550.S1/668½
Memorandum by the Economic Adviser (Feis)
Mr. Bewley63 came in to see me Saturday morning, April 15. He handed me a paraphrase of a cable received from his Government which contained one of the important monetary ideas favored by his Government. The memorandum suggested the creation of an international fund by contributions of various governments for the purpose of making loans to central banks which in return would end exchange controls and reduce other barriers to international trade. Such a fund (which the memorandum suggested would be a billion and a half to two billions of dollars) would be loaned at very low rates, and by freeing trade, et cetera, should, in the judgment of the British Government serve to raise prices.
We discussed various features of the suggestion and agreed that there were three sets of questions that would have to be answered in regard to it: (1) Could it as a practical matter work, or would the practical difficulties be so great as to make it unworkable even if brought into existence? (2) Would it achieve the ends desired, that is, tearing away barriers to trade and raising prices? (3) Would it be politically possible to win support for it in this country?
I stated informally and without authority it seemed to me that the proposal was open to doubt on all three points. The problem of allotment of the available funds would be an extremely difficult one [Page 575] and might well connect up with European politics. As for (2), unless this arrangement were accompanied by many others for clearing the channels of trade, this one would not do so. As for (3), I emphasized the nature of the strong opposition in this country to any proposals under which this Government would obligate itself to furnish any more money to foreign governments—especially in the light of the threatened default on all its past loans.
I gathered from Bewley’s talk that one of the ideas behind the British proposal is that these funds would stabilize the exchanges of other countries and thereby not expose the pound to the fluctuations of other currencies.
I said that I thought it would be a mistake if at this phase of the discussions between the two governments there should be any leak to the effect that the main British proposal was one calling upon the American Government to provide fresh funds for the sake of foreign governments. This apparently impressed him and he said that he would not therefore hand me a copy of his paraphrase now but would reserve it until a later time. In the meantime, I promised that I would make a memorandum regarding the conversation and circulate it among those who would be concerned with it.
- Thomas Kenneth Bewley, Financial Adviser of the British Embassy.↩