August 5th 1942, 2 pages on blue paper folio with 3 other file copies, from Christ Church.
"You said something the other day about doing a revised version of the Clearing Union for American eyes.
"There is an outstanding point of supreme importance with which I do hope that you will be able to deal-I refer to the definition of the point at which sanctions against a debit country are to be introduced.
"I have mentioned this before but I am not ashamed of labouring it again. I see it as the crux of the whole matter. With this point satisfactorily settled we are all right; without it I do not think that the Clearing Union would represent much advance.
"...You can say such and such will happen 'if the degree of indebtedness of the debit country is times (say 3 times) the current average indebtedness of the debit countries'. Then in a footnote you can say that 'the degree of indebtedness in a debit country is measured simply by dividing its actual indebtedness by its debit quota; and that the average indebtedness of debit countries is measured by dividing the sum of all debits by one half of the sum of the debit quotas of all countries in the Union'. I do not think that sounds too complicated. "On this hangs one's whole conception of the functions of the Clearing Union...it seems clear that in the world equilibrium we certainly ought not to be a borrowing and probably ought to be a moderately lending country.
"...I do not believe that America is going to solve the problem of making internal investment equal to saving at a fairly good level of employment within a decade or within two decades.....
"..P.S lt will of course be clear to you that the mere fact that we do not expect to proceed for a long time as a debit country does not mean that the easement proposed for the genuinely debit countries does not effect our vital national interests. It is of course a vital interest for us, for our exports and employment, that the debit countries should not be under constant pressure to rectify their balance."
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