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United States Department of State / Foreign relations of the United States, 1947. The British Commonwealth; Europe

The British Commonwealth of Nations,   pp. 1-195 PDF (70.7 MB)

Page 13

action is taken, particularly since they probably cannot expect to
have the friendly cooperation of the exchange control authorities of
the other country which is so vital to effective control. Otherwise
there seems to be a very fine line to be drawn between the effect of
such unilateral action and a similar state of affairs set up by mutual
  Perhaps one further explanation of the British reluctance to admit
the use of the expression "blocked" and to "block" by
unilateral action
is that this definitely suggests frozen and long term. On this basis a
suitable investment for the funds would be long dated, high yield,
United Kingdom Government or other securities rather than the one-
half percent short dated Government issues which are deemed suitable
for "liquid" reserves. It is a little difficult to see how funds
which may
not be used until after four years, and even then probably not in their
entirety, can still be considered liquid and their investment restricted
to one-half percent issues. The one-half percent interest provision was,
of course, agreed to by Argentina in the original settlement of balances
with that country.
  The other alternative facing the British, namely postponement of
the effective date of Section 10, would engender strong opposition in
the United States where it would be widely construed as the first in a
series of moves by the British to recoil from fulfilling commitments
which they made in the Financial Agreement and which were accepted
by the United States in good faith.
  There is no clear indication at this time as to how this dilemma will
be resolved. Unilateral action in difficult cases seems more probable
than an appeal to the United States for postponement of the obligation
accepted under Article 10.
                                            ARTHUR F. BLASER, JR.
841.51/5-1647: Telegram
The Ambassador in the United Kingdom, (Douglas) to the Secretary
                              of State
SECRET                              LONDON, May 16, 1947-4 p. In.
  2772. On May 12, I lunched with Dalton, Chancellor of the Excheq-
uer. He discussed in general terms and at considerable length the
British dollar position and the problem of sterling balances.
  In regard to the dollar position he said that he was drawing down
dollars against the line of credit more rapidly than was anticipated.
This was due to a rise in our price level and the unanticipated slow-
ness of European recovery and the winter crises. I told him that ouir
calculations of British dollar position, based upon the assumptions
on which the calculations were made, did not indicate a serious situa-

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