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Sterling Agreements came to an end had been the subject of long
consideration by Officials and Ministers, but that in the difficult
international situation and a world so different from that of 1968,
it was not easy to see what would be in everybody's mutual interests.
One message had already been sent from the Chancellor to Sterling
Agreement signatories explaining his background thinking and asking
for their views. A second message, which would include more precise
suggestions for arrangements after 24 September, was promised for
early September when Ministers would have decided exactly what
proposals they wished to make
4. The Governor and Mr Haddon-Cave could not, of course, be told
of the various possibilities which might be put to Ministers for
decision - these include a unilateral declaration by the UK which
would, unlike a negotiated agreement, be simple and quick to put into
operation. Such a declaration would probably offer a dollar
guarantee to countries which continued to observe the minimum sterling
proportions. The attractiveness of a declaration of this sort to
sterling holders would depend largely on the rate which we chose as
the basis for the guarantee. No decisions have been taken; but
it is possible that Hong Kong will, in the event, find that its
worst fears have not been realised.
5.
The result of Hong Kong's discussions with Mr Nott and after-
wards with officials was that while they were clearly unsatisfied
not to learn anything precise about what was to happen after
24 September, they were prepared to use their best endeavours to
discourage the Hong Kong banks from selling sterling forward during
the remainder of the life of the Agreement (everyone accepted that
in the final analysis they could not dictate to the banks).
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