Stop-Gap Dollars

Press, Volume LXXXIII, Issue 25300, 27 September 1947, Page 8

Stop-Gap Dollars

The Secretary of the United States Treasury, Mr John Snyder, when he was interviewed in London 10 or 12 days ago, crisply denied that there was any “scarcity of dollars”; it was production that was short. If any country produced enough, it could get all the dollars it needed. This is of course a perfectly correct statement, within its limits; but those are obvious. They define, in fact, the very occasion to which the Marshall Approach and the Paris report are addressed. It is no use talking to “ any country ” in Europe or to Europe as a whole about producing more, until a broken system is restored and reorganised; and it is no use upbraiding any country for lagging in reconstruction, or making poor use of aid already given. Even if such criticisms can in part be fairly directed, it is only in part, even in small part; and they can be dealt back—e.g., against the deliberate and disastrously mistaken decision to make UNRRA an agency of relief only, and not of reconstruction as well. The arguing of such charges and counter-charges will not alter the present situation and may impair the chance of early, agreed action to remedy it. But the earliest and best-founded plan of action, to which the Paris report contributes indispensably, will not begin to work for weeks and months. The Cripps plan, which is directly related to Britain’s contribution, will not significantly better Britain’s position for months. Meanwhile, the dollar deficit will continue. The day when import cuts and export increases will have closed the gap is far ahead; and it must therefore be bridged by temporary expedients. Two of these were announced immediately after Sir Stafford

Cripps’s speech, explaining his plan. The Treasury reported the sale of £20,000,000 in gold to the American Treasury; and the purchase of £15,000,000 worth of dollars from the International Monetary Fund followed next day. It may be expected that such transactions will be repeated. Though the £ 600,000,000 gold reserve is in effect the gold reserve of the sterling area system, there is no reason to believe that the Treasury must regard £580,000,000 as an irreducible figure. (What would be regarded as an irreducible minimum can only be guessed. One. suggested figure, £200,000,000, is probably too low, at least while any risk remains of a trading division of the world into dollar and sterling blocs.) There will, of course, be increments from South Africa and Australia notably; but apart from that the Treasury may be expected to consider that the £ 20,000,000 transaction can "be several times repeated without danger. It is perhaps worth noting that the sale of gold came first; the resort to I.M.F. second. There may be a connexion. The I.M.F. charter provides that it shall lend a member the currency of another member, only if it is shown that the advance is “ presently needed ”, which may be supposed to imply that a country is willing to use, and is in fact using, resources of its own: in this case, gold. It may follow, therefore, that sales of gold and-resort to the I.M.F. will go on in parallel; and Britain could obtain five more dollar advances of the same order, within the current year, before its quota right of £81,000,000 would be exhausted. Five parallel gold sales added would make a total of £200,000,000 worth of stop-gap dollars—a figure which corresponds precisely with a minimum estimate of the gap to be bridged in the next 12 months. But these first stop-gap dollar transactions have an importance greater than their amount measures: they have expressly signalled to Washington, and the American public, and the rest of the world Britain’s desperate shortage of foreign exchange. They represent a political decision as well as an economic one; and the political decision is the more remarkable because, so recently as August, Dr. Dalton rejected the idea of borrowing from I.M.F. while there was gold to use. He has now found that he needs to use both.