Addressed to the Prime Minister.
Your 174 of 15th November. 
I have refrained from replying to your telegram sooner as when I received it I had a meeting with Eady pending, as a result of which I hoped to be able to give you a more definite indication of the position.
I have seen Eady several times since his return from Bretton Woods.  In these conversations, while we have touched on the sterling balance position and Eady, I am glad to say, has not gone back on his previous acceptance of my contention as to our rights with regard to our post-war income, the discussion has turned mainly upon Keynes' [activities]  in his negotiations in the United States of America. The upshot of all our talks until the last has been that pending a clarification of the results of Keynes' mission in America it would be desirable that I should not raise with Treasury here the question of our sterling balances.
In a conversation which I have just had with Eady, however, he suggested that the time had now come when it would be a good thing if I were to propose to the Chancellor that the informal conversations which I have been carrying on with Eady should now be taken up on a slightly more formal basis. Eady told me that Treasury and the Bank of England have been discussing this matter and that they desired to open the question of sterling balances first with us with a view to ascertaining what the attitude of the United Kingdom creditors on the subject was. The reason for this desire, he told me, was that they thought the Australian field would be the best one in which to explore the matter.
I asked Eady whether it meant that for the moment they were leaving the question of how they were to deal with the astronomical Indian and Middle East balances in abeyance. Eady said that that was the position.
I told Eady that we were anxious to get on with the exploration of the position and that I would be only too willing to open the matter up on a more official basis than the talks we had had.
The upshot of our conversation was that it was agreed that I should write a letter to the Chancellor of the Exchequer setting out that I had had informal discussions with Eady with regard to the problem of our sterling balances and that I thought the time had now arrived when the matter might be taken up on a rather more official basis but still confined to an exploratory survey without commitments on either side. This action I am now taking. I will keep you advised of developments.
Personal for the Treasurer.
Copland has now arrived in this country. Is it your wish that I should keep him informed of the position and use him as a consultant?