we shall have to take to restore the balance of our external 
                  trade have time to bear fruit.            
 
                                                            
 
 
Early in the year we heard, almost accidentally, that the 
      President had authorized a directive to the effect time the British 
      reserves were not to be allowed to rise beyond a billion dollars 
      ($250,000,000). It is not clear that this directive was ever 
      issued in such explicit terms, and we were certainly not consulted 
      about it. But the U.S. Treasury maintain that this alleged directive 
      puts the Departments under orders to cut off Lend-Lease as soon 
   as our total reserves exceed the limit of a billion dolla
 
                                                            
 
 
In course, of time, this figure has been passed. Our reserves 
      are no more than $1,200 million. From now on they are likely 
      to increase, owing to our receiving thee dollar equivalent of 
      the pay of the American troops in the sterling area. According 
      to present estimates of the numbers of American troops who will 
      be drawing their pay in those areas, our reserves may increase 
           by as much as $600 million in the next year.     
 
                                                            
 
 
This does not mean, however, that we are getting richer. Our 
      liabilities are increasing five or six times as rapidly as our 
      reserves and we are constantly getting deeper into the pit of 
      net indebtedness. Indeed, I doubt if we can maintain our external 
      financial fabric on its present basis, unless some moderate proportion 
 of our increased liabilities is covered by reserves against
 
                                                            
 
 
All this has been explained in great detail to the American 
      Administration. The late Chancellor of the Exchequer wrote a 
      long letter to Mr. Morgenthau, rather more than two months ago, 
      which the latter acknowledged and premised to answer. No reply 
      has been received. When our Delegation was recently in Washington 
      in connection with the currency and commercial talks, Lord Keynes 
      and his colleagues