Beyond the sterling devaluation: The gold crisis of March 1968

Contemporary European History

Volumn 17, Issue 1, 2008, Pages 73-95

  Hamilton, Arran ^a  

^a NONE

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EID: 60949617176     PISSN: 09607773     EISSN: 14692171     Source Type: Journal    
DOI: 10.1017/S0960777307004286     Document Type: Review

References (122)

1. See for example T. Bale, 'Dynamics of a Non-decision: The "Failure" to Devalue the Pound, 1964-67', Twentieth Century British History, 10 (1999), 92-217
2. K. Burk, '1967 Devaluation Symposium', Contemporary Record, 1 (1987), 44-53
3. R. Roy, 'The Battle of the Pound', unpublished Ph.D. thesis, University of London, 2001
4. Ponting, Breach of Promise: Labour in Power 1964-70 (London: Hamish Hamilton, 1989)
5. A. Cairncross, Managing the British Economy in the 1960s: A Treasury Perspective (London: Macmillan, 1996), 210-15
6. Cairncross was head of the Treasury's economic section
7. Adapted from P. Hall, 'Policy Paradigms, Social Learning and the State: the Case of Economic Policy-Making in Britain', Comparative Politics, 25 (1992), 275-96
8. The National Archive (henceforth TNA), T267/36, 'Treasury Historical Memorandum: The Break-Up of Bretton Woods', 27
9. TNA, T230/1052, Paper by Economic Section, 'The Domestic Prospect after Devaluation', January 1968
10. Bank of England Archive (henceforth Bank), OV44/159, C. W. McMahon, 'The Future of the Sterling Balances', February 1968
11. Bank, G3/287, Parsons to Armstrong, 7 March 68
12. Ibid
13. J. Callaghan, Time and Chance (London: Collins, 1987), 214
14. See also Financial Statistics (Central Statistics Office (CSO), No. 93, January 1970), 95
15. Burk, '1967 Devaluation Symposium', 53
16. Foreign Relations of the United States (FRUS), Vol. 8, Fowler to Lyndon Johnson, 12 November 1968
17. Cairncross, Managing, 180
18. H. Wilson, The Labour Government 1964-1970: A Personal Record (London: Weidenfeld & Nicolson, 1971), 440
19. FRUS, Vol. 12, Rostow to Lyndon Johnson, 'Contingency Support for Sterling', 19 October 1967
20. Callaghan, Time, 215
21. TNA, T312/1828, Baldwin, 'Note for the Record', 4 December 1967
22. See TNA, PREM 13/1447, PM to Chancellor, 5 November 1968
23. R. Crossman, The Crossman Diaries 1964-1970 (London: Book Club, 1979), 353
24. TNA, PREM 13/1854, 'Draft telegram to Washington', undated; TNA, PREM 13/1447, 'Note for the Record', 9 November 67
25. TNA, PREM 13/1854, 'Draft Telegram to Washington', undated
26. Wilson, Labour, 451
27. FRUS, 1968, Vol. 12, Rostow to Lyndon Johnson 'Sterling Crisis', 13 November 1968
28. Callaghan, Time, 220
29. Roy, 'Battle of the Pound', 302
30. TNA, PREM 13/1444, Trend to Wilson, 'Cabinet: Operation Patriarch', 16 November 1967
31. House of Commons Debates, Vol. 754 (London: HMSO,1967), cols. 632-5
32. TNA, T318/183, 'The Length of our Tether as at 17th November 1967'
33. R. Rhodes-James, Ambitions and Realities: British Politics 1964-70 (London: Weidenfeld & Nicolson, 1972), 39
34. R. Stones, 'Labour and International Finance', 222-3, in P. Marsh and R. Rhodes, Policy Networks in British Politics (Oxford: Clarendon Press, 1992)
35. Bale, 'Dynamics', 217
36. J. Bruce-Gardyne and N. Lawson, The Power Game: An Examination of Decision-Making in Government (London: Macmillan, 1976), 118
37. Ponting, Breach, 290
38. Burk, 'Symposium', 52
39. TNA, T312/1827, 'Possible Short-Term Reflux Following a Devaluation, Table II', undated
40. TNA, T318/183, 'The Length of our Tether as at 16th November 1967'
41. Modern Records Centre: University of Warwick (henceforth MRC), Crossman Papers, MSS.154 August 19120, 21 March 1968
42. Bank, 2A93/1, O'Brien, 'Cablegram 22145', 18 November 1967
43. TNA, T318/178, 'Report on the Reserves and Exchange Rates: week ended Friday, 17 November', 1967', undated
44. TNA, T312/1401, 'F.U. (65) 10th Meeting', 29 July 1965
45. Barbara Castle, The Castle Diaries: 1964-70 (London: Weidenfeld & Nicolson, 1984), 325
46. TNA, T312/1401, 'F.U. (65) 6th Meeting', 19 May 1965, and interview with Lord Croham (Sir Douglas Allen, Permanent Secretary, HM Treasury), 6 March 2003
47. TNA, PREM 13/1447, Crossman to Wilson, 13 November 1967
48. TNA, T230/1052, Posner to Armstrong, 'Export Prices and Devaluation', 2 January 1968
49. Callaghan, Time, 222
50. E. Dell, The Chancellors: A History of the Chancellors of the Exchequer 1945-90 (London: HarperCollins, 1997), 354
51. R. Jenkins, A Life at the Centre (London: Macmillan, 1991), 221
52. TNA, T230/889, Butler to Hawtin, 'An Early Budget', 3 January 1968
53. TNA, CAB128/43, 'Conclusions of a Meeting', 4 January 1968
54. Jenkins, Life, 227
55. TNA, PREM 13/2051, Note by the Treasury, 'Contingency Planning', undated
56. Of course, this does not mean that this was the first time that the Treasury had engaged in contingency planning under Wilson, merely that it was the first time that it was done with the blessing of the prime minister. See TNA, T312/1635, Walker to Armstrong, 'Contingency Planning', 5 May 1966, which sets out an account of the formation and operation of the Forever Unmentionable (FU) group, which secretly planned for the possibility of a devaluation between 1964 and 1967
57. TNA, T267/21, 'THM: March Gold Crisis 1968', undated
58. R. Roy, 'The Battle for Bretton Woods: America, Britain and the International Financial Crisis of October 1967-March 1968', Cold War History, 2, 2 (2002), 51
59. TNA, PREM, 11/4203, Maudling to Hume, 'Gold', 20 November 1961. The Bank of England files on the development of the gold pool (Bank G1/280-284) are still classified
60. TNA, T267/21, 'THM: March Gold Crisis 1968', undated; Bank, OV31/125, Rickett to the Governors, 29 September 1966
61. Bank, OV53/56, Kessler, 'The Gold Problem', 4 March 1968
62. Bank, OV53/38, 'Tel No. Eager 2', 14 March 1968
63. TNA, T318/189, Copeman to Goldman, 'Reasons for Outflow from Reserves', 27 March 1968
64. TNA, PREM 13/2036, Balogh to Wilson, 'Exchange Control', 10 January 1968
65. TNA, PREM 13/2036, Dawe to Baldwin, 11 January 1968
66. See TNA, PREM 13/2036, 'Blocking the Sterling Balances', 19 January 1968
67. TNA, T312/1398, 'Blocking', 12/4/65
68. Interview with Lord Croham; TNA, T199/1239, 'Treasury Organisational Chart: May 1968'
69. TNA, T295/604 Rawlinson, 'Brutus 8', 16 May 1968
70. TNA, T295/495 Hughes to Allen, 'Brutus: Implications of International Trade', 17 June 1968
71. TNA, T295/510, Rawlinson to Figgures, 'Cranmer: Telling Whitehall', 8 July 1968
72. TNA, T230/1052, Posner to Cairncross, 'The Future of Sterling', 19 March 1968
73. Interview with Michael Posner (economic adviser to the Treasury), 24 January 2003
74. TNA, T295/489 Goldman to Dowler, 'Contingency Planning', 15 March 1968
75. Interview with McMahon
76. This is supported by TNA, T312/189, 'Reserve Position', 14 March 1968
77. Interview with McMahon; TNA, T295/489, Goldman to Principal Private Secretary, 'Contingency Planning', 15 March 1968
78. Interview with Sir Jeremy Morse, 29 Jan. 2003
79. TNA, T318/189, 'Credits utilised and remaining facilities-end-March 1968'
80. Bank, OV53/38 Morse to Governors, 14 March 1968
81. Bank, G3/287, O'Brien to Armstrong, 21 March 1968. The governor recognised that in accepting credit the Bank would be putting itself into a situation where 'it might not be able to meet its repayment obligations on the due date'
82. Bank, OV53/38, Morse to Governors, 14 March 1968
83. Interview with Morse
84. TNA, PREM 13/2051, Balogh to Wilson, 'For the Record', 16 March 1968
85. TNA, T295/606, Rawlinson to Allen, 'The Euro-Dollar Market', 17 June 1968
86. For the proposed solution see TNA, T295/580, Rawlinson, 'Brutus: Mobilising Private Overseas Portfolios', 13 June 1968
87. Interview with McMahon; Bank, OV53/38 Morse to the Governors, 14 March 1968
88. Bank, OV53/38, Morse to Governors, 14 March 1968. Morse states that 'it [floating] would be unlikely to leave the same long-run scars as a blocking operation'
89. and T295/489, Goldman to Dowler, 'Contingency Planning', 15 March 1968
90. T295/489, Goldman to Principal Private Secretary, 'Contingency Planning', 15 March 1968
91. Interview with Anthony Glover (assistant to Anthony Rawlinson), 13 Feb. 2003
92. TNA, CAB130/497, 'MISC 205 (68), International Monetary Situation', 17 March 1968
93. Jenkins, Life, 235. Crossman states that the, 'Bank, of England utterly betrayed the government by leaving [it] in the dark to the very last minute and not foreseeing and warning them of the catastrophe.' MRC MSS.154 August 19120, 21 March 1968. However, Kit McMahon and Jeremy Morse both denied this in recent interviews. Their version of events is supported by the fact that daily EEA reports were supplied to the Treasury between February and March 1968. See TNA, T318/184, 'Daily Reports to the Chancellor on Sterling and the Foreign Exchange Market', 6/2/68-17 May 1968
94. TNA, CAB128/46, 'CC(68) 21st Conclusions', 15 March 1968
95. FRUS, Vol.12, Rostow to Johnson, 14 March 1968
96. It later emerged that the bank holiday had technically been illegal, since the banks had remained open for domestic business. See TNA, T312/2132, 'Priam: Stopping an immediate outflow', undated
97. G. Brown, In My Way (Middlesex: Penguin, 1971), 161
98. See Wilson, Labour Government, 509-10
99. Brown, My Way, 161-79
100. MRC, MSS.154/8/120, 17 March 1968
101. Castle, Diaries, 400
102. TNA, CAB128/46, 'CC(68) 22nd Conclusions', 18 March 1968
103. Benn, T. Office Without Power: Diaries 1968-72 (London: Hutchinson, 1988), 47
104. Castle, Diaries, 462. Crossman also confirms its importance
105. Bank, OV53/38, Armstrong to Jenkins, 17 March 1968
106. TNA, CAB 130/497, 'Minutes of Misc 205(68) 1st Meeting', 17 March 1968
107. Under Brutus I, balance holders would still have been able to use their sterling to pay for British goods, but under all other versions of the plan this courtesy was rescinded and the balances would have been inconvertible and frozen
108. FRUS Vol. 12, 'Telegram from Wilson to Johnson', 18 March 1968, 617
109. Bank, OV53/38, 'Telegram No. 925' 16 March 1968
110. Interview with Goldman; FRUS, Vol. 12, 'Paper Prepared in the Department of State', undated; Bank, OV53/38, Armstrong to Jenkins, 17 March 1968
111. Bank, OV53/38 Morse, 'New Arrangements for Sterling', $1,150 millon 18 March 1968. This comprised existing standbys totalling $2,835 million, plus an additional $1,150 million. Of the additional credits $700 million came from the United States, $50 million each from Italy, Switzerland, Belgium and the Netherlands, $150 million from Germany and $100 million from the BIS
112. TNA, T295/605, Rawlinson to Hoskin, 'Cranmer', 22 July 1968
113. TNA, T295/604, Rawlinson to Hawtin, 'The Horror of Brutus', 11 June 1968
114. TNA, T312/2131, Posner to Allen, 'Contingencies', 11 September 1968
115. The code name for the floating operation was Hecuba. See TNA, T312/2544, 'Hecuba: Note of a Meeting in the Chancellor of the Exchequer's Room', 22 January 1969
116. TNA, T312/1636, Ryrie, 'Fixed or Flexible Rates', 22 September 1966
117. Interview with Goldman
118. Bank, OV44/160, 'Extending the Basle Arrangements', 10 April 68
119. Bank,OV44/164, 'The Sterling Area and the Basle Negotiations', 19 June 1968
120. PREM13/1402, Balogh to Wilson, 'Bank, of England', 20 May 1966
121. TNA, CAB130/497, 'MISC205 (69)', undated
122. TNA, T267/21, 'THM: The March Gold Crisis 1968', undated