Lot 58F47, Box 1287
Memorandum by the Treasury Representative in the United Kingdom (Hebbard) to the Ambassador (Douglas)
Subject: The Drain on British Reserves
I. Summary
A. In the future movements in the level of British gold and dollar reserves will have more significance than in the past, because sources of borrowing have been depleted. These movements will also have more significance in terms of policy, because the British are going to attempt to prevent any further reductions in their central reserves.
B. In the four weeks ending May 1 the drain of reserves was reduced to $23 million a week, as contrasted with $45 million a week for the first quarter of the year.
C. The future drain is unpredictable because (1) the United States and the United Kingdom have not yet agreed on an import program for Britain; (2) United States-Canadian negotiations may result in further credits from Canada; and (3) the sterling area countries might draw on the I.M.F.
D. More gold might be received from South Africa—at some future time—if the flow of capital to the Union is curtailed.
[Page 1083]E. It is not yet certain to what extent (if any) we will accede to the British proposal that E.C.A. should, in effect, cover the drain of the sterling area dominions.
[Here follow sections on the new significance of the reserve figures, the drain in the recent past, the prospects for the future, and policy decisions and other developments which will influence future drains.]