Keynes's arrival at the Treasury in July 1940 coincided with a transformation in Britain's external economic position. Before June 1940 the authorities' use of Britain's gold and dollar reserves plus marketable overseas securities had been based on the assumption that they would have to last three years. The German successes in the West in May and June led to a decision not to let financial considerations stand in the way of Britain's struggle for survival. Almost immediately, the fall of France led the authorities to take over existing French contracts in the United States, thus adding an additional financial burden. As a result, the efficient use of existing foreign resources and the realisation of assets became major short-term concerns of the Treasury, although in the longer term, everyone expected American financial assistance.

At the beginning of August 1940, largely as a result of his previous activities and experience, Keynes became a member of the Chancellor's newly formed Exchange Control Conference. The terms of reference of this advisory body, made up of Treasury and Bank of England officials, were:

1. (1) to review exchange control policy with a view to its modification or development;

2. (2) to deal with major administrative questions arising from the policy; and

3. (3) to consider steps to control the rate of expenditure of foreign exchange.

In the circumstances of August 1940, item (3) was regarded as contingent.

For the first meeting of the Conference, the following memorandum prepared by Keynes for the Chancellor's Consultative Council was the subject of discussion.