The British Prime Minister, Mr. James Callaghan, suggested on Monday (25 October) that the United?
CU British Prime Minister James Callaghan speaking
CALLAGHAN: "I would very much like to see us get into a situation where these liabilities of ours, which we have as a reserve currency, were taken over in some form or other. Whether that can be attained of course isn't only for me. But, I do say this, I think Germany and the United States and perhaps Japan have got some responsibility here. They've got vast reserves. The German reserves are something between 35 and 40 billion dollars. If we had that, we wouldn't be worried about a run today. It would be trivial and I think that if, for example, the International Monetary Fund were to try to force us into policies which would be so harmful to the economy, that we would go into a downward spiral. Then we would have to say to some of these other countries, look, the International Monetary Fund and you yourselves must accept the political consequences of what you're doing. I'm not threatening anybody. What I'm saying is that when one country had been a traditional holder of sterling for so many years and has got these balances and has held them over a period of years and others have got these vast reserves, then it's........time we come more together than we have been and try to get it on to a more rational basis."
The International Monetary Fund, the U.S. Treasury Secretary, Mr. William Simon and British authorities denied the Sunday Times report, which said the U.S. and the IMF had agreed to allow sterling to depreciate to 1.50 U.S. dollars. Sterling's weakness on foreign exchange markets was compounded by heavy demand for West German marks.
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Background: The British Prime Minister, Mr. James Callaghan, suggested on Monday (25 October) that the United Kingdom may have to reconsider its attitude towards western defence if it were forced by creditors into a massive deflationary policy. He was speaking after a massive run on sterling, which forced the pound to its lowest ever level -- 1.57 U.S. dollars. The pound recovered later in the day to 1.59 dollars. The drop followed a report in the London Sunday Times newspaper that the International Monetary Fund wants to see the currency depreciate further to help British exports. Mr. Callaghan also commented on how wealthier countries could help Britain.