Towards Convertibility
Tiii sterling area's reserve in London of gold 1 and dollars—but mostly gold—continues to grow at a satisfactory pace. A further £14 million was added during November, which shows that Britain is still earning a sufficiently large surplus in its international accounts to carry some of the less fortunate sterling countries through a difficult period. The value of the sterling system has once again been plainly demonstrated.
Indeed, so little anxiety is now felt about the future of the E that talk has revived of sterling convertibility. The signs are propitious. Sterling and dollar are in better balance, the International Monetary Fund is in a position to support 'the transition to a freer C, and, to some, convertibility now appears as one way of salvaging something out of the wreck of the European Free Trade Area negotiations.
These are complicated problems, but by a piece of happy timing, the Institute of Economic Affairs has this week published a pamphlet* which clarifies some of them. The author, Mr. Paul Bareau, suggests that the next step the authorities should take is to merge the transfer- able sterling market, which includes all Europe and Iron Curtain countries, with that for sterling
- , — - 111 -1-URE, OF THE„ SYS1EM. Price 5s. from 24 Austin Friars, EC2.
In the hands of Americans and Canadians. This would not be difficult, for the rates at which these two markets operate are now exceptionally close to each other—itself a significant pointer. And all that would be necessary would be for the authorities to allow banks in London to deal in .transferable sterling, which is at present obly dealt in at Zurich and New York. The change would not really be of great consequence, except as proof that sterling has at last thrown away its crutches. It is even passible that some kinds Of capital transactions will also be freed. CertainlY some alteration in exchange-control practice seems likely in the next month or two.
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