Prime Minister                       
 
                     Gold and Dollar Balances               
 
                                                            
 
 
Thanks to gold from South Africa and pay to American troops 
      in the U.K. and the Empire, our gold and dollar balances have 
      increased to $1200 million and may rise to $2000 million by the 
      end of the war. Much of the increase is not really ours at all 
      but represents profits of Empire countries who choose to use 
      us as their banker. Actually our reserves are far out-weighed 
      by out liabilities, especially in India and the Middle East, 
      which are rising about five times as fast as our reserves and 
      may amount to $10,ooo million by the end of war. Thus our net 
      overseas position is deteriorating rapidly and our reserve when 
  the war ends is likely to be only on fifth of our liabilit
 
                                                            
 
 
Certain Americans, ignoring these liabilities, claim that 
      supplies on Lend/Lease should now be reduced and that we should 
      be made to pay gold and dollars for goods supplied. Why they 
      should pick on us for such treatment is not clear; it is never 
      suggested that Russia and France with their enormous gold balances 
              should pay for goods supplied to them.        
 
                                                            
 
 
The Lend/Lease administration who, with the State Department, 
      are favorable to us, are reluctantly proposing to cut supplies 
      since the United States Treasury maintain that the President 
  issued a directive limiting British reserves to $1000 mill
 
                                                            
 
 
The President has appointed a Committee to examine the matter, 
      whose report may be already in his hands, it is vital to us that 
      he should make the right decision. If our Lease/Lend supplies 
      are cut off and our balances reduced to $1000 million, it will 
      be almost impossible for us to tide over the difficult post-war 
        period while we are building up our export trude.   
 
                                                            
 
 
                     (signed) Cherwell                      
 
      12th November, 1943