the negotiations with

the British, I welcome an opportunity to express my conviction that the Agreement as drawn up represents a constructive effort to solve this crucial British
problem in a manner fully consistent with broad U. S. Objectives.

Without

assistance in the form of this loan, I do not see how the British can hope to
meet their prospective deficits in the 194.6-50 period except by continuing
their wartime exchange and trade restrictions, further strengthening the
sterling area ties and in general resorting to any means at their disposal to
/
push their exports and obtain essential imports. Such trade and financial
measures would certainly run the risk of undermining the entire Bretton Woods
program at its inception and they would also set up numerous points of friction
in the trade relations between this country and the British Empire at a most
inopportune time.

http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

-2-

The Export-Import Bank has a direct and immediate interest in the
success of the whole broad effort to re-create a healthy world economy.
statutes require us to have reasonable assurance of repayment.

Our

If the

effort to revive trade succeeds, the countries to ?/hom we have made emergency
reconstruction loans out of the funds granted by Congress to the Bank for
this purpose should have no difficulty in repaying the loans. If, however,
the British loan falls through and the Bretton Woods program thereby falls
of its own weight, the prospect of repayment of loans already made will be
substantially lessened and it will ba very difficult for us to see our way
clear to making any further reconstruction loans.

In conclusion, I do not

believe that you can separate the British loan from the Bretton Woods program
and the expanded lending authority granted to the Export-Import Bank last
year.

The whole effort will, I believe, stand or fall together.


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

f.ffDfiRD

FORM NO. 64

UNITED STATES GOVERNMENT

Office
TO

:

Assistant Secretary Martin

FROM

:

jjj«. GrlendinningAstf^

SUBJECT:

DATE: February 23, 1948

Anglo-American Financial Agreement

I. The Problem
The general convertibility provisions of the Anglo-Aaerlean
Financial Agreement have been "temporarily suspended" since the exchange
of letters between Secretary Snyder and Chancellor Dalton on August 20,
1946. This situation is somewhat embarrassing because the provisions
of the Financial Agreement do not contain any general escape clause
which would provide a clear-cut basis for suspending the obligation by
administrative action.
When the letters suspending convertibility were exchanged, the
British Government announced that it would not request any further withdrawals on the line of credit. This announcement was, of course, made
at the insistence of the United States. However, when it became evident
that it was wholly impossible for the British to return to complete convertibility, a decision had to be made concerning the release of the
$400 million remaining on the line of credit. The Secretary discussed
the release of these funds with Congressional leaders in December 1947
and he told them quite frankly that the "temporary" suspension of the
convertibility obligations would probably prove to be of more than a
temporary nature, and that it would probably be necessary for the
Administration to submit modificationstof the Agreement to the Congress.
He opposed immediate modifications, however% taking the position that
it was impossible to determine the extent of modifications which would
be necessary until the European Recovery Program had taken shape.
More than a year has now elapsed since those conversations. The
Secretary has wanted to be prepared for any questions which the Congress
might raise as to our intentions with respect to the Financial Agreement.
For this reason we have been discussing proposals for modification with
the British intermittently over the past several months. As yet no conclusions have been reached in these negotiations. The purpose of this
memorandum is to acquaint you with the status of negotiations and to
suggest possible courses of action.
II. Summary of the Principal Provisions of tne Agreement
(a) Convertibility •provisions
(l) Section 8(ii) - This is the general convertibility clause
of the Agreement. It requires the British to eliminate all restrictions


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

- 2on payments and transfers for current transactions not later than
July 15, 1947, unless in exceptional cases a later date is agreed
upon. The only pertinent exception to this obligation is that res*rictions may "be imposed in conformity with the Articles of Agreement of
the IMP, provided that the transitional period privileges of the Fund
Articles will not be invoked after July 15, 1947 unless in exceptional
cases the Governments of the United States and the United Kingdom agree
otherwise. There is no provision for a general postponement or modification of the commitment by administrative action. The legislative
history indicates that "exceptional cases" was intended only to permit
exemption of certain countries and was not intended to provide an outlet
for a general postponement. The obligation is stated to be in anticipation of more comprehensive arrangements by multilateral agreement and
expires on December 31, 1951.
(2) Section 8(i) - This section guarantees convertibility of
sterling for residents of the United States. The only exception provided is that restrictions may be imposed under the scarce currency
provisions of the IMS'. This provision also expires on December 31, 1951.
Section 7 - This section provides for the convertibility
of currently acquired sterling for sterling area countries — a provision which overlaps the provisions of Section 8(ii). In addition,
this section requires that each member of the sterling area will have
its current dollar receipts at its free disposition. Like Section
8(ii), Section 7 was to become effective on July 15, 1947, unless in
exceptional cases a later date was agreed upon. The purpose of this
section was to insure that any discrimination arising out of the socalled sterling area dollar pool would be removed. It refers to all
members of the sterling area, and that phrase is defined elsewhere in
the Agreement to include dependent territories. Section 7 has no
expiration date.
(4) Section 10(ii) - This paragraph requires that any
accumulated sterling balances released or otherwise available for
current transactions after July 15, 1947 be freely convertible. It
contains no expiration date.
(b) Nondiscrimination in quantitative im-port restrictions
Section 9 - This section requires that any quantitative
import restrictions maintained by either country be administered on a
basis which does not discriminate against imports from the other country
in respect of any product. There are three exceptions, however. One is
related to the scarce currency provisions of the IMP and is not now
relevant. Another involves the utilization of inconvertible currencies
accumulated prior to December 31, 1946. It is not particularly significant. The third permits discriminatory restrictions where "there may


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

-3be special necessity ... to assist, by measures not involving a substantial departure from the general rule of non-disc riiaination, a
country whose economy has been disrupted by war." This exception has
been liberally utilized to permit discrimination in favor of European
and North African countries, even though the primary purpose of the
measure has actually been to reduce the drain on Britain's dollar
reserves.
This section, like the section on general convertibility, expires
on December 31, 1951.
(c) Modifications
Section 12 - This section provides that modifications of the
Agreement must be submitted to the Congress and the Parliament.
III.

Review and Status of Negotiations

Publicly we have taken the position that consultations with the
British on this problem have been in progress ever since the suspension
of convertibility in August 1947. We have, actually, kept in close
touch with developments in British international financial policy and
have discussed the Financial Agreement problems with British technicians
quite frequently during this period. During the annual meetings of the
IMF and the International Bank in September, the Secretary had two brief
conversations with Sir Stafford Cripps and three meetings were held with
Sir Henry Wilson-tkaith, Second Secretary of the Treasury in charge of
Overseas Finance. Following these preliminary meetings, concrete proposals for modification of the convertibility provisions were submitted
to the United Kingdom Treasury Delegation here in Washington in November,
and early in January a further meeting was held to hear the British
reply to these proposals. The present situation is as follows:
(a) General convertibility provisions
The United States proposed that the Agreement be modified to
provide for the resumption of the convertibility of sterling on July 1,
1952 unless the two governments agreed to a further postponement. The
British have not accepted this proposal nor offered more than a very
general counter proposal. The disagreement is over whether the obligation should be assumed only when the two governments agree that it
should be undertaken, or whether it should be assumed at a specific time
unless the two governments agree to a postponement.
There is technical agreement among the United States agencies
that, although it is too early to obtain any clear picture of the situation in 1952, it does not now seem likely that Britain could maintain
complete convertibility at that time. If, as 1952 approached, it
should be evident that convertibility could not be maintained, a further


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

postponement would be granted. The proposal which we have advanced
includes a broad escape clause which woald permit a postponement for
general balance of payments reasons.
The United States proposal was advanced because of a feeling that
it would be difficult to obtain the approval of the Congress for a modification which did not retain some commitment or obligation on the part
of the British Government. The United States agencies were not in complete agreement as to the wisdom of this proposal. The State Department,
in particular, felt that the United States had no right to seek an
extension of the convertibility obligation. (The proposal advanced
does involve an extension of a commitment beyond the original expiration date.) Nevertheless, the State Department was willing to see the
proposal advanced as a bargaining position. It seems unlikely that the
British win ever accept it.
(b) Convertibility for United States residents
The United States has proposed that Britain!s obligation to
convert sterling for residents of the United States be continued beyond
the present expiration date of December 31> 1951- The British have not
committed themselves definitely on this proposal but have informally
indicated that it might be acceptable in conjunction with a modification
of the general convertibility obligation along the lines which they have
suggested.
From an economic standpoint it may not be particularly important to the United States to obtain an extension of this commitment.
Since the British would have to pay in dollars for American goods and
services in any event, the commitment is really effective only for current
income from American investments in sterling and miscellaneous payments.
Since the British themselves still maintain substantial investments
overseas, it seems quite unlikely that they would place any restrictions
on convertibility of income from American investments, even if this commitment were dropped. It was our feeling, however, that extension of
this obligation might have certain political advantages, and it was for
this reason that the proposal was advanced.
(c) Convertibility for the sterling area and abolition of the
dollar pool
The United States has proposed, in effect, that Britain's
commitjnent covering convertibility for sterling area countries be placed
on the same basis as her commitment to non-sterling area countries. The
British agree in principle with tnis proposal but would like to see the
section redrafted along somewhat different lines.
The United States had proposed complete redrafting of the
present Section 7 to clarify and separate the two commitments which it
now contains: (l) the free disposition of sterling receipts and

http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

-5(2) the free disposition of dollar receipts. The United States also
proposed to make it clear that the conimitEient applied only to those
members of the sterling area not included in the common currency quota
of the United Kingdom under the Fund. For political reasons the United
Kingdom wishes to avoid drawing a sharp distinction between countries
within the common currency quota and other sterling area countries.
Furthermore, they are somewhat hesitant to accept a redrafting of the
paragraph which would make it particularly clear that sterling area
countries were at present to have their dollar receipts at their free
disposition. They believe that the section can be redrafted simply to
refer to the general convertibility section.
(d) Convertibility of accumulated sterling balances
The United States has proposed that releases from accumulated
balances be entitled to the same privileges as current earnings. The
British agree with this principle but believe that the objective can
best be achieved through reference to the general convertibility provisions rather than by the use of the language which the United States has
suggested.
(e) Non^discrimination against United States imports
General agreement has been reached on the basic proposal
that the non-discrimination provisions of the Financial Agreement be
superseded by the charter of the ITO. There has been no determination,
however, as to whether this will require legislation.
IV. Possible Courses of Action
We have a general understanding with the State Department that the
Treasury will not press for Congressional consideration of the Financial
Agreement prior to the submission of the ITO charter. As a matter of
fact, the Secretary has not decided when he should take the initiative
in presenting modifications to the Congress. It is our belief, however,
that the longer we delay the more difficult it will become for us to
obtain favorable Congressional action. As American industries encounter
growing difficulties in disposing of production which is surplus to
domestic requirements, they come to us with proposals involving, in
essence, the convertibility of sterling. In view of this situation it
might be advisable to discuss this question with the Secretary at an
early date, and, if he agrees, to plan to submit modifications to the
Congress as soon after the conclusion of the ITO hearings as is convenient to the Banking and Currency Committees.
If this course is adopted, we should immediately schedule further
conferences with other KAC agencies to agree upon our next approach to
the British. Actually the negotiations can probably be concluded within


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

a short period of time, if the United States is prepared to accept the
basic principles involved in the British proposals on the general convertibility provisions.
On the non-discrimination provisions, Treasury and State Department
legal advisors should probably confer at an early date to determine
whether they believe it necessary to obtain specific legislation to provide for the supersession of the non-discrimination provisions by the
ITO charter. If they feel that no specific legislation mil be required,
this view should be presented to the British to see whether it is acceptable to them. If the supersession of Section 9 can be handled in this
•way, it need not be dealt with in action under Section 12. However, if
it is the opinion of the legal advisors that specific legislation is
required, proposals concerning Section 9 could be included with modifications of the convertibility sections or separate legislation might be
sought to cover aH cases where the ITO Charter will conflict with existing legislation.


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

This article is protected by copyright and has been removed.
Author:

John H. Crider

Article Title:

British Loan -- First Lap

Journal Title:

Finance

Date:

April 10 1946


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

HtD FORM NO. 64

Office

^Aeworandum • UNITED STATES GOVERNMENT

SECRET
TO
: Assistant Secretary Martin
FROM

DATE: March 8, 1949

: Mr, Glendinning

SUBJECT: Modification of the Anglo-American Financial Agreement
I. Convertibility Provisions
In accordance with your suggestion at the close of our meeting on the
Anglo-American Financial Agreement on February 24, I have drawn up several
possible alternatives for modifying the general convertibility provisions
of the Agreement (Section 8(ii)), with the idea that we might use these
alternatives as a basis for further discussion of this problem*
Alternative 1
"The Governments of the United States and the United Kingdom agree that
not later than July 1, 1952, unless a later date is agreed upon after consultation, they will impose no restrictions on payments aid transfers for current transactions. The obligations of this paragraph (ii) shall not apply; .„,
(b) to restrictions imposed in conformity with the Articles of
Agreement of the International Monetary Fund, provided that
the Governments of the United Kingdom and the United States
will not continue to invoke the provisions of Article XIV,
Section 2 of those Articles after this paragraph (ii) becomes
effective, unless in exceptional circumstances they agree
otherwise; or «* c * '
This is the proposal handed to the British in November which they were
unable to accept*
Alternative 2
"The Governments of the United States and the United Kingdom agree that
after a date to be agreed upon they will impose no restrictions on payments
and transfers for current transactions ,... ll
In principle this would seem to correspond to the proposal which the
British have suggested*
Alternative 5
"The Governments of the United States and the United Kingdom agree that
on or.before the date on which consultation with the International Monetary
Fund would be required under the provisions of Article XIV, Section 4, of"
the Articles of Agreement of the Fund, they will impose no restrictions on
payments and transfers for current transactions."
In Section 8(ii) (b) the word "cases" would be changed to "circumstances"
as in Alternative-* 1 above.

SECRET


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

This alternative -would appear to conform, -with the suggestion introduced
by 'dr. Tasca at our previous meeting. If anything, it might be consi.dered a
less liberal modification than Alternative 1 since it provides for no exceptions other than those in Section 8(ii) (b). Actually, of course, by changing
the word tfcases'1 to "circumstances" in Section 8 (ii) (b) adequate provision
would be made for a general postponement of convertibility for balance of
payments reasons.
Alternative 4
"The Government of the United States and the United Kingdom agree that
after a date to be determined by the two governments they will impose no restrictions on payments and transfers for current transactions. The two governments -will, consult not later than Ilarch 1, 19501 and each year thereafter,
until restrictions on payments and transfers for current transactions have
been eliminated. The obligations of this paragraph (ii) shall not apply;"
Section 8(ii) (b) -would be modified to read as follows:
"to restrictions imposed in conformity with any of the provisions of the
Articles of Agreement of the International Llonetary Fund other than the provisions of Article XIV« Section 2.w
Basically, this alternative is little more than the proposal suggested
by the British, but by establishing a schedule for consultations, it forces
the matter into the open and requires public statements of the attitudes of
the two governments. Thus, it should enable the U. 3. to exert a certain
amount of pressure on the British.
Alternative 5
"It is the intention of the Governments of the United States and the United
Kingdom to end all restrictions on payments and transfers for current transactions before the date on which consultations with the International Monetary
Fund would be required under the provisions of Article XIV of the Articles of
Agreement of the Fund. If either Government shall find itself unable to end
restrictions by that time the two Governments will cons-alt annually thereafter,
looking toward the removal of such restrictions."
Section 3(ii) (b) to be modified as in Alternative 4*
This alternative is similar to Alternative 4 except that it attempts to
emphasize the expectation that convertibility mil be achieved in 1952.
Alternative 6
t!

Tiie Government of the United Kingdom expects to remove all restrictions
on payments and transfers for current transactions on or before March 1, 1952.
Should the Government of the United Kingdom find itself unable to end all

SECRET


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

-3 such restrictions by that time, it mil consult -with the Government of the
United States concerning those restrictions nnhich are to be retained, and
the two Governments -will consult annually thereafter until all restrictions
are removed.11
Section 8(ii) (b) to be modified as in Alternative 4-This is a more direct phrasing of Alternative 5 "which recognizes that
the United States has not taken advantage of Article XIV of the International
iionetary Fund and is not now authorized to impose restrictions on current
transactions•


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

II. Non-discrimination
We need to establish a definite Treasury position on the question of
how supersession of the non-discrimination provisions of the financial Agreement by the ITO is to be brought about. You will remember that at our previous meeting Mr, Arnold indicated he had been unable to obtain a definite
answer from the State Department as to whether that Department felt it would
be necessary to have specific legislation on this point. As a means of obtaining the views of the State Department, he suggested that the Treasury make
a concrete suggestion. For this purpose, we offer the following alternatives:
Alternative 1
Proposals submitted to the Congress and Parliament for the formal modification of the Financial Agreement should contain an addition to Section 9
(in substitution for the reference to Section 9 which is new contained in
Section 8(iii) stating that "This section shall operate until the date on
which the International Trade Organization shall begin operations, provided
that both the Government of the United Kingdom and the Government of the
United States are members of that organization at that time, or until
December 31* 1951* whichever i's earlier."
This alternative would assume that specific legislation is required
to provide for the supersession of Section 9 by the ITO and would avoid any
question as to the interpretation of Section 8(iii). If the question were
raised during the ITO hearings, Congress would be advised that modifications
of the Financial Agreement were soon to be submitted to the Congress and would
contain a proposal of this nature.
Alternative 2
During the hearings on ITO, Administrative spokesmen would state that
the Government of the United States and the Government of the United Kingdom
consider that the provisions of Section 9 will be superseded by the ITO
whenever that organisation comes into effect with the United States and the
United Kingdom as members.

cc: Messrs. Willis, Glendinning, Arnold, Southard, Tasca, McNeill, Bronz,
fields, Elaser, Widman

SECRET

http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Sfefejeett

British Proposal for Belaa&i^ the Mof>-ia»criwi nation

U the ariftisii plan raises a aus&er of serious doubts on
purely economic gjremie* which should be resolved os&y after the
asM»t o*ref iil c ajiaidera^ioo i» the *MtC. iJnr tentative ecmelusim
Is that the antiafe are ^«king •gbetaatial cortcessiona rrea us
bat edtferiJ^ relatiml^ lit vie. In e£Teetf the Uritisfa aye
aeking our bleeaing for baiJytHnii ft discrlsdnato^r s^ft curreooy
block yneler thetJT
a* *he Britieh |4azi would Teqtiire aodif icsetiom cif 3eoUon 9f
no&HHgerlJgl.n<ttiop pr««i4iiiie^ of the ^tt^lo fceerieaa ^inein^al
If a aodlTieAtion of Section 9 neve raised with the
that the other prsfisien* ef the %-reeaHM* wold alee be 3*iaed«

o reweve ii^oj-t r«witjlcticma an
eoft urrency ar»t,» for virt\taUy all geo4e not
tpyeiwieiit oofi^met* fieetfletiosie would be re~
In two sUgeet firat, tilth r^peet to Continental
with ireepect to other soft currency
i iveuLd f*9t oangr thrwogh with etage one
unless etftge ti»o cou!4 be assured* fke altiaa i« success of the
|iJ@ wo»jld dte^eni ^on other countries maidlag sindlUr concessions
to Hritsdn. the i^aa wmld apply to only about ^5 percent of
iritiah li^perta as the great bulk of British ttstports are ea


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

the yrltiah fteojyet of the U.^». to .ffect rlap
^Sodiricatior. of the

the existing provision* of tb*
Agr**a*ntf th* British could extond their program to
"war cieYAatated" aroa&* Howovor, thoy **** not prepar**! to tak*
tfai* *top unlaas tb* program can bo subsequently ext.*; ided to
30ft erarmuj^r arms.
Tb* plan, a* appliod to aroa* othar than war cl*va*ta )*od,
would bo clearly iooocislatent with the provision* of *ctlon 9
of tb* Financial Agroeatant and would rociuir*
jjjfi *jj*i*Ow* til* ifflfltl*n ar*
lootion 9| or, a* tb*j pit it, to tak*
provision* of tb* 1TO prior to the tia* tb* charter
b»
ot prooojit American propo«il0 la i^rts rogar^lfig ti» int j*iiuropean pa^aont** acht«ef which mjuld atrongtton the band of
luropoan debtor counr>rie« and smbject er*Htor« to greater
potitl&t f ro« tho

.r^^

*

f

**

WLti

»h •*•*•

toward rodutolng trad* barilors wi^ln tbe soft curr*n<J3r
the trond will bo toward aor«? and laoro bHat*rmli*m a* a
ont oat'&ojm* »tRii* to*y arsftJ* that to* iffittn 1* a stop in tn*
of restoring faultllatoral tr^d* on a broad *eal*>
it will not affo*t trad* barrier* with tb* dollar aroa.
f b» British nldO eontMnd that If tb* plan 1ft aoeoptod by
other countrlo* it ulll msm A gr*at*r d^r«n of ooopitltlOB
for Europeta >rodtt»«ra and bolp roftuoo oo*t* In th* *oft currerusy

to tlie
of

ffi«ro is a ^sry roal quoation nhottioar th* pdm «111
MMNi tradto within ^rop* ftt th*
of
area, particularly la vlow of tho

11, A* pwrlottiOar ftotodt thai plan would
25 p*ro«nt of firiti*h ii^ort*, th* bulfc of iaporta still
a wteUBtial iiwreaa* la multilateral trad* idtlUn tb*


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

currency ar»a will depend upon tlu> nature an** «xt€8% of
bulk purebae* negotiation* and thair Inevitable effect an the
whca* patt«m ^T trad* ol Britain and th» r«st of th» soft
Hi* fh» »uo«e«» of
ciprocal action % other soft enrfCKHJf countries. 'Jntil th«
ftttlttul* of other eountrUs l« .Hncfmf it will b« iapouslble to
tell whether th» pUn could b» carried out Igr ^» Briti^i &&


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

iv» Tl» acwt fundaiwntaa. quostlon i» itetbiir tbt
bl^ck proposed by the JUtish «cml4 b««oe« ft p«rwaneat
ar«a tmtl»ir than prove to b« a tranaition toward
trad* im a world basis.

Bui flu parses el an sf Seetisa 9 ef tlit
the Charter of tl*» ITQ
f es? the Fimnsla! %r®^s@^t witli the United
with e*ita|& exceptions, tt*t Ut either £*vewaaeirb ® imposes
4>r B*ini*tH* (awatitativB insert r*strieti»ji», s«eh restriction sli&U
Iw G«tednlat»ro<5 «B a imsis
aot iis^rladmte agaiagt to<w*ts
fron.tii* otshfir country ia m*p*ct ^ aa^ p^»«t.* SteMoc 8(iii) of
8 aai 9 *whi«fe %f« ia
xiatii l^aw^inr 3it I901«tt

Ihcre is a*

th» Cli&rter «f th® ITO eanM l^trO op^i^tidn, it TwJLd penait
th® United Xiag^^s t^ tepss© 9^antitati7« iifipt yestrletisiia for
«f pptti^i reasons a»a to diaeHalnftte imder certHxln eoadltioru&.
pronriniflto* nf tdw Charter ocrs^r th» «as»e subjeot ^ttor
la S«©tioa 9 af the Itimoalal. %z^weafe. Ihey
n«t be alicwed uwier dtetlaa f *
the priaoipiU @C Isfet^aatioasa law is weU c&^nllshed thftt
the
er « aoa«*l*te»t wi-Wi the et>^ati<naft oentained ija a
agreement betew^a tin** thr ^arrisiozjs ef the later agree^eiit will
the eldigpitioiiB ©cs^ainei ia ^e foffeer whan* as ia the
i^ie tw» ^«nmsiKHnb8 uaienitaxMl that tli® l&ter provision &r« to
future rolatiezts* If c^ettien is raised abeut &m date of
l$$l, &p$m?$®£ la ^«M«« S(iii) af tlie Agf^eaeast, it
be pointed cait that ttetewr ^^ imtont ac^f hairw been at the tine
the !<oas Agf^i^mt «a0 »iltp%««lt tlie imt©23* In agreeing t© ppo«eufc the
to supersed* tslmt date in w*U aa the prorigionB of SeeUen 9


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

•

•

nay fe* mined about 3eotio& 12 of tie
which prwridoo tt*t tt®ither gownvaoot aim*! b* *t*titt«d
appraaoh ^» oth*r f»r r»eo2»ld«m%loii @f tint pr07i*10&» of this
* * idi^ a vifsr to asr^tis^ upoa i^tUf lc&felon*£ or pr8»
tk«ir r$$p©etlv» legislatures »w If suali 9tt*$ti»3ac art
the Ti«* slwfulA be 0»:pr^aad tlmt
Is oozuliUMmt witJi th» i«*c«ifjgioas Of t^it
i3 ar^ ptHMMMtiiv 1fe* cahartor of t^® IfQ *£ aa
f S»et4«u 9 of
will not tsact plae* until t3s» Churtvr
lifl»lMMirtt aafi It OOMI* iafet t£T««t wi^ tfe»
tfe*


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

STANDARD FORM NO. 64

UNITED STATES GOVERNMENT

Office
TO

:

Mr. Martin

FROM

:

Mr. Willis

SUBJECT:

DATE:

Marc)

Documents Relating to Implementation of the Anglo-American
Financial Agreement
^

We have rather hastily pullsd together some of the letters and
documents relating to the implementation of the Financial Agreement.
You may wish to glance over some of this material in order to give
you an idea of what is available.
The material in the attached folder is as follows:
1. Correspondence between policy officials of the British Government and the U. S. Treasury on matters which relate primarily to the
Financial Agreement. Some of the communications from the British merely
describe new arrangements or new developments, and do not deal directly
with the more substantive questions. However, you may be particularly
interested in:
(a)

The press release of February 5, 1947 which covers the controversy over the British agreement with Argentina and its
relationship to the sterling balance provision;

(b)

Secretary Snyder's letter of May 7, 1947, and Chancellor
Dalton's reply of May 23, 1947 on the techniqies used by the
British in seeking sterling balance settlements;

(c)

The letter from Mr. Christelow of July 3, 1947, Secretary
Snyder's reply of July 10, and NAG Document No. 477 of
July 15, 1947 relating to the exceptions to the convertibility clause;

(d)

The press release of August 20, 1947 on the suspension of
convertibility; and

(e)

A press release of December 6, 1947 with regard to the release
of the final $400 million of the loan.

We do not have a copy of Cripps1 letter to the Secretary of December 23,
1949.
2. A chronology of discussions with the British in
written by Frank Southard.


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

August 1947,

3. A copy of a statement used by the Secretary in appearing before
Congressional committees in December 1947 to discuss the release of the
final £400 million of the loan, as'well as a memorandum written by
Mr. Southard reporting on the Secretary's conversations with the committee
chairman.
4. Minutes $>£ meetings between Mr. Southard and Sir Henry WilsonSmith at the time of the Fund-Bank meetings in 1948. Secretary Snyder
had two brief talks with Sir Stafford on the financial Agreement at this
tine but we have no written record of those conversations. Minutes of a
further meeting with Mr. Southard and of one which took place in your
office early in 1949 are also included.
5. As you are probably aware, there is a large mass of NAG material
on this subject and nearly all of the implementation problems are covered
in great length in MC documents. Rather than attach all of these documents
I have attached:
(a)

An index of NAG documents which gives some slight indication of
the subject matter of each, and

(b)

Copies of the NAC actions dealing with the Financial Agreement.

6. An "aide rnemoire" to Larry Hebbard which he was authorized to show
the British but which probably cannot be said to have any official status.
It is indicative of our plans in early 1948.
In addition to this material there are several documents regarding
conversations at the working level, most of them taking place in August
1947. No material has been attached relating to the Tripartite talks of
last fall., although they may well be said to constitute a part of the
history of the implementation of the Financial Agreement.


http://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis