The Sterling Business
The man in the street has come to regard July 15th as a fateful date for British finance, without quite knowing why. Under the terms of the Anglo-American financial agreement one of the con- ditions on which we received the American loan was that, as from last Tuesday, current earnings of sterling by any foreign country were to be made freely convertible into any other currency. To take the simplest case, if an Indian exporter sells goods to this country after July 15th he can require that the sterling thus earned shall be 'converted at once into dollars. In recent years, owing to the working of exchange control and the arrangements of the sterling area that has not always been possible. Clearly the new arrange- ment is, on the face of it, one more burden placed upon this country in return for the American loan. It is much more con- venient for us not to have to find dollars in exchange for sterling, or to find them in our own time, than to have to provide them on demand. But it is easily possible to exaggerate the weight of the burden. In the first place the arrangement only applies to future transactions. We do not have to provide dollars for every pound of the vast sterling balances already held by India, Egypt, Eire and others. Special arrangements will have to be made for the paying off, or funding, or even scaling down of those balances. A whole list of such arrangements has been made in recent weeks, notably with Egypt, Spain, Czechoslovakia and the Scandinavian countries. Often the scaling down of the balances commands full American support. Nor need it be concluded that the current sterling earnings of the countries concerned will be on balance very great. On the whole we are finding it easier to export to the countries holding sterling balances than to those which have dollars to spare. Conse- quently our indebtedness to them is not likely to increase greatly. The convertibility of sterling is a potential danger rather than an immediate catastrophe, and everything possible has been done to discount it in advance.
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