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allies, her credit in the United States, and the possibility of American help towards stabilisation in Europe—the German economy being sunk in inflationary disarray. Furthermore Baldwin had to negotiate against the background of a damaging partial commitment by the Coalition Government, including the elegantly drafted butill-judged Balfour note of July 1922, and an American public opinion which was inward-looking and brashly commercial. ‘They hired the money, didn’t they?’ was a simpler appeal than intricate arguments about Britain’s countervailing claims, the difference between a war debt and a normal commercial transaction, and the problems (however vividly exemplified by Germany) of making large payments across the exchanges without upsetting international trade. Still greater than these difficulties was Bonar Law’s stubborn (and in many ways sensible) resolve not to accept a massive continuing burden. He had said that he regarded all-round cancellation as the only fair solution to inter-Allied debts, and this remained his basic position throughout. Reluctantly, however, he authorised Baldwin to make a settlement which did not exceed a payment of £25 million a year.
    Baldwin’s mission to Washington took him away from 27 December to 27 January. There were fluctuating negotiations, and some acerbity in the flow of telegrams from London. ‘Is it not possible that you are too much under the influence of Washington which is not even the New York atmosphere?’ 5 In spite of such warnings Baldwin’s desire for a settlement was fortified by the views of the Governor of the Bank of England, Montagu Norman,who was with him, and of Auckland Geddes,the ‘political’ Ambassador in Washington. Baldwin tabled proposals which involved payments of £34 million a year. The Americans countered by accepting this for the first ten years, but adding an extra ½ per cent interest, bringing the annual figure to £40 million for the remaining fifty-two years.
    Baldwin thought the counter-offer acceptable, but as a rump Cabinet of the Prime Minister and six other members unanimously rejected it, he was forced to return with the matter unconcluded. At Southampton he made his own position devastatingly clear to the waiting journalists. He disclosed the terms of the American offer, he left no doubt that they were in his opinion the best that could be obtained and should be accepted, and he rounded things off with what were interpreted as some highly uncomplimentary remarks about the quality of the Congressional opinion which had to be accommodated.
    There then ensued one of the most extraordinary episodes in the history of British Cabinet government. There was no discussion between the Prime Minister and the Chancellor for two days. Then they together met the American Ambassador. Law denounced the proposed settlement. Baldwin remained silent. But he defended his attitude firmly at the Cabinet on the same day. The Prime Minister argued against him, and when opinion swung heavily in the Chancellor’s favour he indicated that he would resign rather than accept the settlement. An adjournment was then agreed to. The next morning (30 January)
The Times
carried an anonymous letter, rather quaintly signed ‘Colonial’, which repeated several of the arguments and phrases used by Law the previous afternoon. It was in fact written by the Prime Minister.
    That same morning the entire Cabinet, with the exception of the Prime Minister, met in the Lord Chancellor’s room. Only Lord Novar,the Scottish Secretary, was in favour of repudiating the Baldwin settlement. A deputation of Baldwin, the Lord Chancellor (Cave) and the Duke of Devonshirewas appointed to wait upon Bonar Law and persuade him not to resign. Law agreed, although not with a very good grace. He had discovered that City opinion, for the interpretation of which he relied upon McKenna and which he had previously been informed was strongly against acceptance, had swung overwhelmingly