A small but persistent inflation, rather than basic monetary unsoundness, is the basic cause of economic trouble in the United Kingdom, Edward Bernstein, head of the Statistics and Research Department of the International Monetary Fund, asserted last Thursday.

Bernstein spoke in the Thursday Afternoon Lecture Series in Lamont Forum Room, on the "United Kingdom and World Economy."

This inflation, he said, is the prime cause of the United Kingdom's relatively poor payments position and the poor payments position, in turn, tends to prevent the complete confidence necessary if sterling is to regain its position as prime mover in world finance.

"It is a two penny inflation," Bernstein said, rising at a rate of about three percent a year. He called for "bold efforts taken now" to preserve the historic position of sterling as a reserve area.

Bernstein noted cause for hope in what he termed a "new world spirit of dynamism," and universal desire for rapid development and a consequent need for investment.

The United Kingdom may well play a greater role in this investment than the larger dollar area of the United States and Canada, he predicted, since British bankers are a little less fearful of foreign investment than American. This is especially true, he said, of loans to Asia.

"United Kingdom problems are world problems," Bernstein declared, since the United Kingdom is more responsive to world trade and finance than the United States, with its great internal markets.

Bernstein urged putting an end to Britian's "transitional restrictions" on free conversion of sterling into gold and dollars, since, he said, de facto convertability already exists in New York and Zurich. A reserve currency must be convertabile, he said. International institutions, such as the Monetary Fund, can combat drains on gold and dollar reserves, he added.

Cause of strain on the United Kingdom's reserves have come from the weak payments position of Britain and of the other countries in the sterling area and from speculation against sterling, he said. Bernstein attributed the poor payments position of sterling area countries also to inflation, and called for strict financial policies there as well as in Britain. fied, he said by the large amount of sterling held by non-sterling banks due to war payments to Europe and South America. When sterling is under pressure these banks tend to liquidate their holdings, he explained.