Memorandum of Conversation, by the Assistant
Secretary of State (Berle)
,] October 6, 1942.
||Sir Frederick Phillips;
||Mr. William Taylor of Treasury;
||Mr. A. A. Berle, Jr.
Sir Frederick Phillips came in at my request. I handed him the list of
questions on Lord Keynes’ “Proposals for an International Clearing
Union.” (Copy of list attached.)
We had some general conversation about the Keynes’ plan. I said that, as
Sir Frederick realized, certain main points were obvious.
Britain and probably other countries would need goods and were faced with
adverse balances. There were only two ways as yet worked out of settling
these balances—gold, if gold is acceptable, and otherwise, goods. Lord
Keynes’ proposals really came to giving to the proposed Clearing Union a
method of creating money which could be used in settling these balances.
In practice this would probably mean that we would acquire considerable
amounts of this new money which could be availed of only by taking
Sir Frederick objected, saying that great use of it was for foreign
I said we realized this; so that what it really came to was a method by
which American, and possibly other goods, could be made available to
certain countries, notably Britain, on what was in fact though not in
form a credit arrangement, terms of the credit beings of course, the
degree of usefulness of this international currency.
I said that this raised squarely a problem which the American Government
would have to face, and in facing it would have to take account of
Congressional opinion and public sentiment.
I said that I thought there was a growing realization here that
arrangements would have to be made, certainly during the immediate
post-war period, to enable other commercial countries to get back on
their feet and start work. This period might well synchronize with a
period when the United States was seeking activity for its plants and
employment for its people. We were in process of considering, carefully,
the kind of measures which could be wholeheartedly supported by this
Government, especially in view of its well known position that commerce
should be as widely open as practicable.
Questions on Lord Keynes’ Proposals for an
International Clearing Union
- Is it assumed that exchange rates between members of the Union
would fluctuate within gold points or their equivalent and that
foreign exchange obtained through bancor facilities would be
sold only at such gold points?
- If transfer is to be at a fixed rate may not two rates of
exchange develop between member countries unless the governments
are prepared to take active steps through a stabilization fund
or other agency to control the rates?
- Is it contemplated that transfers of bancor could take place
other than by direct transfer between central banks or
treasuries? (a) [Page 226] Specifically, will the new
“instrument of international currency” be utilized by means of
negotiable drafts in bancor on the Clearing Union or by entries
on the books of the Union? (b) If the
first, by whom would it be sold and bought in individual
countries? Specifically, would transactions in bancor be a
monopoly of the central bank and/or the Treasury, or would it be
generally negotiable like an ordinary bill of exchange? (c) Would the bancor be an instrument of
payment between member and non-member countries? If so, how
would this operate?
- In what currency and under what exchange rate regulations
would non-members keep “credit clearing accounts” with the Union
and what would be the advantage to them to do so, since they
cannot borrow from the Union?
- How under the plan could the quantum of international currency
be contracted to reduce “effective world demand”, mentioned in
paragraph 1 (c) of the Proposals?
- What provision is there for preventing the use of bancor
quotas to meet foreign obligations where there is no adverse
balance of payments on current account? What could prevent
countries with weak currencies from quickly exhausting their
quotas should they wish to acquire strong currencies?
- What is the contemplated order of magnitude of total bancor
quotas? Are we correct in understanding that within such amounts
a country could do nothing to limit the call of the Clearing
Union for its currency? What is the maximum amount of U. S.
dollars which the United States might be obligated to provide in
return for bancors during the first five years of
- What disposable assets would the Union hold to assure
liquidation of bancor credits in the event of dissolution of the
Union or in the event of war? In the event that any country
wishes to withdraw, what specific steps could it take to
liquidate without loss the bancor that it might have
- Does the proposal envisage that the British Commonwealth as a
whole is to have one representative on the Board and one quota,
or would each of the dominions also have a separate
representative and a separate quota? If the Commonwealth is to
be treated as a unit, is it thought that intra-commonwealth
trade is to be treated as foreign trade for the purpose of
determining the quota?
- Is it not likely that those countries likely to develop large
creditor accounts with the Clearing Union will be in a minority
so far as voting strength and control over policies are
- Does the drawing of a distinction between a few founder states
and other members run counter to the general objective of
securing international collaboration?