ABSTRACT
The US government wanted to treat its former wartime ally fairly but many US manufacturers and farmers wanted to exploit Britain’s temporary weakness and dismantle Imperial preference and the sterling area. Britain received a credit from Canada under similar terms to take the total to the figure originally requested. Liberalisation of European trade and payments helped Britain to cope with the dollar shortage. The US Treasury seized on this adverse movement and pressed strongly for devaluation, undermining international confidence and the government’s policy of promoting sterling’s re-emergence as a trading currency. Britain rearmed with an economy which was already at full employment. The markets required rather more incentive to hold sterling and began to hedge and speculate against a sterling devaluation. But the EMS was so politically symbolic that it had to be defended to the hilt by keeping British interest rates relatively high until recession in the German economy allowed some relief.
