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4. THUS OUR ONLY MEANS OF AVOIDING ACCIDENTAL BREACHES WOULD BE TO CARRY A LARGE AMOUNT OF STERLING IN EXCESS OF MSH, WHICH WOULD RUN THE RISK OF NOT BEING COVERED UNDER THE GUARANTEE. THIS COULD NOT BE JUSTIFIED HERE, NOR DO WE THINK THIS CAN BE REQUIRED OF US UNDER THE GUARANTEE ARRANGEMENT. AS I SEE IT, THE FOINT IS THAT THE PURPOSE OF THE GUARANTEE ARRANGEMENT WAS TO PROTECT THE STABILITY OF THE STERLING EXCHANGE RATE. THIS STABILITY IS NOT DAMAGED, OR AFFECTED IN ANY WAY, BY FALLS IN OUR HOLDINGS WHICH COME ABOUT SIMPLY BECAUSE OF FALLS IN THE MARKET PRICES OF GILT EDGED SECURITIES IN FACT, THE TOPPING UP WHICH WE AGREE WE ARE REQUIRED TO DO, AND HAVE DONE, POSITIVELY STRENGTHENS THE STERLING EXCHANGE RATE: AND THE TIMING OF THIS TOPPING UP PROCESS IS HARDLY MATERIAL.
5.
HAVING SAID THIS, I AM ANXIOUS TO MAKE IT CLEAR TO YOU THAT I AM CONCERNED TO ESTABLISH THAT WE HAVE ABIDED BY THE LETTER OF OUR OBLIGATIONS, AS WE THINK THEY MUST BE INTERPETED: AND NOT TO PLEAD THAT, AS OUR ACTIONS HAVE NOT BEEN AGAINST THE SPIRIT OF THE ARRANGEMENTS, WE DESERVE CONCESSIONARY TREATMENT.
6.
THERE IS A FURTHER POINT: OUR INTERPRETATION OF PARAGRAPH 2 OF YOUR TELEGRAM 1209 MUST HAVE BEEN CLEAR FROM THE LAST SENTENCE OF THE ACCOUNTANT GENERAL'S LETTER OF 11TH FEBRUARY TO THE CHIEF OF THE ECONOMIC INTELLIGENCE DEPARTMENT, BANK OF ENGLAND. IT IS A PITY THAT OUR INTERPRETATION WAS NOT CHALLENGED UNTIL 18TH MARCH WHEN PAYTON SENT THE ACCOUNTANT GENERAL A TELEX MESSAGE, SO THAT WE WERE NOT ABLE TO ARGUE THE POINT EARLIER AND UNDES LESS PRESSURE.
7. IN PARAGRAPH 1 OF YOUR TELEGRAM 314 OF 27TH MARCH, YOU SAY THAT NO OTHER CASE HAS LED TO MISUNDESTANDING OR DIFFICULTY. BUT IS THIS RELEVANT? OTHER PARTICIPANTS PRESUMABLY HAVE LOWER MSP'S AND SO
ARE LESS CONCERNED TO AVOID HOLDINGS IN EXCESS OF THEIR MSP'S: OR THEY HAVE STERLING LIABILITIES WHICH REQUIRE TO BE COVERED BY
STERLING ASSETS: OR THEY MAY NOT BE SO HEAVILY INVESTED IN LONG- DATED GILT EDGED SECURITIES.
8. THE INFORMATION WE GET HERE QUICKLY ABOUT GILT EDGED MOVEMENTS IS SCANTY. BUT THE APPARENT MAGNITUDE OF FALLS IN THE LAST THREE WORKING DAYS OF MARCH IS SUCH AS TO ILLUSTRATE WELL. OUR DIFFICULTIES. THE AMOUNT OF STERLING WE FELT IT NECESSARY TO BUY, WAS POUNDS STERLING 10 MILLION BY 29TH MARCH, RATHER THAN THE
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/ POUNDS