I asked Keynes to come and see me this morning and we had a quite
interesting three quarters of an hour's conversation.

I told him that I felt some concern that we were not really
getting on to his side of the post-war policy, namely,
International economic co-operation. I asked him what had happened
with regard to the Clearing Union paper and the one on 'Buffer
Stocks'. [1]

With regard to the former he said that Phillips had taken it back
to the U.S.A. and given it to the Administration there in its
revised form. [2] There had been a considerable pause but only
yesterday they had heard that the United States Treasury are now
putting in a counter paper which Keynes feels is certain to be
down the lines of White's scheme for an International Bank. [3]

With regard to the 'Buffer Stocks' paper [4], it had been
drastically revised as a result of the recent conversations in
London and was now at the point where it was likely to be
submitted to the Cabinet for its approval.

Keynes also told me that the paper the Treasury is contemplating
putting in would be a paper that had not the endorsement behind it
of the American Administration, and would be treated merely as a
private document. He said that this appeared to him very
unsatisfactory and that led us to the point that really this
matter is not progressing as it should.

On this theme I developed to Keynes very briefly my whole view
with regard to post-war problems and how they are all linked
together, and the necessity of getting a definite policy agreed
and getting on with the job. I found that Keynes was in complete
agreement and he told me that he had been attending a weekly
meeting at the Foreign Office where the Political problems were
being considered, but that he had been horrified at the lack of
really sound thinking. He told me that what I had said to him was
the first realistic approach that he had heard to the whole
subject.

I then put to Keynes very strongly, with regard to his own
particular subject, that it seemed to me the time had come for
ceasing these underground discussions and coming out into the open
with the broad principles that we feel should be adopted and then
creating the machinery for getting on with the job of considering
practical propositions. I asked him whether he would have any
objection to that now being done. His reply was that on the
contrary he would welcome it.

Keynes said that while we had no definite ideas as to our own
policy it would have been embarrassing, but now that we knew
roughly where we stood he thought it would be much better to take
a definite line.

We then discussed how this could be brought about and were agreed
that the only way was to get the Prime Minister to see the
necessity and that he and the President should make public
statements as to what we had in mind.

On this basis we left this phase of our discussions and then went
on to deal with the American position and our approach to them. I
outlined to Keynes my idea that we should put it flatly up to
America that we were prepared to play in bringing about
International economic co-operation but that whether this could be
effected depended entirely on the attitude of America. If they
were not prepared to play then we would have to get on with the
job of consolidating the British Empire economically. I pointed
out to Keynes that while all the Dominions were anxious to bring
about an expansion of International trade, and as long as there
was any hope of doing that, [they] would not listen to any idea of
an Empire Economic Unit. If, however, International economic co-
operation was impossible the Dominions would be prepared to co-
operate in Empire economic solidarity.

I pointed out to him that the Ottawa Conference [5] had been
solely for the purpose of meeting the economic chaos that then
prevailed and had not the sinister objective of bringing about

Empire economic autarchy. I told him that I was sure the
Dominions' point of view was-we quite liked Imperial Preference,
but that would not weigh in the balance with us in comparison with
the real expansion of world trade.

Keynes said that he very much agreed as to the attitude we should
have taken towards America and then raised the question of
reciprocal Lease-Lend. He gave me a startling piece of
information, which they had only discovered in the Treasury in the
last few days, that probably the reciprocal Lease-Lend that we
were affording was equal to 50% of what the Americans were doing
and if you took into account what we were doing for Russia and
other countries, the British Empire was probably giving freely 75%
of what America was affording by Lease-Lend.

Keynes then told me that in America propaganda is being put out
that reciprocal Lease-Lend is only equal to about 1% of what
America is doing. We agreed that the Americans ought to be
undeceived on this particular point but felt it could best be done
by the Americans themselves and there is quite a prospect that
Stettinius will bring it out in his evidence before the Congress
Committee.

The conversation was quite interesting and useful and we agreed
that we would have further talks.

S.M.B.