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	resources and reserves of the producing companies at a time when the pro­vision of further finance will be impossible. Secondly, enormous stocks are accumulating which have a serious psychological effect upon the public as well as on the trade. The Government, with its many other pre­occupations, has, we feel, not hitherto fully realized the true facts of the situation. This is quite natural. It is not aware for example of the great difficulty which we experienced in obtaining credits from the banks for financing the Diamond Corporation's purchases even for the present year, nor of the definite refusal of [a certain bank] to provide any further facilities. Undoubtedly the fact that the companies were still producing diamonds while not selling any, instead of conserving their resources was one of the main reasons for the reluctance of the banks. We fully appreciate the natural anxiety of the Government to prevent the growth of unemployment in the Union, but the pursuit of their present policy of compelling the com­panies to keep men at work producing diamonds regardless of the economic position of the industry may lead to the bankruptcy of the producing companies and consequently to permanent loss of employment of thousands of men. Our object in sending this cablegram is to urge upon you and the Government not to be content to wait upon events but to act decisively in reducing production in spite of the difficulties which such a policy involves. Both Sir Basil Blackett, a director of the Bank of England, and Sir Frank Meyer, in close touch with Rothschilds, must obviously have been fully conscious of the deeper dangers of the situation. In fact, the European summer of 1931 was marked by banking crises in Germany and in Austria and, later, by increasing suspicion of the position of the pound sterling. On 20 September 1931 Great Britain abandoned the gold standard, though South Africa remained on that standard till 27 December 1932. A new set of problems was at once created. All sterling obligations in the United Kingdom in terms of South African pounds became less onerous; all liabilities in South Africa, in terms of British pounds, became the more onerous the greater the fall in British sterling; all this apart from the fact that a fluctuating British pound presented management problems, the degree of depreciation at any time being given. The Diamond Corporation decided to sell to cutters on the Continent in terms of gold, or at the rate of 12 florins to the British pound. This meant that British sterling receipts rose as the paper pound fell and gave the producers additional paper profits in London. The technical side of the diamond situation was thus compli­cated, while the currency disorganization in itself added to the current degree of confusion in economic affairs.