By Dr Catherine Schenk
To enrich present paintings at the British family financial system within the post-war interval it will be important to ascertain exterior monetary coverage. while substantial paintings has been performed on Britain's family members with Europe and with the US, the complexities of the sterling quarter have remained imprecise. This quantity makes an important contribution to unravelling the strands of British exterior financial coverage within the post-war interval.
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Extra info for Britain and the Sterling Area: From Devaluation to Convertibility in the 1950s
THE STERLING BALANCES AND CONFIDENCE Since, in the event, the sterling balances did not have a directly destabilising impact on the British economy in the 1950s, we are left with the question of whether the existence of these liabilities actually made destabilising speculative capital flows larger than they would otherwise have been. Unfortunately, it is impossible to construct a reliable counterfactual measure of speculative flows since opinions about the danger of the sterling balances cannot be isolated from their reaction to other weaknesses of the British economy.
Thus, a guarantee of Britain’s ability to survive a run on the reserves would probably not have been enough to eliminate the strains on the balance of payments in the 1950s either. The assertion that it was the threat of the sterling balances being run-down without an adequate cushion of short-term assets that was the major destabilising force is unsupported by subsequent events. A further consideration in assessing the contribution of the sterling balances to confidence is that the published reserves did not cover the total foreign exchange assets held by the Exchange Equalisation Account (EEA).
The publication of the total sterling balances was therefore inconsistent with the secrecy surrounding the total British reserves. 51 In the eyes of Britain’s creditors, therefore, these assets were considered liquid enough to act as loan security. This reinforces the conclusion of the previous section that the ratio of ‘assets’ to ‘liabilities’ on which so much public criticism of the sterling area was based was misleading. If this spurious ratio had a destabilising impact on confidence this was partly self-inflicted by the government of the time.