(2) 27th November, 1947. where our troubles were not due to bad luck, they were due to our own bad management, particularly inflation and a failure to put the repayment of sterling debt contracted during the war on the same footing - or something like the same footing - as the repayment of the debt to Canada and the United States. The last section was intended to be (and has generally been taken to be) an urgent appeal to British statesmen not to lose their heads and embroil us in commercial disputes with America. I have examined both the text of my article and my conscience to dis- cover any traces of any other intention and I have found none; and friends whom I have asked whether my article could bear such an interpretation as yours have been as amazed as I am that the question should ever have arisen. I sent the article to you and other friends in the United States in the hope that, what- ever your agreement with the analysis, you would at least be pleased that someone over here was not prepared to blame America for all our troubles. I am sorry it has been taken in just the other sense. You say on Page 8 that the occasion of your letter is my question regarding the inclination of the Government to rely on gentlemen's agreements concerning the right of withdrawal. And you go on to say "it is not clear whether the blame for ungentlemanlike conduct refers to the United States as a whole nation or to individual American business enterprises." I must ask you where in this context or elsewhere in this connection is there a word of reference to the United States or to individual American business men? The sentence which you quote referred to certain doctrines prevalent in the Bank of England and well-known to the readers of Lloyds Bank Review, at least in the City of London, regarding the relation between the Bank and the other Central Banks with which it has special relations. The story is a long one and the reference is perhaps a trifle esoteric. But you would certainly find, if you asked common friends over here, that it was in this sense that it has been universally understood in this country. Whether during the period of our difficulties the institution of clearing arrangements of the kind I mentioned would have been a good thing is a matter on which I am sure reasonable men may easily differ. I have always found the con- ception of current account convertibility beset with great conceptual and practical difficulties. You may take it from me that I like none of these things and am prepared to tolerate them only in virtue of a situation of such great social and political peril that I fear the alternative would involve the loss of all that we both believe in. But in referring to those