33. Telegram From the Embassy in the United Kingdom to the Department of State0
5156. Department pass Treasury. At small private lunch with me yesterday, also attended by Maudling,1 William Rootes of Dollar Exports Council, Moore and Colt of Bankers Trust Co.,2 Chancellor of the Exchequer Amory, speaking very informally, stated British case for reviewing the financial structure which underpins world trade. He referred to Oliver Franks’3 statement in Lloyds Bank annual report, [Page 81] and said Franks was “able fly a kite” which a Chancellor could not do without being pressed for explanations and specifics. Franks’ proposals, he thought, deserved careful thought.
US was being called on over and over again to bail out countries in crisis situations. This good neither for their morale nor ours, and might sometimes involve tossing money away without much effect. He thought it necessary look carefully at underlying financial structure which supported world trade, to decide whether billions spent to cope with crisis situations might be used more effectively to repair and strengthen that underlying financial structure. He greatly impressed with work which had been performed by IMF and International Bank, thought attention should perhaps be focused on schemes which would use these institutions as means enlarging financial base.
There would be Commonwealth economic conference in September, and it was realized that Commonwealth only a fragment of world and two of largest markets, America and Europe, lay outside. British had no intention giving up Commonwealth—they did not want to do so, and would not be politically possible if they wanted to. There had to be working appraisal of kind of economic relations which were to exist between Commonwealth, American and Europe. They hope have European FTA and kind of commercial policy on both sides which would bring sterling and dollar worlds closer together, but there was danger these things could not be achieved, particularly if there were a recession in world trade.
It was coincidence of recession in US and shortages in international reserves of many countries which worried him. We had arrived at stage where business assessments of future prospects could easily turn more pessimistic. Cold war consequences of such a development could be disastrous. He thought it important to consider whether this danger might be averted by measure which would forestall development on [of?] liquidity crisis.