THE QUESTION OF THE BRITISH GOLD AND DOLLAR BALANCES    
 
                                                            
 
 
1. Some time back, in different circumstances from the present, 
      the President approved a line of policy which would permit the 
      British gold and dollar reserves to reach solve figure between 
      $600 million and $1,000 million. There was no agreement by the 
         British to limit their reserves to this figure.    
 
      2. For some little time past the British reserves have exceeded 
      $1,000 million, and may be increasing at a rate of some $600 
      million a year. This includes gold and represents, their total 
      resources against growing liabilities in all parts of the world, 
        which amount to six or seven times these reserves.  
 
                                                            
 
 
3. This increase in the British reserves does not reflect 
      an improvement in their financial position. Their quick liabilities, 
      largely caused by heavy cash out goings in the Middle East, are 
      increasing at four or five times the rate at which the reserves 
      against them have increased. Their net overseas position, in 
   fact, is deteriorating at a rate of about $3 billions a y
 
                                                            
 
 
4. The increase in their gold holdings is due to certain receipts 
      from South Africa and Russia. The increase in their dollar variances 
      is due to their receiving the dollar equivalent of the local 
      currency provided to meet the pay of America troops within the 
      sterling area. Indeed, if it were not for the pay of the American 
      troops the British dollar balances would be going down
 
                                                            
 
 
5. Apart from certain raw materials, the British are already 
      giving reciprocal aid to the fullest extent of American Government 
      requirements. They have not: offered raw materials purchased 
      by the U.S. Government in Great Britain and the Colonies on reciprocal 
      aid terms. This would retard the growth of their balances