841.5151/8–1947: Telegram
The Acting Secretary of State to the Consulate at Geneva
1028. For Clayton’s Eyes Only from Lovett. Eady informed Snyder yesterday morning of his government’s intention to suspend as of close of business today transfer of sterling to dollar accounts, in effect terminating convertibility. Cited rapid increase rate of weekly drawing from 77 million in second quarter, 115 million in July to 237 million last six days. Eady gave assurance however that this action would not effect transactions between UK and US. Specifically proposed that following this action UK would ration dollars against sterling.
Eady asserted restriction would extend beyond elimination capital transfers to limitation current items. In these circumstances we are confronted with question whether breach agreement involved. At present seems clear only escapes must be found in Section eight-two, especially para B. Also seems equally clear that phrase “exceptional cases” refers individual countries. Br insist cannot at this time apply restrictions basis individual countries.
In this situation informed Br last night that unless they could limit action within agreement if confronted by unilateral action we would have to assert breach agreement and freeze unnotified balance credit (550 million). Suggested as alternative (a) that Br advise us by letter of (1) proposed act (2) continued Br stake in securing convertibility of sterling, (3) consistency of action with purpose and intent agreement, (4) desire to consult reference section 8 and (b) that we reply (1) expressing sympathy gravity British problem, (2) indicating uncertainty re consistency terms agreement (3) agreeing week consultation during which unnotified portion credit frozen. Br demurred especially re implications last two items. Br suggested asking London twenty-four hour postponement action during which explore alternatives. Br have now informed us London agrees this postponement.