In stark contrast to the opportunities available to New York banks at the end of the war, the recovery of the London merchant banks was beset with problems. Britain had liquidated much of its overseas investments and financially was virtually as weak as the defeated countries. An attempt to make sterling freely convertible in 1947 quickly collapsed, and it was not until 1961 that the pound became fully convertible for trade purposes, while exchange controls remained for capital transactions until 1979. It was New York, the home of the US dollar markets, that played the key role in financing and servicing the rapid growth of international trade and capital flows in the late 1940s and the 1950s. The London merchant banks were largely confined by official controls to conducting international operations in sterling, which more or less restricted their international activities to the ‘sterling area’ — the British Commonwealth and some other countries that used sterling as the normal means of settlement — or to transactions that benefited the British balance of payments.
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Notes and References
- 1.E. Steffenburg, ‘Merchant Banking in London’, in Current Financial Problems and the City of London (London: Institute of Bankers, 1949) p. 66.Google Scholar
- 19.William Clarke, The City’s Invisible Earnings (London: Institute of Economic Affairs, 1958) pp. 47, 96.Google Scholar
- 86.Colin Fraser, Harry Ferguson. Inventor and Pioneer (London: John Murray, 1972) pp. 163–72.Google Scholar