Even more important is the fact thet Great Britain is inclined to favour Sterling Bloc countries in matters of trade, by allowing them a large export surplus in their trade ale with her. In the case of some Sterling Bloc countries, such as Finland and Sweden, this favourable balance has assumed particularly large proportions. The theory that aeny: such surplus automatically accumulated in the form of an increase of the sterling balances of the countries concerned, explained the willingness of Great. Britain to lend to the Sterling Bloc countries, and to make favourable trade arrangements with them. From this, it was only one step to the theory that the countries of the Sterling Bloc actually constituted a single trading area. It is now widely believed that if the United States has an import surplus in relation to, say, Sweden, this should tend to offset the effect on sterling of a corresponding part of her export. surplus in relation to Great Britain; for the reason that the Swedish export surplus to the United States li be converted into a sterling balance of the Swedish Central Bank.
As far as the Crown Colonies and, to a lesser extent, the British Dominions are concerned, this assumption is undoubtedly correct. The monetary management of the Crown Colonies is in the hands of the authorities appointed by the Colonial Office, and it goes without saying that any favourable surplus is transferred into sterling by the various Currency Boards. In the case of the Domin-ons, a similar result does not necessarily follow, since the Dominions are in a position to accumulate gold instead of a sterling balance. Nevertheless, it is broadly true to say that an export surplus by a Dominion helps to offset an import surplus by the Mother Country. But-the assump-"on may be entirely wrong where zon-British members of the Sterling Bloc are concerned. For years, while the trend of funds was towards London, it was substantially correct to say that the surplus of those countries accumulated largely (though by no means exclusively) in the form of sterling balances. Even then, ~hower, the Central Banks of the" Sterling Bloc countries were accustomed from time to time to convert part of their sterling balances into gold. "Tt is true that they left the gold in London for the time being, so that they could use it in the event of a change in the trend of their trade. When they found, however, that their trade continued to be favourable, they repatriated part of the surplus, which they assumed to be unnecessary for immediate exchange purposes. tendency of sterling was downwards, several additional countries joined the Sterling Bloc—temporarily at any Tate. France has been practically a member since her lest devaluation, when the limit of the depreciation of the frane was fixed, not in relation to the dollar but to sterling. During the late summer the Swiss franc and the Dutch guilder also tended to move to a large extent in sympathy with sterling. As a result, the depreciation of sterling did not correct its overvaluation to anything like the extent it would have done in the absence of the Sterling Bloc arrangement.
Text read from the printed page and cleaned; old type leaves the occasional error.