§ Mr. Maurice Macmillanasked the Chancellor of the Exchequer whether, in view of the fact that in the last quarter 140W of 1968, when the borrowing from the overseas sector was £337 million, the money supply increased by £681 million, it remains Government policy to treat external transactions, when they reduce the Government's domestic borrowing requirement, as a factor leading to a reduction in the money supply.
§ Mr. Harold LeverWhen the sterling counterpart of external transactions reduces the Government's need to borrow from domestic sources, the direct contractionary effect on the money supply is automatic and does not result from Government policy. At any particular point in time, this contractionary effect can be offset by other factors working in the opposite direction, such as a weak gilt-edged market. This is what happended in the fourth quarter of 1968.