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Historical documents

21 Nimmo to Department of the Treasury

Cablegram 2131 LONDON, 28 June 1948, 8.15 p.m.


It is becoming clear that the problem of long term dollar
viability [for] [1], the Sterling Area as a whole is to a large
extent associated in the minds of the United Kingdom Officials
with the increasing diversion of the rest of the Sterling Area
exports from United Kingdom and other relatively soft currency
areas to dollar and other hard currency areas (e.g. Argentine).

When this long term problem is raised with the United Kingdom
Officials almost invariably reference is made to the possible
scope of such diversions. United Kingdom are questioning to what
extent the goods they previously regarded as essentials are really

This thinking on diversion is probably part of a search for a
wider field of exports to North America and suggests that the
United Kingdom has achieved maximum diversion of her own exports.

She is also faced with the problem of her own overall balance and
may be examining the feasibility of cutting non dollar imports
which are not prime essentials and which might be sold for

These assumptions have not been confirmed but preliminary thinking
for the forthcoming London talks should be aware of such
suggestions. They also emphasise the difficulty of obtaining
increased allocations for Australia of United Kingdom exportable
surpluses of world scarce commodities.

Sterling Area Development Committee is paying increasing attention
to the feasibility of coordinating capital development within the
Sterling Area.

Economist of [26th June contains] article entitled 'Dollar
Shortage for Ever'. The argument contrasts two views. There is
first the current American view that the present dollar scarcity
is a short term phenomenon caused by massive temporary dislocation
brought about by Hitler's war, that this will have vanished by
1952 and that the intervening gap will be covered by Marshall Aid.

On the other hand there is implied view of Economist that the
causes of chronic dollar shortage were just below the surface in
the inter war period and were masked by large American loans to
Europe and South America, that the last war pushed the permanent
shift in relationships a good bit further, that the gold reserves
have gone and investment of income has almost gone and that South
East Asia is no longer a dollar earner that it was because
synthetic rubber plants and tin smelters have been constructed in
the United States. 'If dollar shortage is likely to be permanent
the Marshall Plan should be regarded as a transition to some
different pattern of international economic relationships.'

1 Words in square brackets corrected from the London copy.

[AA: A1838, 708/12A]
Last Updated: 11 September 2013
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