(Due to arrive Canberra 24.8.29)

My dear P.M.,

You will have seen from the press with interest and, I think,
disappointment the fact that Lloyd [1] has been sacked. As I think
I told you this has come about by the machinations of the Foreign
Office working in conjunction with the known dislike of the Labour
Party for Lloyd. It is most unfortunate and all decent people
deplore it.

As soon as it appeared in the press Rudyard Kipling [2] got in
touch with me to know if you could do anything about it-I told him
that in my opinion it was impossible for you to make any
representations on the subject, but that if it subsequently
transpired that the British policy, vis-a-vis Egypt, was going to
be reorientated, then possibly you might have something to say.

Sir Granville Ryrie [3] got back from Geneva last night and I did
my best to explain to him early this morning the situation as
regards Singapore, Naval limitation and Egypt-before this
morning's C.I.D. Meeting. I will not repeat the story to you here
as it has been all covered in telegrams between us.

International Affairs are seldom dramatic, except in retrospect-
but this last month has seen rather a thriller in a mild way. The
French were due to pay the United States 80 million on 1st August
for war stores, railways etc., taken over from the Americans at
the end of the war. They had to find this huge sum in cash if the
French debt to U.S. was not funded by that date-or at least if the
funding agreement had not been ratified by the French Parliament.

There was violent opposition, in that lunatic assembly, to binding
themselves to funding (and so crystallising) their debt to U.S.

until they had a quid pro quo in the shape of a hard and fast
guarantee from Germany for the Reparations debts-in order to leave
no doubt that they would get the annuities from Germany in order
to be in funds to meet the service of the debt to the United
States.

The Reparations Expert Committe report was more or less acceptable
to France but it was no use until it had been accepted
internationally, even possibly with minor variations. Then came
the race-whether the International Reparations Conference could be
held and decision arrived at by all the nations concerned, so as
to enable a document to be signed engaging Germany to a certain
definite reparations annuity programme before 1st August-which
would have enabled Poincare [4] to get the French Parliament to
agree to ratification of the United States debt funding agreement
with an easy conscience. Failing this (which it became clear in
early July was quite impossible to do in the time) it was a
question of Poincare trying to force ratification of the United
States debt through his Parliament in the teeth of opposition of
the most determined type-and his Government going out if he
failed. Otherwise he had the comparatively easy but pusillanimous
alternative of drifting with the tide of biassed, ignorant and
irresponsible opinion in France, refusing to ratify the U.S. debt
funding agreement, and having to find the 80 million in cash on
1st August. Luckily Poincare has recognised his obligation to his
country and has forced the funding agreement through his
Parliament-and got away with it by only eight votes. So that the
80 million is now to be funded with the rest of the French debt.

The danger to this country inherent in the position was that if
the 80 million had had to be found, a good proportion of it would
have been drawn from London, in the form of gold and credit, which
would (so I learn from the Treasury and Foreign Office) have had a
distinctly bad effect here, and at a time when the City was not in
good shape to withstand it. Curiously enough the general public
and the press did not realise the danger, so the cloud has passed
without people realising that there had been a cloud.

G.L. Wood, Lecturer in Economics at Melbourne University [5], is
in London doing research into the economic history of the
Commonwealth, and is producing a book on the subject. He has been
letting me see the chapters in draft form as he has written them.

He is intelligent, although rather narrowly an economist. The book
is most depressing, and can only have a depressing effect when it
is published-although it is so tough and heavy to read that it
will have only a limited public.

In short-he lays all our troubles at the door of our overseas
borrowing. He thinks we are in for a crash-and that it will be due
to nothing less than the borrowing sins of the past generation-and
not to some curable cause, such as high cost of production-except
in so far as the two are connected.

The book is a profound study of our finances, but as the economic
practitioner is like the doctor, more interested in disease than
in health, the book makes gloomy reading. As he has asked me for
my comments I have begged him to put a warning to this effect
prominently in his preface-which he is doing.

He is convinced that we were on the verge of a crisis in 1914 when
the War intervened.

He goes so far as to think that all our borrowing has been a
mistake-which common sense tells one is an over-statement.

However, such a book is really only of academic interest-it
underlines the mistakes of the past, probably too severely-but
gives but little guide to the future.

Your speech to the Commercial Travellers' Association in mid-June
seems to me, if I may say so, to put our present economic position
briefly and convincingly.

I dined with John Sanderson [6] this week and got his impressions.

He confirms that the country is waking up to the unpleasant facts
and seems in rather more of a mood to face them-thanks to your
patient and careful handling.

We certainly have not been lacking in the last year or so in
people ready to warn us of the wrath to come, and I expect it is
possible that their cries will have the effect of producing a
flight from investment in Australian industry, although from the
reports that I get this does not yet appear to have begun.

I enclose a good cartoon of Low's. [7]

Hankey's '[8] daughter was married this week to young Berm, the
son and heir of the publishing house of Ernest Benn. [9] Just
before going to the Church from this office, Hankey appeared,
rather perturbed-(as you know he isn't a very dressy fellow)-and
said he'd never worn spats before, and did the buttons go on the
inside or outside!

I am, Your sincerely,
R.G. CASEY