Just ask urself: WHAT was WWII really all about?

[Apollonian]

What Was World War II About?​

Paul Craig Roberts • March 8, 2021

Link: https://www.unz.com/proberts/what-was-world-war-ii-about/

In the United States the feel good explanation is that the war was about making freedom and democracy safe. In actual fact there were many agendas at play, and they had next to nothing to do with freedom and democracy.

World War II Has many origins. For Germany the war originated in the Versailles Treaty that stripped Germany of territory and imposed reparations for World War I in violation of President Wilson’s Fourteen Points. Hitler wanted German territory returned from France, Czechoslovakia, Denmark, and Poland, and to unify the German people.

For Japan it was desire for colonies or empire like the Europeans and the need for raw materials and energy.

For the British disturbed by revanchist Germany the concern was maintaining British hegemony over Europe. For Churchill war was the road to power and an opportunity to be a great war leader like his famous ancestor, the Duke of Marlborough.

For Stalin it was an opportunity to expand communism once Britain, France, and Germany had exhausted themselves in another war.

What was the American agenda? Reading David Irving’s biography of Churchill, Churchill’s War, has left me convinced that it was not the idealistic one of the history books. From the 1,000 pages of the second volume of the biography, Triumph in Adversity, I conclude that President Roosevelt’s agenda and that of his government was to replace the British Empire with an American one and to prevent a Japanese empire in Asia, thereby keeping the road open for the United States.

Irving does not say this or offer an explanation of Washington’s war purpose, but this conclusion is what emerges from the official wording of countless documents that Irving has unearthed over decades of research. Irving is an unusual historian. He lets the facts speak for themselves.

The British got themselves into a war with Germany that they could not win. For Churchill it was essential to bring the Americans into the war. Roosevelt knew that. The price the British would have to pay would be their empire. The British Empire controlled world trade with the discriminatory trade practices which were at the core of Imperial Preference. Roosevelt’s agenda was to undo that system and replace it with American hegemony with the US dollar as world reserve currency. At every critical British period when Roosevelt could apply pressure, he raised the question of the Empire. Having the British at war with Japan in addition to Germany is the likely real reason Roosevelt provoked the Japanese by cutting off oil deliveries and breaking off negotiations, knowing that the result would be to send Japanese armies into British possessions.

Hitler was on the verge of success in restoring Germany’s borders. Only the Polish held territory remained. Recklessly, the British interfered in the German-Polish negotiations by offering Poland a guarantee against German aggression. This encouraged the Polish military government to break off negotiations, which led to the Molotov-Ribbentrop Pact followed by Germany’s invasion of Poland followed a couple of weeks later by a Soviet invasion of the other half of Poland.

Confronted with the German invasion of Poland, the British saved face by declaring war on Germany, and this required France also to declare war on Germany.

To the surprise of all, Germany rapidly defeated the French and British armies. Hitler offered the British a generous peace treaty asking nothing except the return of Germany’s African colony and promising to defend the British Empire. Churchill kept the offer secret and counted on American entry into the war.

It is claimed that the allies—US, Britain, Soviet Union—won the war. But in fact only the US war aim was achieved. Washington achieved its goal of hegemony. The British lost their empire and their hegemony with it. Stalin managed to defeat the Wehrmacht, but at a cost of 26 million Russians. The Soviets got Eastern Europe, but it was the Red Army that was exhausted, and blocked by the Americans it was unable to spread communism into Western Europe.

Japan’s bid for empire failed.

Hitler was successful in reconstituting Germany but undid himself by invading Russia. On the other hand, according to former KGB officer Viktor Suvorov Hitler only missed being invaded by Stalin by a few weeks. Suvorov documents in his book, The Chief Culprit: Stalin’s Grand Design to Start World War II, published in 2008 by the Naval Institute Press in Annapolis, Maryland, that Stalin was preparing to invade Nazi Germany just as Hitler was preparing to invade Russia. Neither seemed to know of the other’s intentions. It was happenstance that Hitler struck first. Had Stalin struck first, Germany and all of German occupied Western Europe would have been overrun by the Red Army.

According to Suvorov, an army preparing for an offensive has no defense and is vulnerable to attack. It is this factor that accounts for the rapid advance of the Wehrmacht, and the Germans would have succeeded except that winter came six weeks early and stopped the German advance before Moscow and Stalingrad. This gave the Red Army time to recover and organize.

The Cold War was about maintaining US hegemony by constraining the Soviet Union. The collapse of the Soviet Union in 1991 left US hegemony unchallenged. Putin’s restoration of Russian sovereignty and the swift rise of China are regarded in Washington as threats to US hegemony and explain Washington’s hostility toward Russia and China.

The American Empire was the consequence of World War II. The question is after enjoying hegemony for three-quarters of a century, can Washington step back and treat other countries as equals? If not, war is our future.

 

[Apollonian]

THE FINANCIAL CONSEQUENCES OF THE WAR​

By Francis Delaise,.
From the Revue des Vivants
Translation May 4th, 1933 No., 4195S

Link: https://www.garethjones.org/american_articles/financial_consequences.htm

The British and French Treasuries were called upon during the first year of the Great War to finance not only their only their own armies, also the else the armies of their poorer allies. Towards the end of 1915 France was obliged to pledge all her gold withdrawn from circulation and all her best shares, both French and foreign, at New York in order to pay the United States for goods furnished. The British Treasury was then forced to shoulder the whole burden: it too, became exhausted and in March 1917 was unable to meet a call of 50 millions.

Fortunately the United States came into the War in April of that Year; from that moment on the American Treasury became the sole and unique banker of the World War. Soaking up by means of the Liberty and Victory Loans, the capital returned to the American citizens by the allies, the American Treasury used it to pay for the goods with which it continued to supply the belligerent countries. We now come to a remarkable reversal of positions: at the beginning of War (1914) the American Treasury was Europe’s debtor to an amount £5 milliards (1000 million (Brit)); at the end of the War the American Treasury was Europe’s creditor to an amount of $10 milliards.

The victorious allies settled down to dividing up the booty in 1919: the Austro-Hungarian Monarchy was split up politically and Germany was dismembered economically. Uncle Sam generously refused to exact anything from the vanquished, he had no use for territorial gains. All the same he did not let a chance of business slip through his fingers. “Business usual". At that time the U.S.A. had a foreign trade equal in volume and expanse to that of Great Britain and the Empire. The U.S.A. also were the possessors of all the best shares and bonds, made over by Britain and France at an earlier date. At the same time the U.S. had short-term credits on all the towns, governments and public utility services throughout the world. The United States had accumulated in the vaults of the banks two thirds of the entire gold stock in the world. Nothing lay in the way of seizing the monetary leadership held by Britain for over a century. London and Paris were only able to maintain their currencies at par with the direct co-operation of the United States. In March 1920 Washington suddenly denounced the "Exchange Agreement" concluded in1917.

The immediate consequences were:

(1) that the Bank of England, unable to pay gold, allowed sterling to drop; and

(2) the franc itself started on its downward course.

America had visions of Wall Street as the international clearing centre. This proved a mere figment of the imagination. The City, in spite of the fall of the pound, remained the principal currency market and the South African Mines continued to sell their gold in London.

The Central Banks were able to create an international currency with the help of the mechanism of "acceptance". The reason why New York never rose to take London’s position as a Clearing Centre can be explained by the fact that the American Banks had no foreign branches (before the War they imported capital and did not export any). Great Britain alone had been able during a century of expansion to weave an intricate net of banks over the entire g1obe. In the records of each bank included in this net is kept the history of all concerns of any importance in international trade.

The American Offensive: Wall Street quickly realized that the key to London's position was to be found in the system of acceptance.

The Acceptance Council was founded at the end of 1918 on the initiative of Paul Warburg to educate American bankers. Suddenly the magnificent branch offices of the Guaranty Trust, Bankers Trust, National City Banks, etc. sprang up in all the important centres throughout the two hemispheres. It is easy enough to erect a magnificent building in six months time but it is another matter when it comes to experience and an intelligence service. In order to speed up operations the co-operation of certain large French and Swiss banks was sought and the International Acceptance Company formed.

France, though for over fifty years she had been the World’s second-largest exporter of capital had never bothered about organising a system similar to the British. At the very eve of the World War France’s largest deposit bank was carrying out exchange operations at London through the Deutsche Bank! 1924 saw the stabilisation of the German mark under cover of the Dawes Plan. German capital, which had sheltered from the storm in Swiss and Dutch Banks, now returned to the Reich Banks (on short term).

London with an unstable currency was suddenly faced with a redoubtable coalition. It was hurriedly decided to stabilise the pound; and as America might at any moment cause a fall in the pound by exacting the repayment in a lump sum of the enormous floating debt contracted during the war, Mr. Baldwin rushed off to New York to consolidate the British debt. Without consulting his co-debtors Baldwin accepted the most onerous terms. British supremacy on the exchange market must be saves at all costs.

The pound was re-established at the old gold parity in 1925. A sharp struggle now broke out. Wall Street, profiting from the uncontested stability of the dollar, had recourse to long-term loans, which it was able to offer cheaply on account of the excessive abundance of capital. Wall Street won over Canada and the South American States to pay back part of their loan on London, and come to the American market. Even South America and Australia began to borrow on New York.

Beaten on the field of long-term loans, London was better able to defend herself on the field of short-term loans. The City resumed the old pre-war relations with the Central Banks on the Continent, and practically all of these consented now that the pound was stabilised to replace part of their gold reserve by first-class interest-bearing bills. As these bills would have to be repayable in gold on demand, sterling was chosen in preference on account of the special facilities obtaining on the London market.

The Gold Exchange Standard gradually took the place of the Gold Bullion Standard. Very close relations were established between the London and Vienna Banks. From Vienna the Sterling credits spread out over the Danube and Balkans.

Naturally New York did not like to be beaten on this field: second-class banking houses (Harris Forbes & Co., Blair & Co., etc.) began to specialise in European transactions and rapidly came to the front.

New stars appeared on the horizon: Loewenstein of Brussels, Insull of Chicago and Ivar Kreuger. Kreuger, the good Samaritan specialised in coming to the help of States in distress, on the fragile basis of a Match trust.

London and New York were at this time in keen competition as to which market was to furnish most capital to the world at large to secure the supremacy of either the pound or the dollar. There is no doubt that this competition for the world's monetary hegemony was a powerful factor in contributing to the recovery of Europe during the period l924-28.

France's Hour: Up to the end of l927 the struggle for supremacy lay exclusively between London and Wall Street but at the end of that year there suddenly arose an unexpected competition in the shape of the Bank of France.

During the years 1924-27 hundreds of thousands of French capitalists alarmed at the rapid denaturisation of the franc, invested practically the whole of their capital in foreign currencies, foreign bills and foreign securities. But when, in 1927 M. Poincare succeeded in stabilising the franc at one-fifth of its former value the fortunate possessors of all these foreign assets hastened to "repatriate" their money, this making a very substantial profit on the exchange into francs.

Now although the new revalorised French frame was on a gold basis the Bank of France obtained leave, by a special law to pay for the great mass of foreign currencies, and bills handed over its counters by printing notes for the purpose. These notes were never accounted as part of the note circulation properly so-called. Thus the French State became legitimate owner of foreign gold assets to the value of about £280,000,000 by merely setting the printing presses at work.

The stabilisation of the franc had re-established French confidence and this transaction has always been regarded as one of the cleverest financial transactions ever carried out by any Government, for it enabled the State to enter into possession of a huge mass of appreciated foreign currencies without disbursing a single ounce of gold metal.

A portion of these foreign currencies was used by the French Government of the day to pay off its immediate foreign indebtedness and the remainder was handed over to the bank of France on terms. The bank transferred a substantial portion to the French joint stock banks specialising in exchange business, and it then became necessary to know what it would do with the remainder.

The possession of the greatest stock of foreign currencies in the world gave birth to the ambition to become the universal clearing house in lieu of London, leaving the dollar to the American continent.

But with whatever faults the French financial authorities may be criticised by their foreign competitor, they were not slow to perceive that it is one thing to be in possession of a huge stock of desirable merchandise, and quite another to find the customers for such goods. Nobody thought of going to Paris for exchange facilities, and, as France's share in the trade of the world does not exceed between 6 per cent. and 7 per cent., she found great difficulty in obtaining a market for her mass of foreign currencies.

The gigantic American boom during the summer of l929 enabled France to utilise her foreign assets in contangoes with the Wall Street brokers, but at the first sign of a lull she was prudent enough to withdraw, so that very little loss was incurred by French capitalists in the Wall Street October smash.

As these foreign currencies could not be allowed to remain idle, they were immediately placed out at about 2 per cent. with the London banks, which lent the money to Germany with what results we now know. At the end of 1930 according to an official statement made by the then Governor of the Bank of France - the French State had something like 17 milliards of francs, or £l36,000,000 placed out on short-term sterling loans with British bankers.

Thus, discarding for the time being her fleeting ambition to become the great European acceptance market Paris was content to act as a purveyor of foreign currencies to London, hence giving the London market remarkable support in its rivalry with Wall Street But the crisis took a turn for the worse.

The Danubian usurers were unable in the autumn of 1930 to pay back the pounds and dollars loaned by Vienna owing to the fall in the price of corn. The Credit Anstalt started to totter and an appeal was sent to France for help.

France wanted to barter her financial aid against some political advantages and Tardieu brought forward his Danubian Plan. Tardieu did not succeed in substituting his Danubian Plan for the Anschluss and the Credit Anstalt went under.

The German banks were placed in peril by this development, and the gold reserve of the Reichsbank quickly drained. If payment of the reparations falling due on June 15th had been exacted it would have meant the collapse of the mark which would have endangered British and American capital.

Hoover proclaimed his Moratorium

Paris protested and fussed but finally gave in: too late! The Reich in order to save the mark, had to obtain a general moratorium for private debts. Short-term credits, amounting to 100 million pounds and perhaps twice that amount of dollars were "frozen" in Germany.

British capitalists now took fright in their turn and attempted to withdraw their deposits. This time the Bank of France rushed to render aid. Going halves with the Federal Reserve Bank of Bank of France advanced first 50 then 80 million pounds to its former rival.

Again too late! Panic had broken out in London. The pound was divorced from gold on Sept. 21, 1931 and the Bank of France in spite of its prudence, lost 2 ½ milliard francs.

The devalution of sterling cost the Bank of France a little matter of £20,000,000 owing to the fact that the bank had been obliged to take over from the State sterling currencies in less than six weeks, twelve nations, swept into the maelstrom of the pound, were compelled to abandon the gold standard. Many other nations, in order to abandon like fate, were constrained to institute a rigid control of their exchanges and it came about that at a time when Great Britain and America - the two great purveyors of foreign exchange - had most of their available credits locked up in Germany and in Austria, every nation was in want of exchange facilities.

This fact led to a sudden change in the position for whereas the Bank of France had been obliged to run after buyers of its bills in London and New York, it now found itself met with an enormous demand so that it could pick and choose.

Paris, with its 68 milliards franc stock of gold and 21½ milliard stock of foreign currencies, suddenly became master of the situation.

It might have been thought that, in such a widespread catastrophe, which shook the very foundations of the economic world, the three great rivals institutions would have come together and united all their efforts in a strenuous endeavour to repair the broken mechanism. But nothing of the kind occurred. Each Central Institution thought only of protecting its own position. The mistress of the position for the time being, France had only one idea, which was to derive as much profit as she could from the universal state of disorder.

Lord Reading hastened over to Paris on October 6 with proposals for the “redistribution” of gold and currencies among the various Central Banks to enable the private banks to return to a common standard.

The occasion might have been taken to reduce the gold currency to a lower value which would have lightened burden of the debtors to a considerable extent.

It was only evident that such a step would have consolidated the international clearing position which London had just 1ost. Mr. Laval paid no attention to these overtures.

Through the Federal Reserve Bank the French banking authorities learnt that President Hoover was most anxious that France should not listen to the British suggestion concerning a decrease in gold values. The American Ambassador in Paris had frequent interviews on the subject with him and these culminated in a personal invitation for a visit to Washington.

At the Washington Conference, President Hoover impressed upon his French guest the absolute necessity - from the point of view of two such gold currency nations as France and the United States, holding between them two-thirds of the world's stock of gold of maintaining the existing level of gold values. To this both President Hoover and M. Laval were in agreement. But they got no further. The further did President best to induced the French Prime Minister to agree that the payment of German private debts should for the time being take precedence of reparation payments.

He also asked M. Laval to prevent the Bank of France from converting its enormous dollar deposits in the United State into gold, for this would dangerously weaken the American gold stock. M. Laval prudently sheltered his responsibility behind the French Government and Par1iament. He therefore again procrastinated, as he had done with Lord Reading and also as he had done with the English statesman - Finally said "No".

Placed as he was between the two great monetary and financial rivals he pondered how the situation could be turned to the advantage of French political, financial and monetary influence. But the monetary and financial problems which arose out of this question of paramount influence, which would make France the arbiter of the world, were altogether beyond his ken. As for his technical experts, they, too proved to have erred, for they advised M. Laval that by allowing matters to take their course the English pound would go on indefinitely losing value and would eventually fall to the subordinate rank of a mere national currency.

Recovery of the pound

Agreement was reached on only one thing at thing Washington Conference: the French and American Governments came to an agreement to maintain the gold standard at the current level. Great Britain abandoned by France and losing all hope of a redistribution of gold was left to do the best she could with her frail and unstable pound. It was then that Sir Montagu Norman effected unaided the most amazing recovery in the financial history of our times.

His plan of action appears to us to-day as clear, straight-forward, and carried to its logical conclusion. In order to regain its former position as the world’s Clearing house the City would have to fulfill the following three essential condition: become a great currency market once again, keep the mine market, and replenish the gold reserve.

A beginning was made at the first point, and the pound was allowed to fall.

The announcement that the Bank of England had cut itself loose from gold caused all the Central Banks on the Gold Exchange Standard to sell their holding for metal. The pound was subject to a 30% fall on the exchange market in the course of a few weeks.

One ounce of gold was sold at up to 122 shillings instead of 84 shillings. The governments companies or private individuals having contracted loans in Britain before the fall of the pound quickly realised that one ounce of gold would now repay 122 shillings of the loan instead of the old 84.

India, the store-house of vast quantities of gold poured forth the gold that had been hoarded there for centuries,

The unexpected happened: the inflow of gold to London increased with the depreciation of the pound.

The British Government was careful not to increase the volume of currency in circulation and carefully avoided all forms of credit inflation. Consequently internal prices remained stable.

Foreign consumers of British products were quick to realise that the purchasing power of the pound remained the same on the domestic market although the pound had been subject to a 30% fall on the exchange market.

Now all the well-informed people began to buy sterling and the British currency began to rise again from January. That was when the Equalisation Fund, an entirely new instrument came into play. This Fund was granted a credit of £150 millions (later to be increased to 175 millions) by the Parliament and was outside the control of either the Bank of England or the Exchequer. Superficially this Fund had been formed with a view to avoiding too great fluctuations of the pound. But so vast a capital was not required for this.

The real reason for forming the Fund was rapidly to replenish the gold and currency reserves of the Bank of England, while at the same time preventing the gold mines from abandoning the London market in favour of New York.

It was naturally impossible openly to buy gold against Treasury Bills as that would only have precipitated the fall of the pound. The indirect way had to be resorted to and foreign currencies were bought which would later be turned into gold. The problem was how to induce foreigners to exchange their good gold currencies for an unstable currency. The outbreak of the banking crisis in America at the beginning of l932 proved a stroke of luck, provoking a flight of capital from America. Dollars are sold. The pound is bought as there is scope for appreciation in view of the stable purchasing power on the domestic market. Dollars are sold against pounds and the Equalisation Fund pays for them with three-month Treasury Bills. The dollars are then presented at the Federal Reserve Bank of New York in exchange for gold which is left on deposit at New York (ear-marked). Gold from the mines is also bought with francs or florins and a gold reserve is built up in this way without causing a fall in the pound.

During the American crisis in the spring of l932 care was taken that the supply of sterling bills be slightly below the demand; this explains why the pound rose from 85 to 96 francs between January and April. The rumour broke cut that the British Government intended to stabilise at 100. Now the danger arose that if the rise of the pound continued the supply of gold from India, Egypt etc., might be stopped. The Fund now intervened and increased the supply of sterling bills with a view to producing a downward movement. On speculation accelerating the downward movement, the Fund had recourse to its currency reserve and sold dollars or francs against pounds thus causing a rise in the pound.

What now? The Bank of England has been able to increase its gold reserve from £120 millions at the end of 1931 to £166,400,000 in March 1933 with the sole aid of this ingenious device. It is estimated that the Fund holds in addition to this between £60 and £80 millions in gold.

If all this gold were placed at the disposal of the Bank, the metal reserve would certainly exceed 50% of the bills payable on demand. The stabilisation of the pound can consequently be effected at any moment without difficulty. This is however only a secondary result to Sir Montagu Norman.

Owing to the volume of the stock of gold currencies held by the Fund dollars can at any moment be sold against francs, French francs against Swiss francs and these against florins and dollars.

We are now faced with the phenomenon that London with an unstable currency, daily fixes the quotations for gold currencies. The Stock Exchange is faced with this extraordinary paradox which has caused it to believe in the satanic genius of Sir Montagu Norman.

This clever policy has enabled London to become the world's largest currency market, to keep the gold market and replenish the gold reserve.

The three essential conditions for maintaining world supremacy in the sphere of Clearing were fulfilled in eighteen months.

New York, weakened by a banking crisis has been rendered hors de combat. France on the other hand still maintains intact her organisation and reserves. But if, as might conceivably be the cases France should one day remain the only country with convertible currency, the other markets could, by buying francs withdraw gold from France without paying any in. France would have to impose a system of exchange restrictions and consequently abandon the gold standard in practice in order to safeguard her gold reserve.

At the time of the pending World Economic Conference Britain will be in the dominant position occupied by France for a brief moment in the summer of 1931.

The three large monetary institutions have struggled bitterly for over ten years for the mastery of the mechanism of international exchange, and have finished by breaking it. The coveted price has faded into thin air. World Economic Conference should take upon itself the task of reconstructing this mechanism. This is not the time for petty struggles between banks.

The French banks have proved to the world the strength of their powers destruction. The French banks must give up all vain visions of monetary hegemony which they can never attain by the very nature of things.

 

[Apollonian]

[Below is a prop. leaflet fm Germany, and it probably has lots of truth in it though, don't forget prop. typically trumpets the good parts and tends to over-look any problems or criticisms. Still, it's worth a look in this age of Jew-friendly, Jew-serving lies and prop.]


Background: Hitler had a habit of calling a referendum after significant events. After marching into Austria on March 14, 1938, he called the last of the referendums for 10 April 1938. This 28-page pamphlet was part of the propaganda leading up to that vote, which to no one’s surprise turned out 99% in his favor. It was distributed widely, and is a good summary of the accomplishments Hitler claimed. The pamphlet includes charts illustrating the statistics. It is interesting that in reviewing Nazi accomplishments, nothing is said of anti-Semitism.

The source: Das danken wir dem Führer! (1938). The brochure has no publication information, but was probably produced by the Nazi Party for the campaign.

We Owe it to the Führer​

Link: https://research.calvin.edu/german-propaganda-archive/danken.htm

The German people should once again examine what I and my comrades have done in the five years since the first Reichstag election in March 1933. They will have to agree that the results have been unique in all history.

—Adolf Hitler on 20 February 1938

The Führer has called! Germany’s goal is to give witness to the indissoluble unity of the nation. A nation of 75 million will proclaim to the world that it is united in infinite confidence in its Führer, united in an irresistible will to further growth, united in unending thanks to Adolf Hitler. The Führer asks for us to prove our confidence. He has a right to do so. The German people will give it to him: before themselves and before the entire world.

Five years of construction are behind us. Look at what has happened during these five years! People are forgetful. They accept good and beautiful things as they happen — and then forget about them. But we do not want to forget how things were, and what has happened. The nations around us look with admiration and amazement when they see the “German miracle,” the unprecedented growth that has occurred in Germany over the past five years. How much more should we take stock of what has been done.

What was it like five years ago?!... Think back on the great and moving events of recent weeks: how millions responded to their Führer with overflowing hearts and indescribable joy. Only people who have been freed from some burden rejoice like that — people who are cheerful, satisfied and happy. That is Adolf Hitler’s work. That is the greatest thing a statesman can do: to make his people happy.

Loyalty deserves loyalty! The Führer has called his people to affirm him. He asks for proof of their confidence. He has the right to do so, based on all that he has done that we have seen with our own eyes — and based on the unique accomplishments of the past five years. We want to recall these accomplishments, and compare Germany today with how it was before the National Socialist takeover. It is a splendid story that fills each of us with pride.

Do you remember the state of Germany and the German people in the days before the aged Reich President von Hindenburg chose Adolf Hitler and his party as the last hope of saving Germany from certain political, social and economic collapse that would lead to chaos? Tens of thousands of factories had closed their gates. Millions of workers and employees lost their jobs and were thrown ruthlessly into the gray misery of mass unemployment. There seemed no way out. In 1932 our cold-hearted enemy, the Frenchman Clemenceau, said that there were 20 million Germans too many. He seemed to be speaking the terrible truth. There were 7 million unemployed in Germany on the day Adolf Hitler left the Presidential Palace as chancellor of the German people. A third of all working Germans, 21.5 million people including their families, depended on meager public assistance and spent their time without hope of escaping their misery.

Eliminating mass unemployment was the Führer’s first task. He called on the entire German nation to begin a massive battle of work, the success of which is visible to us all today.

By the end of 1933, 2 million citizens had jobs again. By September 1936, the number of unemployed had fallen beneath a million. By 1937 unemployment had vanished. Now the problem was a shortage of workers for the tasks at hand. A shortage of jobs became a shortage of workers! Only 11.5 million Germans had jobs in January 1933. By the spring of 1937, the number had risen to 17.5 million, and by last fall it had risen to 20.1 million. The Reich Labor Front had to be called in to help with the harvest, since workers were lacking. Thanks to the Führer’s rapid and energetic actions, the entire German people is at work creating things that will be immortal.

One of the foundations of National Socialism is the knowledge that only work creates value and prosperity. The well-earned pay envelope has replaced the demeaning dole. Short hours today do not reduce income. Countless workers have risen from the ranks of the lowest paid to well paid craftsmen. Workers and employees, but also the entire German people, including farmers, businessmen, craftsmen and industrial workers, all of us five years ago were unsure if our income would be enough for our daily needs. We thank the Führer today for guaranteeing our income! The national income in 1932 was 45.2 billion marks. It has grown steadily since than, reaching a level of 68 billion marks in 1937. The entire national income has increased by about 23 billion marks, almost as high as the total of 26 billion marks in wages from 1932. In 1937, wages were 38 billion marks. The income of the German worker has risen by 70%.

The absolute size of income does not by itself give a proper picture of our growing prosperity. Everyone knows from experience that it is less a question of how much one brings home, rather what one can buy. During the great inflation, we got more money but became poorer. We remember when the unions raised wages through constant strikes, etc., that reduced production. It did no one any good that workers received more than 42 billion marks in 1928, since production did not keep up with income. Goods were scarcer than money, and the result was inflation that required still more pay increases. A spiral of wage and price increases resulted, with wages falling steadily behind.

The increase in income since 1933 is different than the false prosperity of the past. Prices have been kept stable, production has greatly increased and speculation has been ruthlessly suppressed, with the result that the increase in income has meant a real increase in purchasing power.

It is no descent into materialism to welcome an increase in prosperity. A people can grow only when its prosperity is assured. That is the Führer’s true goal. When gray misery was the regular guest at the table of most workers, they lacked the courage to begin a family and raise healthy children. A decline in population threatened us in 1932. The birth rate had fallen so low that there was a danger that the death rate, increased through countless desperate suicides, would surpass it.

The unlimited confidence of the German people in their Führer is shown by the fact that even in 1933 numerous citizens found the courage to begin the family they had long postponed. The number of marriages reached record heights. There were 122,000 more marriages in 1933 than in the year before. !934 showed the tremendous success in reducing unemployment. 223,000 more young German men took brides than in 1932. 6,521,400 men and women were married between 1933 and 1937. Nearly 460,000 more families began than in the five years before the National Socialist takeover. That is probably the best proof of the absolute confidence the German people have in the Führer’s policies and in the future of the Reich. The Führer’s main concern is for healthy growth by the German people. That is why he implemented marriage loans of as much as 1000 marks as early as 1933, which are repayable in easy installments. A quarter of the loan is forgiven at the birth of each child. About half of all couples took advantage of these generous loans in 1933. Improvements in the economy were such that only a fifth needed them in 1934. In the past five years, 878,000 loans were made, and reduced as the result of the birth of 708,000 children.

The total number of births far exceeded that figure. The best evidence for the inner rebirth of our people is that the desire to have children has risen strongly, and that more and more have realized that the future of the German people depends on a large number of healthy children.

But not only the dreadful misery before 1933 reduced the desire of countless Germans to have children. Crass egotism and materialism also played a role. The System Era saw having children as foolish and backward. The transformation that has occurred is clear in the rising German birth rate. In 1932, only 993,000 children were born. Around 6 million were born between 1933 and 1937. The growth resulted in nearly 1.26 million additional children, about the population of the third largest German city, Hamburg!

But more than the birth rate gives us the right to look with pride and confidence to the future. More important still is that these children are growing up healthy, strong and cheerful. The spread of inherited diseases and inferior offspring, which are a heavy burden for the healthy, has been hindered. But everything possible is being done in the new Germany to raise a strong generation. The National Socialist state gives major tax reductions to fathers for each child. Families with three or more children receive payments of 10 and 20 marks monthly. By the end of 1937, 510,000 children were receiving such support. A new law goes into force on 1 April 1938. The previous income boundary of 2400 marks will be abolished, and all insured citizens will be eligible for the payments. The result will certainly be another significant increase in the number of children receiving such support.

The concern for the future of our people goes even further. The NS People’s Welfare organization has established the aid program “Mother and Child,” which has no equal anywhere in the world.

12,000 kindergarten teachers, day care workers and nurses care for 550,000 pregnant women and new mothers. On average, 115,000 children are fed each month, 405,000 children will have had a vacation by the end of 1937 at an NSV establishment and an additional 1.4 million will spend time in the country. If these 1,900,000 children were lined up in rows of twelve, they would reach from Berlin to Leipzig.

In gratitude to the high obligation German mothers fulfill in having healthy children, the “Mother and Child” organization establishes kindergartens to care for countless children while their mothers are at work. It also ensures well-earned rest for mothers. By the end of 1937, 252,000 mothers had received free vacations.

The System Era knew how to praise its social policies, even though they had no goal. National Socialist Germany has policies that will result in a better future. They are supplemented by the work of the Hitler Youth. On the fourth anniversary of the seizure of power, the Reich Youth Leader announced that 7 1/2 million German boys and girls had found their place in the HJ. Over 30,000 doctors cared for their health, sports facilities provided for their physical growth and free time, and special courses provided worldview education. Along with the DAF, the HJ uses the growing National Occupational Contests for the occupational training of the German youth, which will serve them well later in life.

The social policies for working Germans are of a size that casts shame on the dole policies of the Weimar Republic. The crowning achievement is the Führer’s Winterhilfswerk of the German people. This is a truly socialist enterprise that has no equal among the richest nations of the world. The whole German nation undertakes a common fight against hunger and cold.

The Winterhilfswerk is the most beautiful expression of the new German people’s community. It is not the work of a small group of rich people. No, each German, all of us, rich and poor, manual laborers, farmers, and city-dwellers cooperate in fulfilling the Führer’s will: No German may be hungry or cold!

One does not know whom to admire more: the cheerful willingness of those who collect, or the rising amount of the gifts, to which even the poorest contribute their share. The success of the Winterhilfswerk, written permanently into the law of 1 December 1936, demonstrates the efforts of the entire German nation. Gifts of money alone totaled over 920 million marks during the four winters from 1933/34 to 1936/37. An additional 570 million marks of goods were contributed. 50,000 freight cars alone would have been needed for the potatoes contributed in the past years. The three million meters of clothing given out by the WHW would stretch from Berlin to the Middle East. The two million kilograms of coal would form a wall ten meters high around all of Germany. These few examples, and more could be given, prove the strength of the German people’s will to be active socialists

But that is not enough. The social laws in National Socialist Germany have reached extent never even dreamed of by the alleged “socialist” parties. The retirement system was near collapse in January 1933 now has reserves of six billion marks, making pensions for all working Germans secure. The Führer personally ordered a generous canceling of all debts that many citizens had acquired by receiving public support, which would have reduced their income for many years to come. One social measure after another over the past five years proves that National Socialist Germany has practiced a socialism of action.

Another sign of this socialism is the entirely different status of the German worker in factories. The social honor of each working German is guaranteed by law. The state’s representatives ensure that exploiting workers is impossible. The legal working conditions correspond to National Socialism’s high opinion of work. Workers have a right to a vacation and for paid holidays, even hourly and temporary workers. There is nothing like this elsewhere in the world.

The dignity of labor is evidenced by improvements in the appearance of the work place. Wherever one looks in Germany, ugly dark buildings are vanishing. The “Beauty of Labor” movement in today’s Germany is not empty talk or an impossible demand, but living reality. Large sums that formerly would have been wasted in strikes and lockouts have been used since 1933 to improve work places. 23,000 places have been transformed form soulless drudgery to pleasant places to work. 6,000 factory courtyards now offer space for real relaxation, which was not true in the past. 17,000 canteens and lounges, 13,000 shower and changing rooms have been transformed. The dirtier the work, the cleaner the workers. More than 800 community buildings and 1200 sport facilities , including over 200 swimming pools, have been established. The crew quarters in over 3500 ships have also been improved.

The NS Society Kraft durch Freude brings cheer and pleasure to workplaces through concerts and art exhibits. The art exhibits alone introduced more than 2,5 million workers to the creations of true German art. Just five years ago, it was obvious that the great works of German culture belonged to a small group of the upper class. Besides the factory concerns and art exhibitions, the NS Society Kraft durch Freude uses theatrical performances, other concerts, singing and musical groups to introduce the creations of German art to every working German. 22 million citizens have attended theatrical performances, 5.6 million the KdF concerns, and 17 million have found relaxation in more than 40,000 cabaret and variety performances, gaining thereby new strength for their daily work.

Of no less importance is the KdF’s vacation program. Earlier, German workers did not know what to do with their, at best, five days of annual vacation. They could not visit the beauties of the German landscape, much less travel abroad. The NS Society Kraft durch Freude gave German workers the possibility of vacationing at the beach or in the mountains, or to explore the homeland. Over 20 million have participated in KdF trips since 1934. That is more than a quarter of Germany’s population. 19 million citizens participated in 60,000 vacation trips at home. Hand to hand, they would stretch from Berlin to Tokyo. KdF trains have traveled 2,160,000 kilometers, or 54 times around the world. The nine large KdF cruise ships have covered a distance equal to twice the distance from the earth to the moon. They have carried German workers to Madeira, Italy, and Norway, broadening their horizons and giving them unforgettable experiences. Three additional ships will be added the KdF’s own fleet of four. A KdF resort is being built on the island of Rügen. It will not be the only one. A series of other vacation and spa resorts will be built. They will fulfill the Führer’s wishes at the start of the NS Society Kraft durch Freude: to lead a cheerful, creative and strong people to success in the world.

The goal of bringing German culture to the entire German people, regardless of their income, is especially clear with the German radio. Thanks to the people’s radio set, a solid, inexpensive, and capable receiver, the number of radio listeners has risen from around 4 million in 1932 to 9.1 million today. The un-German programming of the System Era has been transformed by National Socialism. Now radio acquaints the German people with the work of their great masters of music and literature. Alongside these artistic programs, the entertaining programming provides for the relaxation of hard-working people.

Clear proof for the rising prosperity of the German people is provided by the growing consumption of foodstuffs and luxury items of every variety. During the prewar year 1913, only a little more than 2.9 million tons of meat were consumed. In 1937, that figure had risen to 3.7 million, up about 5% from 1932. Thanks to the elimination of unemployment, bread consumption increased by about 10%, sugar by 15%. Butter consumption rose from 420,000 to 519,000 tons. Milk production, both for drinking and for making butter and cheese, rose from 23.5 to 25.4 billion liters from 1932 to 1937. Coffee consumption rose from 104,000 to 140,000 tons. Beer consumption has risen from 3.3 to 4.4 billion liters. That is an increase of about 3 billion glasses of beer.

The rise in consumption of luxury items is clear proof of our nation’s growing prosperity. Wine consumption rose from 232.4 million to more than 450 million liters. Many citizens for whom wine was formerly an impossible luxury can now afford a glass of wine. German wine makers have been freed from worries of overproduction. Tobacco consumption, too, has risen from 5.5 billion cigars and 31.3 billion cigarettes to 8.8 billion and 41 billion respectively.

The growing prosperity and rising consumption of foodstuffs and luxury items required hard work. A people can only consume what it produces. In the face of this obvious truth, which however only became clear to us after 1933, all the parliamentary resolutions, all the decisions of international conferences and the demands of the international unions become silly talk. The German people have proved that by our own work. Germany has worked untiringly since 1933, producing itself the goods it needs to improve its standard of living.

The rising production in all areas, which has never before been seen, is the fruit of our work. The foundation of our life is agriculture, whose task is to guarantee that the nation is fed. When the Führer took power, agriculture was in a ruinous state. Officers of the court were regular visitors at German farms. The animals and the harvest were seized ruthlessly because taxes and interests had risen to impossible levels that German soil could not meet. Forced auctions drove tens of thousands of German farmers from their land. Desperation prevailed in the villages. As a result of the desperate situation, agriculture could not ensure the feeding of the German nation. The ghost of hunger threatened.

Here too the Führer set to work immediately. Interest and taxes were lowered, and German soil was freed from usurious capital. Between 1927 and 1931 German agricultural debt rose by 2,9 billion marks. From 1933 to 1936 it fell by 800 million marks. The interest burden, which was over a billion marks in 1931/32, was reduced by National Socialist actions to 630 million marks. The crowning achievement was the creation of the Reich Inherited Farm Law, which guaranteed that the German family farm will always remain the wellspring of the nation.

Farmers owe the Führer their deepest thanks for rescuing them from the depths of despair. Their growing income also resulted in new jobs, giving the city population not only food, but work. In 1932 farmers spent only 160 million marks for new construction and 203 million for repairs. In 1933 these figures rose to 186 and 217 million marks respectively. The figures had reached 481 million by 1937. Farmers could afford only 138 million marks for machinery and equipment in 1932. Growing agricultural prosperity allowed them to buy three times as much in 1937 to modernize their farms, 395 million marks. Despite substantial decreases in price for fertilizers, expenditures for them rose from 180 to 700 million marks. The city dwellers had to make some sacrifices to bring German agriculture back from the abyss, but the German farmer is now doing his part to strengthen the German economy through his increased need for construction, industrial products, and craft work.

On the other hand, the value of agricultural production has rising between 1932 and 1937 from 8.7 billion to over 12 billion marks. Even more encouraging, food imports have deceased significantly even though consumption has increased.

Animal production reached a level previously not thought possible. In the last fiscal year, 500 million more eggs, nearly 4 billion liters of milk and 1.2 million more quintals of meat were produced compared to the averages for 1928 to 1932. The Führer’s agricultural policies have led to a decline in German agricultural imports from 25% to 19% of our consumption. We are now much closer to agricultural independence, and more secure from poor harvests or speculative machinations in other countries.

Land used for oil fruits, flax, hemp, hoed crops, and animal feed has increased significantly. Effective use of fertilizers has led to a large increase in fiber plant crops, which has eliminated the need to import them. To increase production even more, 73 flax production facilities are being added to the existing 22.

A program of improving land and winning new land was started in 1933. It has made a major contribution to the increase in agricultural production. Large sections of productive land were won from the sea in Schleswig-Holstein, which offers a secure future for numerous German farming families and farmer’s sons. Wasteland and moors have been transformed into cultivable land. The System government spent only 298 million marks during its last four years on German soil. The National Socialist government, on the other hand, spent 1.30 billion marks during its first four years to expand German agricultural land. The result has been an increase in land of 300,000 hectares, an area six times as large as the Bodensee.

Besides winning new land and guaranteeing the security of German farms, new farms have been created. The new farms established during the System Era [1919-1933] were not large enough to support a family. The average size of new farms today, on the contrary, is sufficiently large to provide a secure existence for the new settlers. National Socialist policies have allowed 75,000 German citizens, mostly racially valuable form workers and sons of farmers, to find room for healthy growth on nearly 300,000 hectares of land. The Reich has also made large sums available to build worthy housing for agricultural workers. German farm workers have healthy, decent housing for a monthly rent of only 12 to 14 marks.

Just as for farmers and agricultural workers, the urban population is also being cared for. Although more than enough willing and able workers were available in 1932, and although the housing need was certainly great, the government put workers on the dole and built only 141,265 dwellings. This was an area in which the need for new jobs was particularly clear. Even in 1933, the number of new dwellings rose to 178,000, with particular attention being given to small and mid-sized units for those with limited incomes. This number grew year by year, reaching 340,000 dwellings in 1937, double the number of 1932. In all, National Socialist has built more than 1.4 million new, and above all healthy and affordable, dwellings for the German people since 1933. This is enough to house the entire population of Berlin.

As the result of energetic construction, also encouraged by many major new construction projects for the state and party, the total production of the construction industry has risen from 37.8 billion marks in 1932 to more than 75 billion marks in 1937.

The German money supply, everything from thousand mark notes to copper pennies, would have to be increased by a factor of ten were we to pay for it all in cash. Rather than speaking of money, however, we prefer to speak of accomplishment. The Western European democracies can also talk about enormous increases in the circulation of money, as the Führer pointed out in his speech to the Reichstag on 20 February 1938. In Germany, however, the amount of money in circulation has risen only slightly despite growing production, while the Western European democracies have only strikes and falling production to show for their increase in money in circulation. Conflict between wages and prices is the result in these nations, and the terrors of inflation loom.

Growing prosperity and production led to a growth in traffic. The entirely neglected German highway system had to be repaired and expanded. 40,000 kilometers of highway have been repaired since 1933. That is enough to go all the way around the world! Then there are the Reich Autobahns, the most splendid construction project in the world. 2,000 kilometers were open to traffic by the end of 1937. 1,000 kilometers more will be added yearly, until Germany has a highway network unique in all the world.

Automobile production has reached a level that no one would have thought possible a few years ago.

The number of motor vehicles in Germany has doubled, exceeding the 3 million mark in 1937. Thanks to the growing prosperity, broad circles of our nation can now afford a car. 137,141 of the new vehicles in 1937, well over half, were purchased by workers and employees. 30,015 workers and employees were able to buy a car the previous year. Cars are becoming both better and cheaper. The increase in cars will be even more striking when the Volkswagen comes on the market. Enormous factories are even now being built. The best proof for the quality and good pricing of German cars is the fact that automobile exports have increased by a factor of eight since 1932!

It is not possible here to list the enormous growth in every area of production. There is no branch of industry that has not grown by factors of two to ten. We will restrict our discussion to two critical modern industries: coal mining and steel. Before 1932, coal production was greatly decreasing. Despite that fact, coal was piling up at the mines, with no hope of putting it to use in industry. Now consumption has greatly increased, and coal is also being used to produce the new substitute materials required by the Four Year Plan. The German mining industry can look forward to an assured future.

Despite the claim that Germany is poor in iron ore, mining of this important material for the iron and steel industries rose from 1.3 million tons in 1932 to 9.6 million tons last year. By 1940, the figure will reach about 20 million tons. The Reich Hermann Göring Factory will add an additional 21 million tons by then. This 40-50 million tons will give the German iron and steel industries a secure foundation that earlier experts thought impossible.

The expansion of raw material production has received a significant boost by the return of Austria to the Reich. Austria has rich reserves of copper, lead, graphite, etc. It leads the world in magnesium production. The iron ore mines, now incorporated into the Four Year Plan, are of particular significance to German iron and steel production.

German steel production in 1933 was 9.7 million tons. After five years of hard work, this figure has more than doubled. It will reach 21 million tons in 1938. That will make Germany the second leading steel producer in the world, second only to the United States. If one were to export this enormous among of steel, one would have to fill every German ocean-going ship more than ten times.

The unprecedented revival of economic health has naturally affected the transportation industry. On land, water and in the air it has grown greatly. Since 56 million tons of additional goods are being produced, a major expansion of the German river and canal transportation system is planned. This will improve the already thick network of domestic German water transport.

Shipping has also increased significantly. The ship cemeteries once found in German harbors have vanished. At the same time, we have rejuvenated our merchant fleet. One ship after another is being launched from our shipyards, proving to the world the quality of German workmanship and engineering. Before the takeover, only 22,000 tons were under construction. By 1937, 370,000 tons were under construction for German firms, and 350,000 for foreign customers! Another 400,000 tons of orders were waiting. These figures do not even include naval construction. The number of orders corresponds to Denmark’s entire merchant fleet.

Developments with the railroad are equally as impressive. Increasing competition with trucking has given a remarkable spur to the railroad system. The speed of rail transportation has increased. Modern passenger trains with every convenience attain speeds undreamed of only a few years ago. The Reichsbahn has nearly doubled its business since 1932.

The German airlines have won a world reputation in recent years, the result of their reliability and speed. The number of passengers has nearly tripled since 1932. 326,000 domestic and foreign passengers flew on German aircraft in 1937. The air network is being expanded. The length of the air mail routes alone has increased during five years of National Socialism from 31,000 to 62,000 kilometers, with a yearly increase in kilometers flown from 9 to 18 million kilometers.

The great improvements in the German transportation system have resulted in a growing stream of foreign visitors. The pulsing life in Germany is drawing more and more visitors to the Third Reich. The number of overnights by foreigners has risen from 2.7 million in 1932 is far above 7 million in 1937. These foreigners, who often come to Germany with false ideas, see with their own eyes the work of the Führer and the remarkable efforts of the German people. They return home as the best witnesses of the greatness and strength of the German Reich.

These accomplishments and successes are only a part of the great economic, social, and cultural achievements of the past five years. But they are cast into the shadows by the political accomplishments of this most eventful period in German history. Every last German today knows that Germany’s reconstruction, in which each of us participated, was only possible because the Führer brought together all the strength of the nation in pursuit of a single goal: To make Germany free and strong!

The Führer has repeatedly reminded the German people that strong policies are the absolute prerequisite to our economic, social and cultural health. Only intentional hostility and stupidity can still deny that the Führer was right in every respect.

Worried souls prophesied disaster when Germany withdrew from the League of Nations on 21 October 1933. Today the complete insignificance and impotence of the Geneva League is clear to all. The Führer has replaced the system of “collective security,” which never did anyone any good, with direct negotiations between leaders and states. The naval accord with England, the German-Japanese-Italian Anti-Comintern Pact, which dealt a devastating blow to World Bolshevism, and the Berlin-Rome-Tokyo Axis are today the strongest guarantee of European peace. They are persuasive proof of the correctness of German peace policy.

With great joy and thanksgiving, Germany celebrated the powerful referendum victory in the Saar on 13 January 1935. It was easy for our German brothers to decide to return to a united and strong Reich instead of an impotent and fragmented one. Step by step, calmly and with assurance, the Führer went his way. He tore up the shameful treaties of Versailles and St. Germain, erasing forever from German history the shame of the war guilt lie. Jubilation without precedent ran through Germany on 16 March 1935, as the Führer re-armed Germany by introducing universal military service. For 17 long years we were a defenseless nation, a nation without honor. Now our borders and our accomplishments are protected by a strong people’s army, a strong air force guards the Homeland, a fleet guards our commerce. Our brothers abroad are proud witnesses to a national will that preserves the honor and the existence of the nation. Less than a year has passed since German soldiers marched into the demilitarized Rhineland on 7 March 1936, to the indescribable jubilation of the population. German rivers, the German railroad, and the German Reich Bank are free from all the tricks of demeaning international control.

And now the Führer has fulfilled the ancient longing of all Germans. A Reich of 75 million Germans now exists. People joined people. Words are not enough to express what each of us feels who is of good heart and will. We all know one thing: this wonderful rise is solely the result of our Führer’s efforts. He believed unshakably in the strength of his people. He brought an inexhaustible national strength to life. He gave back to entire people its belief in itself.


The disgrace of Versailles is abolished,

Germany is free and strong, great and united.

Has a leader ever done more for his people?

With warm hearts and unshakable loyalty, we want to stand with the Führer. He has done everything for us, giving us his faith and his strength, his days and his nights. The Führer gave us the great blessing of a united, strong respected German Reich. We want to thank him on election day. Our “Yes” is the oath of 75 million German people who are moved to their depths:


One People, One Reich, One Führer!

On 10 April 1938, all Germans will say


Yes!

 

[Apollonian]

Below essay is by Jew, Rothbard, but at least it's fm the "libertarian" perspective and hence, tries to be more strictly scientific for the economics--worth a read. A.

* * * * * * * * * * * * * * * * * * * * * * * *

The New Deal and the International Monetary System​

Murray N. Rothbard

Link: http://ihr.org/other/RothbardNewDealWorldEconomy

The international monetary policies of the New Deal may be divided into two decisive and determining actions, one at the beginning of the New Deal and the other at its end. The first was its decision, in early 1933, to opt for domestic inflation and monetary nationalism, a course which helped steer the entire world onto a similar path during the remainder of the decade. The second was its thrust during World War II, to reconstitute an international monetary order, this time built on the dollar as the world’s “key” and crucial currency. If we wished to use lurid terminology, we might call these a decision for dollar nationalism and dollar imperialism respectively.

I. The Background of the 1920s

It is impossible to understand the first New Deal decision for dollar nationalism without setting that choice in the monetary world of the 1920s, from which the New Deal had emerged. Similarly, it is impossible to understand the monetary system of the 1920s without reference to the pre-World War monetary order and its breakup during the war; for the world of the 1920s was an attempt to reconstitute an international monetary order, seemingly one quite similar to the status quo ante, but actually one based on very different principles and institutions.

The pre-war monetary order was genuinely “international”; that is, world money rested not on paper tickets issued by one or more governments but on a genuine economic commodity – gold – whose supply rested on market supply-and-demand principles. In short, the international gold standard was the monetary equivalent and corollary of international free trade in commodities. It was a method of separating money from the state just as enterprise and foreign trade had been so separated. In short, the gold standard was a monetary counterpart of laissez-faire in other economic areas.

The gold standard in the pre-war era was never “pure,” no more than was laissez-faire in general. Every major country, except the United States, had central banks which tried their best to inflate and manipulate the currency. But the system was such that this intervention could only operate within narrow limits. If one country inflated its currency, the inflation in that country would cause the banks to lose gold to other nations, and consequently the banks, private and central, would before long be brought to heel. And while England was the world financial center during this period, its predominance was market rather than political, and so it too had to abide by the monetary discipline of the gold standard. As H. Parker Willis described it,

“Prior to the World War the distribution of the metallic money of gold standard countries had been directed and regulated by the central banks of the world in accordance with the generally known and recognized principles of international distribution of the precious metals. Free movement of these metals and freedom on the part of the individual to acquire and hold them were general. Regulation of foreign exchange … existed only sporadically … and was so conducted as not to interfere in any important degree with the disposal or holding of specie by individuals or by banks.” / 1

The advent of the World War disrupted and rended this economic idyll, and it was never to return. In the first place, all of the major countries financed the massive war effort through an equally massive inflation, which meant that every country except the United States, even including Great Britain, was forced to go off the gold standard, since they could no longer hope to redeem their currency obligations in gold. The international order was not only sundered by the war, but also split into numerous separate, competing, and warring currencies, whose inflation was no longer subject to the gold restraint. In addition, the various governments engaged in rigorous exchange control, fixing exchange rates and prohibiting outflows of gold; monetary warfare paralleled the broader economic and military conflict.

At the end of the war. the major powers sought to reconstitute some form of international monetary order out of the chaos and warring economic blocs of the war period. The crucial actor in this drama was Great Britain, which was faced with a series of dilemmas and difficulties. On the one hand, Britain not only aimed at re-establishing its former eminence, but it meant to use its victorious position and its domination of the League of Nations to work its will upon the other nations, many of them new and small, of post-Versailles Europe. This meant its monetary as well as its general political and economic dominance. Furthermore, it no longer felt itself bound by old-fashioned laissez-faire restraints from exerting frankly political control, nor did it any longer feel bound to observe the classical gold-standard restraints against inflation.

While Britain’s appetite was large, its major dilemma was its weakness of resources. The wracking inflation and the withdrawal from the gold standard had left the United States, not Great Britain, as the only “hard,” gold standard country. If Great Britain were to dominate the post-war monetary picture, it would somehow have to take the United States into camp as its willing junior partner. From the classic pre-war pound-dollar par of $4.86 to the pound, the pound has fallen on the international money markets to $3.50, a substantial 30% drop, a drop which reflected the greater degree of inflation in Great Britain than in the U.S. The British then decided to constitute a new form of international monetary system, the “gold exchange standard,” which it finally completed in 1925. In the classical, pre-war gold standard, each country kept its reserves in gold, and redeemed its paper and bank currencies in gold coin upon demand. The new gold exchange standard was a clever device to permit Britain and the other European countries to remain inflated and to continue inflating, while enlisting the United States as the ultimate support for all currencies. Specifically, Great Britain would keep its reserves, not in gold but in dollars, while the smaller countries of Europe would keep their reserves, not in gold but in pounds sterling.

In this way, Great Britain could pyramid inflated currency and credit on top of dollars, while Britain’s client states could pyramid their currencies, in turn, on top of pounds. Clearly, this also meant that only the United States would remain on a gold coin standard, the other countries “redeeming” only in foreign exchange. The instability of this system, with pseudo-gold standard countries pyramiding on top of an increasingly shaky dollar-gold base, was to become evident in the Great Depression.

But the British task was not simply to induce the United States to be the willing guarantor of all the shaky and inflated currencies of war-torn Europe. For Great Britain might well have been able to return to the original form of gold standard at a new, realistic depreciated parity of $3.50 to the pound. But it was not willing to do so. For the British dream was to restore, even more glowingly than before, British financial preeminence, and if it depreciated the pound by 30% it would thereby acknowledge that the dollar, not the pound, was the world financial center. This it was fiercely unwilling to do; for restoration of dominance, for the saving of financial face, it would return at the good old $4.86 or bust in the attempt. And bust it almost did. For to insist on returning to gold at $4.86, even on the new, vitiated gold-exchange basis was to mean that the pound would be absurdly expensive in relation to the dollar and other currencies, and would therefore mean that at current inflated price levels, British exports – its economic lifeline – would be severely crippled, and a general depression would ensue. And indeed, Britain suffered a severe depression in her export industries – particularly coal and textiles – throughout the 1920s. If she insisted on returning at the overvalued $4.86, there was only one hope for keeping her exports competitive in price: a massive domestic deflation to lower price and wage levels. While a severe deflation is difficult at best, Britain now found it impossible, for the new system of national unemployment insurance and the new-found strength of trade unions made wage cutting politically unthinkable.

But if Britain would or could not make her exports competitive by returning to gold at a depreciated par or be deflating at home, there was a third alternative which it could pursue, and which indeed marked the key to the British international economic policy of the 1920s: it could induce or force other countries to inflate, or themselves to return to gold at overvalued pars; in short, if it could not clean up its own economic mess, it could contrive to impose messes upon everyone else. If it did not do so, it would see inflating Britain lose gold to the United States, France, and other “hard money” countries, as indeed happened during the 1920s; only by contriving for other countries, especially the U.S., to inflate also, could it check the loss of gold and therefore halt the collapse of the whole jerry-built international monetary structure.

In the short run, the British scheme was brilliantly conceived, and it worked for a time; but the major problem went unheeded: if the United State, the base of the pyramid and the sole link of all these countries to gold and hard money, were to inflate unduly, the dollar too would become shaky, it would lose gold at home and abroad, and the dollar would itself eventually collapse, dragging the entire structure down with it. And this is essentially what happened in the Great Depression.

In Europe, England was able to use its domination of the powerful Financial Committee of the League of Nations to cajole or bludgeon country after country to (a) establish central banks which would collaborate closely with the Bank of England, (b) return to gold not in the classical gold-coin standard but in the new gold-exchange standard which would permit continued inflation by all the countries; and (c) return to this new standard at over-valued pars so that European exports would be hobbled vis a vis the exports of Great Britain. The Financial Committee of the League was largely dominated and run by Britain’s major financial figure, Montagu Norman, head of the Bank of England, working through such close Norman associates on the Committee as Sir Otto Niemeyer and Sir Henry Strakosch, leaders in the concept of close central bank collaboration to “stabilize” (in practice, to raise) price levels throughout the world. The distinguished British economist Sir Ralph Hawtrey, Director of Financial Studies at the British Treasury, was one of the first to advocate this system, as well as to call for the general European adoption of a gold-exchange standard. In the spring of 1922, Norman induced the League to call the Genoa Conference, which urged similar measures. / 2

But the British scarcely confined their pressure upon European countries to resolutions and conferences. Using the carrot of loans from England and the United States and the stick of political pressure, Britain induced country after country to order its monetary affairs to suit the British – i.e. to return only to a gold-exchange standard at overvalued pars that would hamper their own exports and stimulate imports from Great Britain. Furthermore, the British also used their inflated, cheap credit to lend widely to Europe in order to stimulate their own flagging export market. A trenchant critique of British policy was recorded in the diary of Émile Moreau, Governor of the Bank of France, a country which clung to the gold standard and to a hard-money policy, and was thereby instrumental in bringing down the pound and British financial domination in 1931. Moreau wrote:

“… England having been the first European country to reestablish a stable and secure money [sic] has used that advantage to establish a basis for putting Europe under a veritable financial domination. The Financial Committee [of the League of Nations] at Geneva has been the instrument of that policy. The method consists of forcing every country in monetary difficulty to subject itself to the Committee at Geneva, which the British control. The remedies prescribed always involve the installation in the central bank of a foreign supervisor who is British or designated by the Bank of England, and the deposit of a part of the reserve of the central bank at the Bank of England, which serves both to support the pound and to fortify British influence. To guarantee against possible failure they are careful to secure the cooperation of the Federal Reserve Bank of New York. Moreover, they pass on to America the task of making some of the foreign loans if they seem too heavy, always retaining the political advantage of these operations.

“England is thus completely or partially entrenched in Austria, Hungary, Belgium, Norway, and Italy. She is in the process of entrenching herself in Greece and Portugal. She seeks to get a foothold in Yugoslavia and fights us cunningly in Rumania … The currencies will be divided into two classes. Those of the first class, the dollar and the pound sterling, based on gold and those of the second class based on the pound and the dollar – with a part of their gold reserves being held by the Bank of England and the Federal Reserve Bank of New York. The latter moneys will have lost their independence.” / 3

Inducing the United States to support and bolster the pound and the gold exchange system was vital to Britain’s success, and this cooperation was insured by the close ties that developed between Montagu Norman and Benjamin Strong, Governor of the Federal Reserve Bank of New York, who had seized effective and nearly absolute control of Federal Reserve operations from his appointment at the inception of the Fed in 1914 until his death in 1928. This control over the Fed was achieved over the opposition of the Federal Reserve Board in Washington, who generally opposed or grumbled at Strong’s Anglophile policies. Strong and Norman made annual trips to visit each other, all of which were kept secret not only from the public but from the Federal Reserve Board itself.

Strong and the Federal Reserve Bank of New York propped up England and the gold exchange standard in numerous ways. One was direct lines of credit, which the New York Bank extended, in 1925 and after, to Britain, Belgium, Poland and Italy, to subsidize their going to a gold exchange standard at over-valued pars. More directly significant was a massive monetary inflation and credit expansion which Strong generated in the United States in 1924 and again in 1927, for the purpose of propping up the pound. The idea was that gold flows from Britain to the United States would be checked and reversed by American credit expansion, which would prop up or raise prices of American goods, thereby stimulating imports from Great Britain, and also lower interest rates in the U.S. as compared to Britain. The fall in interest rates would further stimulate flows of gold from the U.S. to Britain and thereby check the results of British inflation and overvaluation of the pound. Both times, the inflationary injection worked, and prevented Britain from reaping the results of its own inflationary policies, but at the high price of inflation in the United States, a dangerous stock market and real estate boom, and an eventual depression. At the secret central-bank conference of July 1927 in New York, called at the behest of Norman, Strong agreed to this inflationary credit expansion over the objections of Germany and France, and Strong gaily told the French representative that he was going to give “a little coup de whiskey to the stock market.” It was a coup for which America and the world would pay dearly. / 4

The Chicago business and financial community, not having Strong’s ties with England, protested vigorously against the 1927 expansion, and the Federal Reserve Bank of Chicago held out as long as it could against the expansion of cheap money and the lowering of interest rates. The Chicago Tribune went so far as to call for Strong’s resignation, and perceptively charged that discount rates were being lowered in the interests of Great Britain. Strong, however, sold the policy to the Middle West with the rationale that its purpose was to help the American farmer by means of cheap credit. In contrast, the English financial community hailed the work of Norman in securing Strong’s support, and The Banker of London lauded Strong as “one of the best friends England ever had.” The Banker praised the “energy and skillfulness he [Strong] had given to the service of England” and exulted that “his name should be associated with that of Mr. [Walter Hines] Page as a friend of England in her greatest need.” / 5

A blatant example of Strong’s intervention to help Norman and his policy occurred in the spring of 1926, when one of Norman’s influential colleagues proposed a full gold-coin standard in India. At Norman’s request, Strong and a team of American economists rushed to England to ward off the plan, testifying that a gold drain to India would check inflation in other countries, and instead successfully backed the Norman policy of a gold-exchange standard and domestic “economizing” of gold to permit domestic expansion of credit. / 6

The intimate Norman-Strong collaboration for joint inflation and the gold-exchange standard was not at all an accident of personality; it was firmly grounded on the close ties that both of them had with the house of Morgan and the Morgan interests. Strong himself was a product of the Morgan nexus; he had been the head of the Morgan-oriented Bankers’ Trust Company before becoming Governor of the New York Fed, and his closest ties were with Morgan partners Henry P. Davison and Dwight Morrow, who induced him to assume his post at the Federal Reserve. J.P. Morgan and Co., in turn, was an agent of the British Government and of the Bank of England, and its close financial ties with England, its loans to England and tie-ins with the American export trade, had been highly influential in inducing the United States to enter the World War on England’s side. / 7 As for Montagu Norman, his grandfather had been a partner in the London banking firm of Brown, Shipley, & Co., and of the affiliated New York firm of Brown Brothers & Co., a powerful investment banking firm long associated with the House of Morgan. Norman himself had been a partner of Brown, Shipley and had worked for several years in the offices of Brown Brothers in the United States.

Moreover, J.P. Morgan and Co., played a direct collaborative role with the New York Fed, lending $100 million of its own to Great Britain in 1925 to facilitate its return to gold, and also collaborating in futile loans to prop up the shaky European banking system during the financial crisis of 1931. It is no wonder that in his study of the Federal Reserve System during the pre-New Deal era, Dr. Clark concluded “that the New York Reserve Bank in collaboration with a private international banking house [J.P. Morgan and Co.], determined the policy to be followed by the Federal Reserve System.” / 8

The major theoretical rationale employed by Strong and Norman was the idea of governmental collaboration to “stabilize” the price level. The laissez-faire policy of the classical, pre-war gold standard meant that prices would be allowed to find their own level in accordance with supply and demand, and without interference by central bank manipulation. In practice, this meant a securely falling price level, as the supply of goods rose over time in accordance with the long-run rise in productivity. And in practice, price-stabilization really meant price raising: either keeping prices up when they were falling, or “reflating’ prices by raising them through inflationary action by the central banks. Price stabilization therefore mean the replacement of the classical, laissez-faire gold standard by “managed money,” by inflationary credit expansion stimulated by the central banks.

In England, it was, as we have seen, no accident that the lead in advocating price stabilization was taken by Sir Ralph Hawtrey and various associates of Montagu Norman, including Sir Josiah Stamp, chairman of Midland Railways and a Director of the Bank of England, and two other prominent directors – Sir Basil Blackett and Sir Charles Addis.

It has long been a myth of American historiography that bankers and big businessmen are invariably believers in “hard money” as against cheap credit or inflation. This was certainly not the experience of the New Deal or the pre-New Deal era. / 9 While the most articulate leaders of the price stabilizationists were academic economists led by Professor Irving Fisher of Yale, Fisher was able to enlist in his Stable Money League (founded 1921) and its successor Stable Money Association, a host of men of wealth, bankers and businessmen, as well as labor and farm leaders. Among those serving as officers of the League and Association were: Henry Agard Wallace, editor of Wallace’s Farmer and Secretary of Agriculture in the New Deal; the wealthy John G. Winant, later Governor of New Hampshire; George Eastman of the Eastman-Kodak family; Frederick H. Goff, head of the Cleveland Trust Company; John E. Rovensky, Executive Vice President of the Bank of America; Frederic Delano, uncle of Franklin D. Roosevelt; Samuel Gompers, John P. Frey and William Green of the American Federation of Labor; Paul M. Warburg, partner of Kuhn, Loeb and Co.; Otto H. Kahn, prominent investment banker; James H. Rand, Jr., head of Remington Rand Company; and Owen D. Young of General Electric. Furthermore, the heads of the following organizations agreed to serve as ex-officio Honorary Vice Presidents of the Stable Money Association: The American Association for Labor Legislation; the American Bar Association; the American Farm Bureau Federation; the Brotherhood of Railroad Trainmen; the National Association of Credit Men; the National Association of Owners of Railroad and Public Utility Securities; the National Retail Dry Goods Association; the United States Building and Loan League; the American Cotton Growers Exchange; the Chicago Association of Commerce; the Merchants Association of New York; and the heads of the Bankers’ Association of forty-three states and District of Columbia. / 10

Irving Fisher was unsurprisingly exultant over the supposed achievement of Governor Strong in stabilizing the wholesale price level during the late 1920s, and he led American economists in trumpeting the “New Era” of permanent prosperity which the new policy of managed money was assuring to America and the world. Fisher was particularly critical of the minority of skeptical economists who warned of overexpansion in the stock and real estate markets due to cheap money, and even after the stock market crash Fisher continued to insist that prosperity, particularly in the stock market, was just around the corner. Fisher’s partiality toward stock-market inflation was perhaps not unrelated to his own personal role as a millionaire investor in the stock market, a role in which he was financially dependent on a cheap money policy. / 11 In the general enthusiasm for Strong and the New Era of monetary and stock market inflation, the minority of skeptics was led by the Chase National Bank, affiliated with the Rockefeller interests, particularly A. Barton Hepburn, economic historian and Chairman of the Board of the bank, and its chief economist Dr. Benjamin M. Anderson, Jr. Another highly influential and indefatigable critic was Dr. H. Parker Willis, editor of the Journal of Commerce, formerly aide to Senator Carter Glass (D., Va.) and professor of banking at Columbia University, along with Willis’s numerous students, who included Dr. Ralph W. Robey, later to become economist at the National Association of Manufacturers. Another critic was Dr. Rufus S. Tucker, economist at General Motors. On the Federal Reserve Board the major critic was Dr. Adolph C. Miller, a close friend of Herbert Hoover, who joined in the criticism of the Strong policy. On the other hand, Secretary of Treasury Andrew W. Mellon, of the powerful Mellon interests, enthusiastically backed the inflationist policy. This split in the nation’s leading banking and business circles was to foreshadow the split over Franklin Roosevelt’s monetary departures in 1933.

II. The First New Deal: Dollar Nationalism

The International monetary framework of the 1920s collapsed in the storm of the Great Depression; or rather, it collapsed of its own inner contradictions in a depression which it had helped to bring about. For one of the most calamitous features of the depression was the international wave of banking failures; and the banks failed from the inflation and over-expansion which were the fruits of the managed international gold exchange standard. Once the jerry-built pyramiding of bank credit had collapsed, it brought down the banking system of nation after nation; as inflation led to a piling up of currency claims abroad, the cashing in of the claims led to a well-founded suspicion of the solvency of other banks, and so the failures spread and intensified. The failures in the weak currency countries led to the accumulation of strains in other weak currency nations, and, ultimately, on the bases of the shaky pyramid: Britain and the United States.

The major banking crisis began with the near-bankruptcy in 1929 of the Boden-Credit-Anstalt of Vienna, the major bank in Austria, which had never recovered from its dismemberment at Versailles. Desperate attempts by J.P. Morgan, the House of Rothschild, and later the New York Fed, to shore up the bank only succeeded in a temporary rescue which committed more financial resources to an unsound bank and thereby made its ultimate failure in May, 1931 all the more catastrophic. Rather than permit the outright liquidation of their banking systems, Austria, followed by Germany and other European countries, went off the gold standard during 1931. / 12

But the key to the international monetary situation was Great Britain, the nub and the base for the world’s gold exchange standard. British inflation and cheap money, and the standard which had made Britain the base of the world’s money, put enormous pressure on the pound sterling, as foreign holders of sterling balances became increasingly panicky and called on the British to redeem their sterling in either gold or dollars. The heavy loans by British banks to Germany during the 1920s made the pressure after the German monetary collapse still more severe. But Britain could have saved the day by using the classical gold standard medicine in such crises: by raising bank interest rates sharply, thereby attracting funds to Britain from other countries. In such monetary crises, furthermore, such temporary tight money and check to inflation gives foreigners confidence that the pound will be sustained, and they then continue to hold sterling without calling on the country for redemption. In earlier crises, for example, Britain had raised its bank rate as high as 10% early in the proceedings, and temporarily contracted the money supply to put a stringent check to inflation. But by 1931 deflation and hard money had become unthinkable in the British political climate. And so Britain stunned the financial world by keeping its bank rate very low, never raising it above 4 1/2%, and in fact continuing to inflate sterling still further to offset gold losses abroad. As the run on sterling inevitably intensified, Great Britain cynically repudiated its own gold exchange standard, the very monetary standard that it had forced and cajoled Europe to adopt, by coolly going off the gold standard in September 1931. Its own international monetary system was sacrificed on the altar of continued domestic inflation. / 13

The European monetary system was thereby broken up into separate and even warring currency blocs, replete with fluctuating exchange rates, exchange control, and trade restrictions. The major countries followed Britain off the gold standard, with the exception of Belgium, Holland, France, Italy, Switzerland, and the United States. Currency blocs formed with the British Empire forming a sterling bloc, with parties mutually fixed in relation to the pound. It is particularly ironic that one of the earliest effects of Britain’s going off gold was that the overvalued pound, now free to fluctuate, fell to its genuine economic value, at or below $3.40 to the pound. And so Britain’s grand experiment in returning to a form of gold at an overvalued par had ended in disaster, for herself as well as for the rest of the world.

In the last weeks of the Hoover Administration, a desperate attempt was made by the U.S. to restore an international monetary system; this time the offer was made to Britain to return to the gold standard at the current, eminently more sensible par in exchange for substantial reduction of the British war debt. No longer would Britain be forced by over-valuation to be in a chronic state of depression of its export industries. But Britain now had the nationalist bit in its teeth; and it insisted on outright “reflation” of prices back up to the pre-depression, 1929 levels. It had become increasingly clear that the powerful “price stabilizationists” were interested not so much in stabilization as in high prices, and now they would only be satisfied with an inflationary return to boom prices. Britain’s rejection of the American offer proved to be fatal for any hopes of international monetary stability. / 14

The world’s monetary fate finally rested with the United States, the major gold standard country still remaining. Federal Reserve attempts to inflate the money supply and to lower interest rates during the depression further weakened confidence in the dollar, and gold outflows combined with runs and failures of the banks put increasing pressure on the American banking system. Finally, during the interregnum between the Hoover and Roosevelt Administrations, the nation’s banks began to collapse in earnest. The general bank collapse meant that the banking system, always unsound and incapable of paying more than a fraction of its liabilities on demand, could only go in either of two opposite directions. A truly laissez-faire policy would have allowed the failing banks to collapse, and thereby to engage in a swift, sharp surgical operation that would have transformed the nation’s monetary system from an unsound, inflationary one to a truly “hard” and stable currency. The other pole was for the government to declare massive “bank holidays,” i.e., to relieve the banks of the obligation to pay their debts, and then move on to the repudiation of the gold standard and its replacement by inflated fiat paper issued by the government. It is important to realize that neither the Hoover nor the Roosevelt Administrations had any intention of taking the first route. While there was a considerable split on whether or not to stay on the gold standard, no one endorsed the rigorous laissez-faire route. / 15

The new Roosevelt Administration was now faced with the choice of retaining or going off the gold standard. While almost everyone supported the temporary “bank holidays,” there was a severe split on the longer run question of the monetary standard.

While the bulk of the nation’s academic economists stood staunchly behind the gold standard, the indefatigable Irving Fisher redoubled his agitation for inflation, spurred onward by his personal desire to re-inflate stock prices. Since the Stable Money Association had been supposedly dedicated to price stabilization, and what Fisher and the inflationists wanted was a drastic raising of prices, the Association liquidated its assets into the new and frankly inflationist “Committee for the Nation to Rebuild Prices and Purchasing Power.” The Committee for the Nation, founded in January 1933, stood squarely for the “reflation” of prices back to their pre-1929 levels; stabilization of the price level was to proceed only after that point had been achieved. The Committee for the Nation, which was to prove crucially influential on Roosevelt’s decision, was composed largely of prominent businessmen. The Committee was originated by Vincent Bendix, president of Bendix Aviation, and General Robert E. Wood, head of Sears, Roebuck and Co. They were soon joined, in the fall of 1932, by Frank A. Vanderlip, long close to Fisher and formerly president of the National City Bank of New York, by James H. Rand, Jr., of Remington Rand, and by Magnus W. Alexander, head of the National Industrial Conference Board.

Other members of the Committee for the Nation included: Fred H. Sexauer, president of the Dairymen’s League Cooperative Association; Frederic H. Frazier, chairman of the board of the General Baking Company; automobile magnate, E.L. Cord; Lessing J. Rosenwald, chairman, Sears, Roebuck; Samuel S. Fels, of Fels and Co.; Philip K. Wrigley, president of William Wrigley Co.; John Henry Hammond, chairman of the board of Bangor & Aroostook R.R.; Edward A. O’Neal, head of the American Farm Bureau Federation, and L.J. Taber, head of the National Grange; F.R. Wurlitzer, vice president of Rudolph Wurlitzer Mfg. Co.; William J. McAveeny, president of Hudson Motor Co.; Frank E. Gannett of the Gannett Newspapers; and Indiana banker William A. Wirt. Interestingly enough, this same group of highly conservative industrialists was later to become the Committee for Constitutional Government, the major anti-New Deal propaganda group of the later 1930s and 1940s. Yet the Committee was the major proponent of the inflationist policy of the early New Deal in reflating and abandoning the gold standard.

Also associated with the Committee for the Nation was another leading influence on Franklin Roosevelt’s decision: agricultural economist George F. Warren of Cornell, who, along with his colleague Frank A. Pearson, was the inspiration for the reflationist Roosevelt program of continually raising the buying price of gold.

The Committee for the Nation at first included several hundred industrial and agricultural leaders, and within a year its membership reached over 2,000. Its recommendations, beginning with going off gold and embargoing gold exports, and continuing through devaluing the dollar and raising the price of gold, were fairly closely followed by the Roosevelt Administration. / 16 For his part, Irving Fisher, in response to a request for advice by President-elect Roosevelt, had strongly urged at the end of February a frankly inflationist policy of reflation, devaluation and leaving the gold standard without delay. / 17 By April 19, when Roosevelt had cast the die for this policy, Fisher exulted that “Now I am sure – as far as we ever can be sure of anything – that we are going to snap out of this depression fast. I am now one of the happiest men in the world …” In the same letter to his wife, an heiress of the substantial Hazard family fortune, Fisher added: “My next big job is to raise money for ourselves. Probably we’ll have to go to Sister again [his wife’s sister Caroline] … I have defaulted payments the last few weeks because I did not think it was fair to ask Sister for money when there was a real chance that I could never pay it back. I mean that if F.D.R. had followed Glass we would have been pretty surely ruined. So would Allied Chemical [in which much of his wife’s family fortune was invested], and the U.S. Govt … Now I can go to Sister with a clean conscience ...” / 18

If Irving Fisher’s interest was personal as well as ideological, economic interests also underlay the concern of the Committee for the Nation. The farm groups wanted farm prices driven up including farm export prices, which necessarily increase in terms of other currencies whenever a currency is devalued. As for the rest of the Committee and other inflationists, Herbert Feis notes:

“By the spring of 1933 diverse organizations and groups were crying aloud for some kind of monetary inflation or devaluation, or both. Most effective, probably, was the Committee for the Nation. Among its members were prominent merchants, such as the head of Sears, Roebuck, some journalists, some Wall Street operators and some foreign exchange speculators. Their purpose was to get the United States off the gold standard and to bring about devaluation of the dollar from which they would profit either as speculators in foreign exchange or as businessmen. Another group, more conservative, who stood to gain by devaluation were those who had already exported gold or otherwise acquired liquid deposits in foreign banks. They conceived that they were merely protecting the value of their capital … Then there were the exporters – especially of farm products – who had been at a disadvantage ever since Great Britain had gone off the gold standard and the value of sterling had fallen much below its previous parity with the dollar.” / 19

Also advocating and endorsing the decision to inflate and leave the gold standard were such conservative bankers as James P. Warburg of Kuhn, Loeb & Co., one of Roosevelt’s leading monetary advisors; former Vice-President and Chicago banker Charles G. Dawes; Melvin A. Traylor, president of the First National Bank of Chicago; Frank Altschul of the international banking house of Lazard Freres; and Russell C. Leffingwell, partner of J. P. Morgan & Co. Leffingwell told Roosevelt that his action “was vitally necessary and the most important of all the helpful things you have done.” / 20 Morgan himself hailed Roosevelt’s decision to leave the gold standard:

“I welcome the reported action of the President and the Secretary of the Treasury in placing an embargo on gold exports. It has become evident that the effort to maintain the exchange value of the dollar at a premium as against depreciated foreign currencies was having a deflationary effect upon already severely deflated American prices and wages and employment. It seems to me clear that the way out of the depression is to combat and overcome the deflationary forces. Therefore I regard the action now taken as being the best possible course under the circumstances.” / 21

Other prominent advocates of going off gold were publishers J. David Stern and William Randolph Hearst, financier James H. R. Cromwell, and Dean Wallace Donham of the Harvard Business School. Conservative Republican Senators such as David A. Reed (Pa.) and minority leader Charles L. McNary (Ore.) also approved the decision, and Senator Arthur Vandenberg (R., Mich.) happily declared that Americans could now compete in the export trade “for the first time in many, many months.” Vandenberg concluded that “abandonment of the dollar externally may prove to be a complete answer to our problem, so far as the currency factor is concerned.” / 22

Amidst this chorus of approval from leading financiers and industrialists, there was still determined opposition to going off gold. Aside from the bulk of the nation’s economists, the lead in opposition was again taken by two economists with close ties to the banking community who had been major opponents of the Strong-Morgan policies during the 1920s: Dr. Benjamin M. Anderson of the Rockefeller-oriented Chase National Bank, and Dr. H. Parker Willis, editor of the Journal of Commerce and chief adviser to Senator Carter Glass (D., Va.), who had been Secretary of the Treasury under Wilson. The Chamber of Commerce of the United States also vigorously attacked the abandonment of gold as well as price level stabilization, and the Chamber of Commerce of New York State also called for prompt return to gold. / 23 From the financial community, leading opponents of Roosevelt’s decision were Winthrop W. Aldrich, a Rockefeller kinsman and head of the Chase National Bank, and Roosevelt’s Budget Director Lewis W. Douglas, of the Arizona mining family, who was related to the J. Henry Schroder international bankers and was eventually to become head of Mutual Life Insurance Co. and Ambassador to England. Douglas fought valiantly but in vain within the administration against going off gold and against the remainder of the New Deal program. / 24

By the end of April 1933, the United States was clearly off the gold standard, and the dollar quickly began to depreciate relative to gold and the gold standard currencies. Britain, which a few weeks earlier had loftily rejected the idea of international stabilization, now became frightened: currency blocs and a depreciating pound to aid British exports was one thing; depreciation of the dollar to spur American exports and injure British exports was quite another. The British had the presumption to scold the United States for going off gold; they now rested their final hope for a restored international monetary system on the World Economic Conference scheduled for London in June 1933. / 25

-------------------[END OF PART 1; SEE BELOW FOR PART 2]---------------

 

[Apollonian]

--------------------[HERE'S PART 2 TO ABOVE]----------------------------



Preparations for the Conference had been underway for a year, under the guidance of the League of Nations, in a desperate attempt to aid the world economic and financial crisis by attempting the “restoring [of] the currencies on a healthy basis.” / 26 The Hoover Administration was planning to urge the restoration of the international gold standard, but the abandonment of gold by the Roosevelt Administration in March and April 1933 changed the American position radically. As the Conference loomed ahead, it was clear that there were three fundamental positions: the gold bloc – the countries still on the gold standard, headed by France – which desired immediate return to a full international gold standard with fixed exchange rates between the major currencies and gold; the United States, which now placed greatest stress on domestic inflation of the price level; and the British, supported by their Dominions, who wished some form of combination of the two. What was still unclear was whether a satisfactory compromise between these divergent views could be worked out.

At the invitation of President Roosevelt, Prime Minister Ramsay MacDonald of Great Britain and leading statesman of the other major countries journeyed to Washington for individual talks with the President. All that emerged from these conversations were vague agreements of intent; but the most interesting aspect of the talks was an American proposal, originated by William C Bullitt and rejected by the French, to establish a coordinated world-wide inflation and devaluation of currencies.

“ … there was serious discussions of a proposal, sponsored by the United States and vigorously opposed by the gold countries, that the whole world should embark upon a ‘cheaper money’ policy, not only through a vigorous and concerted program of credit expansion and the stimulation of business enterprise by means of public works, but also through a simultaneous devaluation, by a fixed percentage, of all currencies which were still at their pre-depression parities.” / 27

The American delegation to London was a mixed bag, but the conservative gold standard forces could take heart from the fact that staff economic advisor was James P. Warburg, who had been working eagerly on a plan for international currency stabilization based on gold at new and realistic parities. Furthermore, Conservative Professor Oliver M.W. Sprague and George L. Harrison, governor of the New York Fed, were sent to discuss proposals for temporary stabilization of the major currencies. In contrast, the President paid no attention to the petition of eighty-five Congressmen, including ten Senators, that he appoint as his economic advisor to the Conference the radical inflationist and anti-gold priest, Father Charles E. Couglin. / 28

The World Economic Conference, attended by delegates from sixty-four major nations, opened in London on June 12. The first crisis occurred over the French suggestion for a temporary “currency truce” – a de facto stabilization of exchange rates between the franc, dollar, and pound for the duration of the Conference. Surely eminently reasonable, the plan was also a clever device for an entering wedge toward a hopefully permanent stabilization of exchange rates on a full gold basis. The British were amenable, provided that the pound remained fairly cheap in relation to the dollar, so that their export advantage gained since 1931 would not be lost. On June 16, Sprague and Harrison concluded an agreement with the British and French for temporary stabilization of the three currencies, setting the dollar-sterling rate at about $4 per pound, and pledging the United States not to engage in massive inflation of the currency for the duration of the agreement.

The American representative urged Roosevelt to accept the agreement, Sprague warning that “a failure now would be most disastrous,” and Warburg declaring that without stabilization “it would be practically impossible to assume a leading role in attempting [to] bring about a lasting economic peace.” But Roosevelt quickly rejected the agreement on June 17, giving two reasons: that the pound must be stabilized at no cheaper than $4.25, and that he could not accept any restraint on his freedom of action to inflate in order to raise domestic prices. Roosevelt ominously concluded that “it is my personal view that far too much importance is being placed on existing and temporary fluctuations.” And lest the American delegation take his reasoning as a stimulus to re-negotiating the agreement, Roosevelt reminded Hull on June 20: “Remember that far too much influence is attached to exchange stability by banker-influenced cabinets.” Upon receiving the Presidential veto, the British and French were indignant, and George Harrison quit and returned home in disgust; but the American delegation went ahead and issued its official statement on temporary currency stabilization on June 22. It declared temporary stabilization impermissible, “because the American government feels that its efforts to raise prices are the most important contribution it can make …” / 29

With temporary stabilization scuttled, the Conference settled down to longer-range discussions, the most important work being centered in the subcommission on “immediate measures of financial reconstruction” of the Monetary and Financial Commission of the Conference. The British delegation began by introducing a draft resolution, (1) emphasizing the importance of “cheap and plentiful credit” in order to raise the world level of commodity prices, and (2) stating that “the central banks of the principal countries should undertake to cooperate with a view to securing these conditions and should announce their intention of pursuing vigorously a policy of cheap and plentiful money by open market operations..” / 30 The British thus laid stress on coordinated inflation, but said nothing about the sticking point: exchange rate stabilization. The Dutch, the Czechoslovaks, the Japanese, and the Swiss criticized the British advocacy of inflation, and the Italian delegate warned that “to put one’s faith in immediate measures for augmenting the volume of money and credit might lead to a speculative boom followed by an even worse slump … a hasty and unregulated flood [of credit] would lead to destructive results.” And the French delegate stressed that no genuine recovery could occur without a sense of economic and financial security:

“Who would be prepared to lend, with the fear of being repaid in depreciated currency always before his eyes? Who would find the capital for financing vast programs of economic recovery and abolition of unemployment, as long as there is a possibility that economic struggles would be transported to the monetary field? … In a word, without stable currency there can be no lasting confidence; while the hoarding of capital continues, there can be no solution.” / 31

The American delegation then submitted its own draft proposal, which was similar to the British, ignored currency stability, and advocated close cooperation between all governments and central banks for the “carrying out of a policy of making credit abundantly and readily available to sound enterprise,” especially by open market operations which expanded the money supply. Also, government expenditures and deficits should be synchronized between the different nations.

The difference of views between the nations on inflation and prices, however, precluded any agreement in this area at the Conference. On the gold question, Great Britain submitted a policy declaration and the U.S. a draft resolution which looked forward to eventual restoration of the gold standard – but again, nothing was spelled out on exchange rates, or on the crucial question of whether restoration of price inflation should come first. In both the American and British proposals, however, even the eventual gold standard would be considerably more inflationary than it had been in the 1920s: for all domestic gold circulation, whether coin or bullion, would be abolished, and gold used only as a medium for settling international balances of payment; and all gold reserves ratios to currency would be lowered. / 32

As could have been predicted before the Conference, there were three sets of views on gold and currency stabilization. The United States, backed only by Sweden, favored cheap money in order to raise domestic prices, with currency stabilization to be deferred until a sufficient price rise had occurred. Whatever international cooperation was envisaged would stress joint inflationary action to raise price levels in some coordinate manner. The United States, moreover, went further even than Sweden in calling for reflating wholesale prices back to 1926 levels. The gold bloc attacked currency and price inflation, pointed to the early post-war experience of severe inflation and currency depreciation, and hence insisted on stabilization of exchanges and the avoidance of depreciation. In the confused middle were the British and the sterling bloc, who wanted price reflation and cheap credit, but also wanted eventual return to the gold standard and temporary stabilization of the key currencies.

As the London Conference foundered on its severe disagreements, the gold bloc countries began to panic. For on the one hand the dollar was falling in the exchange markets, thus making American goods and currency more competitive. And what is more, the general gloom at the Conference gave international speculators the idea that in the near future many of these countries would themselves be forced to go off gold. In consequence, money began to flow out of these countries during June, and Holland and Switzerland lost over ten percent of their gold reserves during that month alone. In consequence, the gold countries launched a final attempt to draft a compromise resolution. The proposed resolution was a surprisingly mild one. It committed the signatory countries to re-establishing the gold standard and stable exchange rates, but deliberately emphasized that the parity and date for each country to return to gold was strictly up to each individual country. The existing gold standard countries were pledged to remain on gold, which was not difficult since that was their fervent hope. The non-gold countries were to reaffirm their ultimate objective to return to gold, to try their best to limit exchange speculation in the meanwhile, and to cooperate with other central banks in these two endeavors. The innocuousness of the proposed declaration comes from the fact that it committed the United States to very little more than its own resolution of over a week earlier to return eventually to the gold standard, coupled with a vague agreement to cooperate in limiting exchange speculation in the major currencies.

The joint declaration was agreed upon by Sprague, Warburg, James M. Cox, the head of the Monetary Commission at the Conference, and by Raymond Moley, who had taken charge of the delegation as a freewheeling White House adviser. Moley was assistant secretary of State and had been a monetary nationalist. Moley, however sent the declaration to Roosevelt on June 30, urging the President to accept it, especially since Roosevelt had been willing a few weeks earlier to stabilize at a $4.25 pound while the depreciation of the dollar during June had now brought the market rate up to $4.40. Across the Atlantic, Undersecretary of the Treasury Dean G. Acheson, influential Wall Street financier Bernard M. Baruch, and Lewis W. Douglas also strongly endorsed the London declaration.

Not hearing immediately from the President, Moley frantically wired Roosevelt the next morning that “success even continuance of the conference depends upon United States agreement.” / 33 Roosevelt cabled his rejection on July 1, declaring that “a sufficient interval should be allowed the United States to permit … a demonstration of the value of price lifting efforts which we have well in hand.” Roosevelt’s rejection of the innocuous agreement was in itself starling enough; but he felt that he had to add insult to injury, to slash away at the London Conference so that no danger might exist of currency stabilization or of the reconstruction of an international monetary order. Hence, he sent on July 3 an arrogant and contemptuous public message to the London Conference, the famous “bombshell” message, so named for its impact on the Conference.

Roosevelt began by lambasting the idea of temporary currency stabilization which he termed a “specious fallacy,” an “artificial and temporary … diversion.” Instead, Roosevelt declared that the emphasis must be placed on “the sound internal economic system of a nation.” In particular, “old fetishes of so-called international bankers are being replaced by efforts to plan national currencies with the objective of giving to those currencies a continuing purchasing power which … a generation hence will have the same purchasing and debt-paying power as the dollar value we hope to attain in the near future. That objective means more to the good of other nations than a fixed ratio for a month or two in terms of the pound or franc.” In short, the President was now totally committed to the nationalist Fisher-Committee of the Nation program for paper money, currency inflation and very steep reflation of prices, and then stabilization of the higher internal price level. The idea of stable exchange rates and an international monetary order could fade into limbo. / 34 The World Economic Conference limped along aimlessly for a few more weeks, but the Roosevelt bombshell message effectively killed the Conference, and the hope for a restored international monetary order was dead for a fateful decade. From here on in the 1930s, monetary nationalism, currency blocs, and commercial and financial warfare would be the order of the day.

The French were bitter and the English stricken at the Roosevelt message. The chagrined James P. Warburg promptly resigned as financial adviser to the delegation, and this was to be the beginning of the exit of this highly placed economic advisor from the Roosevelt Administration. A similar fate was in store for Oliver Sprague and Dean Acheson. As for Raymond Moley, who had been repudiated by the President’s action, he tried to restore himself in Roosevelt’s graces by a fawning and obviously insincere telegram, only to be ousted from office shortly after his return to the States. Playing an ambivalent role in the entire affair, Bernard Baruch, who was privately in favor of the old gold standard, praised Roosevelt fulsomely for his message: “Until each nation puts its house in order by the same Herculean efforts that you are performing,” Baruch wrote to the President, “there can be no common denominators by which we can endeavor to solve the problems … There seems to be one common ground that all nations can take, and that is the one outlined by you.” / 35

Expressions of enthusiastic support for the President’s decision came, as might be expected, from Irving Fisher and George F. Warren, who urged Roosevelt to avoid any possible agreement that might limit “our freedom to change the dollar any day.” James A. Farley has recorded in his memoirs that Roosevelt was prompted to send his angry message by coming to suspect a plot to influence Moley in favor of stabilization by Thomas W. Lamont, partner of J.P. Morgan and Co., working through Moley’s conference aide and White House advisor, Herbert Bayard Swope, who was close to the Morgans and also a long-time confidant of Baruch. This might well account for Roosevelt’s bitter reference to the “so-called international bankers.” The situation is curious, however, since Swope was firmly on the anti-stabilization side, and Roosevelt’s London message was greeted enthusiastically by Russell Leffingwell of Morgans, who apparently took little notice of its attack on international bankers. Leffingwell wrote to the President: “You were very right not to enter into any temporary or permanent arrangements to peg the dollar in relation to sterling or any other currency.” / 36

From the date of the torpedoing of the London Economic Conference, monetary nationalism prevailed for the remainder of the 1930s. The United States finally fixed the dollar at $35 an ounce in January 1934, amounting to a two-third increase in the gold price of the dollar from its original moorings less than a year before, and to a 40% devaluation of the dollar. The gold nations continued on gold for two more years, but the greatly devalued dollar now began to attract a flood of gold from the gold countries, and France was finally forced off gold in the fall of 1936, with the other major gold countries – Switzerland, Belgium and Holland – following shortly thereafter. While the dollar was technically fixed in terms of gold, there was no further gold coin or bullion redemption within the U.S. Gold was used only as a method of clearing balances of payments, with only fitful redemption to foreign countries.

The only significant act of international collaboration after 1934 came in the fall of 1936, at about the time France was forced to leave the gold standard. Partly to assist the French, the United States, Great Britain, and France entered into a Tripartite Agreement, beginning on September 25, 1936. The French agreed to throw in the exchange rate sponge, and devalued the franc by between one-fourth and one-third. At this new par, the three governments agreed – not to stabilize their currencies – but to iron out day-to-day fluctuations in them, to engage in mutual stabilization of each other’s currencies only within each 24-hour period. This was scarcely stabilization, but it did constitute a moderating of fluctuations, as well as politico-monetary collaboration, which began with the three Western countries and soon expanded to include the other former gold nations: Belgium, Holland, and Switzerland. This collaboration continued until the outbreak of World War II. / 37

At least one incident marred the harmony of the Tripartite Agreement. In the fall of 1938, while the United States and Britain were hammering out a trade agreement, the British began pushing the pound below $4.80. At the threat of this cheapening of the pound, U.S. Treasury officials warned Secretary of the Treasury Henry Morgenthau, Jr. that if “sterling drops substantially below $4.80, our foreign and domestic business will be adversely affected.” In consequence Morgenthau successfully insisted that the trade agreement with Britain must include a clause that the agreement would terminate if Britain should allow the pound to fall below $4.80. / 38

Here we may only touch on a fascinating historical problem which has been discussed by revisionist historians of the 1930s: To what extent was the American drive for war against Germany the result of anger and conflict over the fact that, in the 1930s world of economic and monetary nationalism, the Germans, under the guidance of Dr. Hjalmar Schacht, went their way successfully on their own, totally outside of Anglo-American control or of the confinements of what remained of the cherished American Open Door? / 39 A brief treatment of this question will serve as a prelude to examining the aim of the war-borne “second New Deal” of reconstructing a new international monetary order, an order that in many ways resembled the lost world of the 1920s.

German economic nationalism in the 1930s was, first of all, conditioned by the horrifying experience that Germany had had with runaway inflation and currency depreciation during the early 1920s, culminating in the monetary collapse of 1923. Though caught with an overvalued par as each European country went off the gold standard, no German government could have politically succeeded in engaging once again in the dreaded act of devaluation. No longer on gold, and unable to devalue the mark, Germany was obliged to engage in strict exchange control. In this economic climate, Dr. Schacht was particularly successful in making bilateral trade agreements with individual countries, agreements which amounted to direct “barter” arrangements that angered the United States and other Western countries in totally bypassing gold and other international banking or financial arrangements.

In the anti-German propaganda of the 1930s, the German barter deals were agreements in which Germany somehow invariably emerged as coercive victor and exploiter of the other country involved, even though they were mutually agreed upon and therefore presumably mutually beneficial exchanges. / 40 Actually, there was nothing either diabolic or unilaterally exploitive about the barter deals. Part of the essence of the barter arrangements has been neglected by historians – the deliberate overvaluation of the exchange rates of both currencies involved in the deals. The German mark, we have seen, was deliberately overvalued as the alternative to the specter of currency depreciation; the situation of the other currencies was a bit more complex. Thus, in the barter agreements between Germany and the various Balkan countries (especially Rumania, Hungary, Bulgaria and Yugoslavia), in which the Balkans exchanged agricultural products for German manufactured goods, the Balkan currencies were also fixed at an artificially overvalued rate vis à vis gold and the currencies of Britain and the other Western countries. This meant that Germany agreed to pay higher than world market rates for Balkan agricultural products while the latter paid higher rates for German manufactured products. For the Balkan countries, the point of all this was to force Balkan consumers of manufactured goods to subsidize their own peasants and agriculturalists. The external consequence was that Germany was able to freeze out Britain and other Western countries from buying Balkan food and raw materials; and since the British could not compete in paying for Balkan produce, the Balkan countries, in the bilateral world of the 1930s, did not have sufficient pounds or dollars to buy manufactured goods from the West. Thus, Britain and the West were deprived of raw materials and markets for their manufactures by the astute policies of Hjalmar Schacht and the mutually agreeable barter agreements between Germany and the Balkan and other, including Latin American, countries. / 41 May not Western anger at successful German competition through bilateral agreements, and Western desire to liquidate such competition, have been an important factor in the Western drive for war against Germany?

Lloyd Gardner has demonstrated the early hostility of the United States toward German economic controls and barter arrangements, its attempts to pressure Germany to shift to a multilateral, “Open Door” system for American products, and the repeated American rebuffs to German proposals for bilateral exchanges between the two countries. As early as June 26, 1933, the influential American Consul-General at Berlin, George Messersmith, was warning that such continued policies would make “Germany a danger to world peace for years to come.” / 42 In pursuing this aggressive policy, President Roosevelt overrode AAA chief George Peek, who favored accepting bilateral deals with Germany and perhaps not coincidentally, was to be an ardent “isolationist” in the late 1930s. Instead, Roosevelt followed the policy of the leading interventionist and spokesman for an “Open Door” to American products, Secretary of State Cordell Hull, as well as his Assistant Secretary Francis B. Sayre, son-in-law of Woodrow Wilson. By 1935, American officials were calling Germany an “aggressor” because of its successful bilateral trade competition, and Japan was similarly castigated for much the same reasons. By late 1938, J. Pierrepoint Moffat, head of the Western European Division of the State Department, was complaining that German control of Central and Eastern Europe would mean “a still further extension of the area under a closed economy.” And, more specifically, in May 1940 Assistant Secretary of State Breckenridge Long warned that a German-dominated Europe would mean that “every commercial order will be routed to Berlin and filled under its orders somewhere in Europe rather than in the United States.” / 43 And shortly before America’s entry into the war, John J. McCloy, later to be U.S. High Commissioner of occupied Germany, was to write in a draft for a speech by Secretary of War Henry Stimson: “With German control of the buyers of Europe and her practice of governmental control of all trade, it would be well within her power as well as the pattern she has thus far displayed, to shut off our trade with Europe, and South America and with the Far East.” / 44

Not only were Hull and the United States ardent in pressing an anti-German policy against its bilateral trade system, but sometimes Secretary Hull had to whip even Britain into line. Thus, in early 1936, Cordell Hull warned the British Ambassador that the “clearing arrangements reached by Britain with Argentina, Germany, Italy and other countries were handicapping the efforts of this government to carry forward its broad program with the favored-nation policy underlying it.” The tendency of these British arrangements was to “drive straight toward bilateral trading” and they were therefore milestones on the road to war. / 45

One of the United States government’s biggest economic worries was the growing competition of Germany and its bilateral trade in Latin America. As early as 1935, Cordell Hull had concluded that Germany was “straining every tendon to undermine United States trading relations with Latin America.” / 46 A great deal of political pressure was used to combat their competition. Thus, in the mid-1930s, the American Chamber of Commerce in Brazil repeatedly pressed the State Department to scuttle the Germany-Brazil barter deal, which the Chamber termed the “greatest single obstacle to free trade in South America.” Brazil was finally induced to cancel its agreement with Germany in exchange for a sixty-million dollar loan from the U.S. America’s exporters, grouped in the National Foreign Trade Council, issued resolutions against German trade methods, and pressured the government for stronger action. And in late 1938 President Roosevelt asked Professor James Harvey Rogers, an economist and disciple of Irving Fisher, to make a currency study of all of South America in order to minimize “German and Italian influence on this side of the Atlantic.”

It is no wonder that German diplomats in Brazil, Chile, and Uruguay reported home that the United States was “exerting very strong pressure against Germany, commercially,” which included economic, commercial, and political opposition designed to drive Germany out of the Brazilian and other South American markets. / 47

In the spring of 1935, the German ambassador to Washington, desperately anxious to bring an end to American political and economic warfare, asked the United States what Germany could do to end American hostilities. The American answer, which amounted to a demand for unconditional economic surrender, was that Germany abandon its economic policy in favor of America. The American reply “really meant,” noted Pierrepont Moffat, “a fundamental acceptance by Germany of our trade philosophy, and a thorough-going partnership with us along the road of equality of treatment and the reduction of trade barriers.” The United States further indicated that it was interested that Germany accept, not so much the principle of the most-favored nation clause in all international trade, but specifically for American exports. / 48

When war broke out in September 1939, Bernard Baruch’s reaction was to tell President Roosevelt that “if we keep our prices down there is no reason why we shouldn’t get the customers of the belligerent nations that they have had to drop because of the war. And in that event,” Baruch exulted, “Germany’s barter system will be destroyed.” / 49 But particularly significant is the retrospective comment made by Secretary Hull, “ … war did not break out between the United States and any country with which we had been able to negotiate a trade agreement. It is also a fact that, with very few exceptions, the countries with which we signed trade agreements joined together in resisting the Axis. The political lineup follows the economic lineup. / 50 Considering that Secretary Hull was a leading maker of American foreign policy throughout the 1930s and through World War II, it is certainly a possibility that his remarks should be taken, not as a quaint testimony to Hull’s idée fixe on reciprocal trade, but as a positive causal statement of the thrust of American foreign policy. Read in that light, Hull’s remark becomes a significant admission rather than a flight of speculative fancy. Reinforcing this interpretation would be a similar reading of the testimony before the House of Representatives in 1945 of top Treasury aide Henry Dexter White, defending the Bretton Woods agreements. White declared: “I think it [a Bretton Woods system] would very definitely have made a considerable contribution to checking the war and possibly might have prevented it. A great many of the devices which Germany and Japan utilized would have been illegal in the international sphere, had these countries been participating members …” / 51 Is White saying that the Allies deliberately made war upon the Axis because of these bilateral, exchange control, and other competitive, devices which a Bretton Woods – or for that matter a 1920s – system would have precluded?

We may take as our final testimony to the possible economic causes of World War II, the assertion by the influential Times of London, well after the start of the war, that “One of the fundamental causes of this war has been the unrelaxing efforts of Germany since 1918 to secure wide enough foreign markets to straighten her finances at the very time when all her competitors were forced by their own debts to adopt exactly the same course. Continuous friction was inevitable” / 52


---------------------[END OF PART 2; SEE BELOW FOR PART 3]---------------

 

[Apollonian]

--------------------------[HERE'S PART 3 TO ABOVE]-------------------------


III. The Second New Deal: The Dollar Triumphant

Whether and to what extent German economic nationalism was a cause for the American drive toward war, one point is certain: that even before official American entry into the war, one of America’s principal war aims was to reconstruct an international monetary order. A corollary aim was to replace economic nationalism and bilateralism by the Hullian kind of multilateral trading and “Open Door” for American goods. But the most insistent drive, and the particularly successful one, was to reconstruct an international monetary system. The system in view was to resemble the gold exchange system of the 1920s quite closely. Once again, all the major world’s currencies were to abandon fluctuating and nationally determined exchange rates on behalf of fixed parities with other currencies and of all of them with gold. Once again, there was to be no full-fledged or internal gold standard for any of these nations; while in theory all currencies were to be fixed in terms of one key currency, which would form a “gold exchange” standard on which other nations could pyramid their own supply of domestic money. But there were two crucial differences from the 1920s. One was that while the key currency was to be the only currency redeemable in gold, there was to be no further embarrassing possibility of internal redemption in gold; gold was only to be a method of international payment between central banks, and never again an actual money held by the public. In this way, the key currency – and the rest of the world in response – could expand and inflate much further than in the 1920s, freed as they were from the check of domestic redemption. But the second difference was more politically far-reaching: for instead of two joint-partner key currencies, the pound and the dollar, with the dollar as workhorse junior subaltern, the only key currency was now to be the dollar, which was to be fixed at $35 to the gold ounce. The pound had had it; and just as the United States was to use the second World War to replace British imperialism with its own far-flung empire; so in the monetary sphere, the United States was now to move in and take over, with the pound no less subordinate than all the other major currencies. It was truly a triumphant “dollar imperialism” to parallel the imperial American thrust in the political sphere. As Secretary of the Treasury Henry Morgenthau, Jr., was later to express it, the critical and eminently successful objective was “to move the financial center of the world” from London to the United States Treasury. / 53 And all this was eminently in keeping with the prophetic vision of Cordell Hull, the man who, in the words of Gabriel Kolko, had “the basic responsibility for American political and economic planning for the peace.” For Hull had urged upon Congress as far back as 1932, that America “gird itself, yield to the law of manifest destiny, and go forward as the supreme world factor economically and morally.” / 54

World War II was the occasion for a new coalition to form behind the New Deal, a coalition which re-integrated many conservative “internationalist” financial interests who had been thrown into opposition by the domestic statism or economic nationalism of the earlier New Deal. This re-integration of the entire conservative financial community was particularly true in the field of international economic and monetary policy. Here, Dr. Leo Pasvolsky, a conservative economist who had broken with the New Deal on the scuttling of the London Economic Conference, returned to a crucial role as Secretary Hull’s special advisor on postwar planning. Dean Acheson, also disaffected by the radical monetary measures of 1933-34, was now back as Assistant Secretary of State for Economic Affairs. And when the ailing Cordell Hull retired in late 1944, he was replaced by Edward Stettinius, son of a Morgan partner and himself former president of Morgan-oriented U.S. Steel. Stettinius chose as his Assistant Secretary for Economic Affairs the man who quickly became the key official for postwar international economic planning, William L. Clayton, a former leader of the anti-New Deal Liberty League, and chairman and major partner of Anderson, Clayton & Co., the world’s largest cotton export firm. Clayton’s major focus in postwar planning was to promote and encourage American exports – with cotton, not unnaturally, never out of the forefront of his concerns. / 55

Even before American entry into the war, U.S. economic war aims were well-defined and rather brutally simple: they hinged on a determined assault upon the 1930s system of economic and monetary nationalism, so as to promote American exports, investments, and financial dealings overseas, in short, the “Open Door” for American commerce. In the sphere of commercial policy this took the form of pressure for reduction of tariffs on American products, and the elimination of quantitative import restrictions on those products. In the allied sphere of monetary policy, it meant the breakup of powerful nationalistic currency blocs, and the restoration of an international monetary order based on the dollar, in which currencies would be convertible into each other at predictable and fixed parities, and there would be a minimum of national exchange controls over the purchase and use of foreign currencies.

And even as the United States was prepared to enter the war to save its ally, Great Britain, it was preparing to bludgeon the British at a time of great peril to abandon their sterling bloc, which they had organized effectively since the Ottawa Agreement of 1932. World War II would presumably deal effectively with the German bilateral trade and currency menace; but what about the problem of Great Britain?

John Maynard Lord Keynes had long led those British economists who had urged a policy of all-out economic and monetary nationalism on behalf of inflation and full employment. He had gone so far as to hail Roosevelt’s torpedoing of the London Economic Conference because the path was then cleared for economic nationalism. Keynes’ visit to Washington on behalf of the British government in the summer of 1941 now spread gloom about the British determination to continue their bilateral economic policies after the war. High State Department official J. Pierrepont Moffat despaired that “the future is clouding up rapidly and that despite the war the Hitlerian commercial policy will probably be adopted by Great Britain.” / 56

The United States responded by putting the pressure on Great Britain at the Atlantic Conference in August, 1941. Under Secretary of State Sumner Welles insisted that the British agree to remove discrimination against American exports, and abolish their policies of autarchy, exchange controls, and Imperial Preference blocs. / 57 Prime Minister Churchill tartly refused, but the United States was scarcely prepared to abandon its crucial aim of breaking down the sterling bloc. As President Roosevelt privately told his son Elliott at the Atlantic Conference:

“It’s something that’s not generally known, but British bankers and German bankers have had world trade pretty well sewn up in their pockets for a long time … Well, now, that’s not so good for American trade, is it? … If in the past German and British economic interests have operated to exclude us from world trade, kept our merchant shipping closed down, closed us out of this or that market, and now Germany and Britain are at war, what should we do?” / 58

The signing of Lend-Lease agreements was the ideal time for wringing concessions from the British, but Britain consented to sign the agreement’s Article VII, which merely involved a vague commitment to the elimination of discriminatory treatment in international trade, only after intense pressure by the United States. The Agreement was signed at the end of February 1942, and in return the State Department pledged to the British that the U.S. would pursue a policy of economic expansion and full employment after the war. Even under these conditions, however, Britain soon maintained that the Lend-Lease Agreement committed it to virtually nothing. To Cordell Hull, however, the Agreement on Article VII was decisive and constituted “a long step toward the fulfillment, after the war, of the economic principles for which I had been fighting for half a century.” The United States also insisted that other nations receiving Lend-Lease sign a virtually identical commitment to multilateralism after the war. In his first major public address in nearly a year, Hull, in July 1942, could now look forward confidently that “leadership toward a new system of international relationships in trade and other economic affairs will devolve very largely upon the United States because of our great economic strength. We should assume this leadership, and the responsibility that goes with it, primarily for reasons of pure national self-interest.” / 59

In the post-war planning for economic affairs, the State Department was in charge of commercial and trade policies, while the Treasury conducted the planning in the areas of money and finance. In charge of post-war international financial planning for the Treasury was the economist Harry Dexter White. In early 1942, White presented his first Plan which was to be one of the two major foundations of the post-war monetary system. White’s proposal was of course within the framework of American post-war economic objectives. The countries of the world were to join a Stabilization Fund, totaling $5 billion, which would lend funds at short-term to deficit countries to iron out temporary balance-of-payments difficulties. But in return for this provision of greater liquidity and short-term aid to deficit countries, exchange rates of currencies were to be fixed, in relation to the dollar and hence to gold, with the gold price to be set at $35 an ounce, and exchange controls were to be abandoned by the various nations.

While the White Plan envisioned a substantial amount of inflation to provide greater currency liquidity, the British responded with a Keynes Plan that was far more inflationary. By this time, Lord Keynes had abandoned economic and monetary nationalism for Britain under severe American pressure, and his aim was to salvage as much domestic inflation and cheap money for Britain as he could possibly induce America to accept. The Keynes Plan envisioned an International Clearing Union, which in return for agreeing to stable exchange rates between currencies and the abandonment of exchange control, provided a huge loan fund to its members of $26 billion. The Keynes Plan, moreover, provided for a new international monetary unit, the “bancor,” which could be issued by the ICU in such large amounts as to provide almost unchecked room for inflation, even in a country with a large deficit in its balance of payments. The nations would consult with each other about correcting balance of payments disequilibria, through altering their exchange rates. The Keynes Plan, furthermore, provided automatic access to the fund of liquidity, with none of the embarrassing requirements, as included the White Plan, for deficit countries to cease creating deficits by inflating their currency. Whereas the White Plan authorized the Stabilization Fund to require deficit countries to cease inflating in return for Fund loans, the Keynes Plan envisioned that inflation would proceed unchecked, with all the burden of necessary adjustments to be placed on the hard-money, creditor countries, who would be expected to inflate faster themselves, in order not to gain currency from the deficit nations.

The White Plan was stringently attacked by the conservative nationalists and inflationists in Britain, particularly G.R, Boothby, Lord Beaverbrook, the London Times and the Economist. The Keynes Plan was attacked by conservatives in the United States as was even the White Plan for interfering with market forces, and for automatic extension of credit to deficit countries. Critical of the White Plan were the Guaranty Survey of the Guaranty Trust Co., and the American Bankers Association; furthermore, the New York Times and New York Herald Tribune called for return to the classical gold standard, and attacked the large measure of governmental financial planning envisioned by both the Keynes and White proposals. / 60

After negotiating during 1943 and until the spring of 1944, the United States and Britain hammered out a Compromise of the White and Keynes Plans in April 1944. The Compromise was adopted by a world economic conference in July at Bretton Woods, New Hampshire; it was Britton Woods that was to provide the monetary framework for the postwar world. / 61

The Compromise established an International Monetary Fund as the stabilization mechanism; its total funds were fixed at $8.8 billion, far closer to the White than the Keynes prescriptions. Its balance of IMF international control as against domestic autonomy lay between the White and Keynes plans, leaving the whole problem highly fuzzy. On the one hand, national access to the Fund was not to be automatic; but on the other, the fund could no longer require corrective domestic economic policies of its members. On the question of exchange rates, the Americans yielded to the British insistence on allowing room for domestic inflation even at the expense of stable exchange rates. The Compromise provided that each country could be free to make a 10% change in its exchange rate, and that larger changes could be made to correct “fundamental disequilibria”; in short, that a chronically deficit country could devalue its currency rather than check its own inflation. Furthermore, the U.S. yielded again in allowing creditor countries to suffer by permitting deficit countries to impose exchange controls on “scarce currencies.” This meant in effect that the major European countries, whose currencies would be fixed at existing highly overvalued rates in relation to the dollar, would thus be permitted to enter the IMF with chronically overvalued currencies and then impose exchange controls on “scarce,” undervalued dollars. But despite these extensive concessions, there was no “bancor”; the dollar, fixed at $35 per gold ounce was now to be firmly established as the key currency base of a new world monetary order. Besides, for the dollar to be undervalued and other currencies to be over-valued greatly spurs American exports, which was one of the basic aims of the entire operation. U.S. Ambassador to Britain John G. Winant recorded the perceptive hostility to the Bretton Woods Agreement by the majority of the directors of the Bank of England; for these men saw “that if the plan is adopted financial control will leave London and sterling exchange will be replaced by dollar exchange.” / 62

The proposed International Monetary Fund ran into a storm of conservative opposition in the United States, from the opposite pole of the hostility of the British nationalists. The American attack on the IMF was essentially launched by two major groups: conservative Eastern bankers and mid-western isolationists. Among the bankers, the American Bankers’ Association attacked the unsound and inflationary policy of allowing debtor countries to control access to international funds; and W. Randolph Burgess, president of the ABA, denounced the provision for debtor rationing of “scarce currencies” as an “abomination.” The New York Times urged rejection of the IMF, and proposed making loans to Britain in exchange for the abolition of exchange controls and quantitative restrictions on imports. Another banker group came up with a “key currency” proposal as a substitute for Bretton Woods. This key currency plan was proposed by economist John H. Williams, vice president of the Federal Reserve Bank of New York, and endorsed by Leon Fraser, President of the First National Bank of N.Y., and by Winthrop P. Aldrich, head of the Chase National Bank. It envisioned a bilateral pound-dollar stabilization, fueled by a large transitional American loan or even grant to Great Britain. Thus, the key currency people were ready to abandon temporarily not only the classical gold standard but even an international monetary order, and to stay temporarily in a modified version of the world of the 1930s. / 63

The mid-western isolationist critics of the IMF were led by Senator Robert A. Taft (R., Ohio), who charged that, while the bulk of the valuable hard-money placed in the Fund would be American dollars, the dollars would be subject to international control by the Fund authorities, and therefore by the debtor countries. The debtor countries could then still continue exchange controls and sterling bloc practices. Here Taft failed to realize that formal and informal structures in the Bretton Woods design would insure effective United States control of both the IMF and the International Bank. / 64

The Administration countered the critics of Bretton Woods with a massive propaganda campaign, which was able to drive the agreement through Congress by mid-July 1945. It emphasized that the U.S. government would have effective control, at least of its own representatives in the Fund. It played up – in what proved to be gross exaggeration – the favorable aspects of the various ambiguous provisions: insisting that debtor access to the Fund would not be automatic, that exchange controls would be removed, and that exchange rates would be stabilized. It pushed heavily the vague idea that the Fund was crucial to post-war international cooperation to keep the peace. Particularly interesting was the argument of Will Clayton and others that Bretton Woods would facilitate the general commercial policy of eliminating trade discrimination and barriers against American exports. This argument was put particularly baldly by Secretary of the Treasury Morgenthau in a speech to Detroit industrialists. Morgenthau promised that the Bretton Woods agreement would lead to a world trade freed from exchange controls and depreciated currencies, and that this would greatly increase the exports of American automobiles. Since the Fund would begin operations the following year by accepting the existing grossly overvalued currency parities that most of the nations insisted upon, this meant that Morgenthau might have known whereof he spoke. For if other currencies are overvalued and the dollar undervalued, American exports are indeed encouraged and subsidized. / 65

It is perhaps understandable, then, that not only the major farm, labor, and New Deal liberal organization pushed for Bretton Woods, but also that the large majority of industrial and financial interests also approved the agreements and urged its passage in Congress. American approval in mid-1945 was followed, after lengthy soul-searching, by the approval of Great Britain at the end of the year. By the end of its existence, therefore, the second New Deal had established the triumphant dollar as the base of a new international monetary order. / 66 The dollar had displaced the pound, and within a general political framework in which the American Empire had replaced the British. Looking forward perceptively to the postwar world in January 1945, Lamar Fleming, Jr., president of Anderson, Clayton & Co., wrote to his long-time colleague Will Clayton that the “British empire and British international influence is a myth already.” The United States would soon become the British protector against the emerging Russian land mass, prophesied Fleming, and this will mean “the absorption into [the] American empire of the parts of the British Empire which we will be willing to accept.” / 67 As the New Deal came to a close, the triumphant United States stood ready to reap its fruits on a world-wide scale.

IV. Epilogue

The Bretton Woods agreement established the framework for the international monetary system down to the early 1970s. A new and more restricted international dollar-gold exchange standard had replaced the collapsed dollar-pound-gold exchange standard of the 1920s. During the early postwar years, the system worked quite successfully within its own terms, and the American banking community completely abandoned its opposition. / 68 With the European currencies inflated and overvalued, and European economies exhausted, the undervalued dollar was the strongest and “hardest” of world currencies, a world “dollar shortage” prevailed, and the dollar could base itself upon the vast stock of gold in the United States, much of which had fled from war and devastation abroad. But in the early 1950s, the world economic balance began slowly but emphatically to change. For while the United States, influenced by Keynesian economics, proceeded blithely to inflate the dollar, seemingly relieved of the limits imposed by the classical gold standard, several European countries began to move in the opposite direction. Under the revived influence of conservative, free-market and hard-money oriented economists in such countries as West Germany, France, Italy, and Switzerland, these newly recovered countries began to achieve prosperity with far less inflated currencies. Hence these currencies became ever stronger and “harder” while the dollar became softer and increasingly inflated. / 69

The continuing inflation of the dollar began to have two important consequences: (1) that the dollar was also overvalued in relation to gold; and (2) that the dollar was also increasingly overvalued in relation to the West German mark, the French and Swiss francs, the Japanese yen, and other hard-money currencies. The result was a chronic and continuing deficit in the American balance of payments, beginning in the early 1950s and persisting ever since. The consequence of the chronic deficit was a continuing outflow of gold abroad and a heavy piling up of dollar claims in the central banks of the hard money countries. Since 1960 the foreign short term claims to American gold have therefore become increasingly greater than the U.S. gold supply. In short, just as inflation in England and the United States during the 1920s led finally to the breakdown of the international monetary order, so has inflation in the postwar key country, the United States, led to increasing strains and fissures in the triumphant dollar-order of the post World War II world. It has become increasingly evident that an ever-more inflated and overvalued dollar cannot continue as the permanently secure base of the world monetary system, and therefore that this ever more strained and insecure system cannot long continue in anything like its present form.

In fact, the post-war system has already been changed considerably, in an ultimately futile attempt to preserve its basic features. In the spring of 1968, a severe monetary run on the dollar by Europeans redeeming dollar claims led to two major changes. One was the partial abandonment of the fixed $35 per ounce gold price. Instead, a two-price, or “two-tier,” gold price system was established. The dollar and gold were allowed to find their own level in the free gold markets of the world, with the United States no longer standing ready to support the dollar in the gold market at $35 an ounce. On the other hand, $35 still continued as the supposedly eternally fixed price for the world central banks, who were pledged not to sell gold in the world market. Keynesian economists were convinced that with the dollar and gold severed on the world market, the price of gold would then fall in the freely fluctuating market. The reverse, however, has occurred, since the world market continued to have more faith in the soundness and the relative hardness of gold than in the increasingly inflated dollar.

The second change was the creation of Special Drawing Rights, a new form of “paper gold,” of newly created paper which can supplement gold as an international currency reserve behind each currency. While this indeed puts more backing behind the dollar, the quantity of SDR’s has been too limited to make an appreciable difference to a world economy that trusts the dollar less with each passing year.

These two minor repairs, however, failed to change the fundamental overvaluation of the ever more inflated dollar. In the spring of 1971, a new monetary crisis finally led to a massive revaluation of the hard currencies. If the United States stubbornly refused to lose face by raising the price of gold or by otherwise devaluing the dollar down to its genuine value in the world market, then the harder currencies, such as West Germany, Switzerland, and the Netherlands, found themselves reluctantly forced to raise the value of their currencies. Their alternative – a massive calling upon the United Stated to redeem in gold and thereby the smashing of the facade of dollar redemption in gold – was too much of a political break with the U.S. for these nations to contemplate. For the United States, to preserve the facade of gold redemption at $35, had been using intense political pressure on its creditors to retain their dollar balances and not to redeem them in gold. By the late 1960s General de Gaulle, under the influence of classical gold-standard advocate Jacques Rueff, was apparently preparing to make just such a challenge – to break the dollar standard as a move toward restoring the classical gold standard in France and much of the rest of Europe. But the French domestic troubles in the spring of 1968 ended that dream at least temporarily, as France was forced to inflate the franc for a time in order to pay the overall wage increase it had agreed upon under the threat of the general strike.

Despite these hasty repairs, it is becoming increasingly evident that they are makeshift stopgaps, and that a series of more aggravated crises will shake the international monetary order until a fundamental change is made. A hard-money policy in the United States that put an end to inflation and increased the soundness of the dollar might sustain the current system, but this is so politically remote as to be hardly a likely prognosis.

There are several possible monetary systems that might replace the present deteriorating order. The new system desired by the Keynesian economists and by the American government would be a massive extension of “paper gold” to demonetize gold completely and replace it by a new monetary unit (such as the Keynesian “bancor”) and a paper currency issued by a new world Reserve Bank. If this were achieved then the new American-dominated world Reserve Bank would be able to inflate any currencies indefinitely, and allow inflating currencies to pay for any and all deficits ad infinitum. While such a scheme, embodied in the Triffin Plan, the Bernstein Plan, and others, is now the American dream, it has met determined opposition by the hard money countries, and it remains doubtful that the United States will be able to force these countries to go along with the plan.

The other logical alternative is the Rueff Plan, of returning to the classical gold standard after a massive increase in the world price of gold. But this too is unlikely, especially over powerful American opposition. Barring acceptance of a new world currency, the Americans would be content to keep inflating and simply force the hard money countries to keep appreciating their exchange rates, but again it is doubtful that German, French, Swiss and other exporters will be content to keep crippling themselves in order to subsidize dollar inflation. Perhaps the most likely prognosis is the formation of a new hard-money European currency bloc, which might eventually be strong enough to challenge the dollar, politically as well as economically. In that case, the dollar-standard will probably fall apart, and we may see a return to the currency blocs of the 1930s, with the European bloc this time on a harder and quasi-gold basis. It is at least possible that the future will see gold and the hard European currencies at last dethrone the triumphant but increasingly uneasy dollar.


References

1. Henry Parker Willis, The Theory and Practice of Central Banking (New York: Harper & Bros., 1936), p. 379.

2. See Murray N. Rothbard, America’s Great Depression (3rd Ed. Mission, Kan.: Sheed and Ward, 1975), pp. 159ff.

3. Emile Moreau diary, entry of February 6, 1928. Lester V. Chandler, Benjamin Strong: Central Banker (Washington, D.C.: The Brookings Institution, 1958) pp. 379-80. On the gold exchange standard, and European countries being induced to overvalue their currencies, see H. Parker Willis, “The Breakdown of the Gold Exchange Standard and its Financial Imperialism,” The Annalist (October 16, 1931), pp. 628 ff.; and William Adams Brown, Jr., The International Gold Standard Reinterpreted, 1914-1934 (New York: National Bureau of Economic Research, 1940), II, pp. 732-749.

4. On the coup de whiskey, see Charles Rist, “Notice Biographique,” Revue d'Economie Politique (November-December, 1955), p. 1005. (Translation mine.) On the Strong-Norman collaboration, also see Lawrence E. Clark, Central Banking Under the Federal Reserve System (New York: Macmillan, 1935), pp. 307-321; and Benjamin M. Anderson, Economics and the Public Welfare: Financial and Economic History of the United States, 1914-1946 (New York: D. Van Nostrand, 1949).

5. The Banker, June 1, 1926, and November 1928. In L. E. Clark, Central Banking Under the Federal Reserve System (1935), pp. 315-16. Also see B. M. Anderson, Economics and the Public Welfare (1949), op. cit., pp. 182-83; Benjamin H. Beckhart, “Federal Reserve Policy and the Money Market, 1923-1931,” in Beckhart, et al., The New York Money Market (New York: Columbia University Press, 1931), IV, pp. 67ff. In the autumn of 1926, a leading American banker admitted that bad consequences would follow Strong’s cheap money policy, but added: “that cannot be helped. It is the price we must pay for helping Europe.” H. Parker Willis, “The failure of the Federal Reserve,” North American Review (1929), p. 553.

6. See Murray N. Rothbard, America’s Great Depression (1975), p. 138; and L. V. Chandler, Benjamin Strong: Central Banker (1958), pp. 356ff.

7. Charles Callan Tansill, America Goes to War (Boston: Little, Brown and Co., 1938), pp. 70-134. On the aid given by Benjamin Strong to the House of Morgan and the loans to England and France, see C. C. Tansill, ibid., pp. 87-88, 96-101, 106-08, 118-32.

8. L. E. Clark, Central Banking Under the Federal Reserve System, p. 343.

9. For examples of businessmen and bankers in favor of cheap money and inflation in American history, and particularly on the inflationary role of Paul M. Warburg of Kuhn, Loeb and Co. during the 1920s, see Murray N. Rothbard, “Money, the State, and Modern Mercantilism,” in H. Schoeck and J. W. Wiggins, eds., Central Planning and Neo-Mercantilism (Princeton, N.J.: D. Van Nostrand, 1964), pp. 146-54.

10. Irving Fisher, Stabilised Money (London: George Allen & Unwin, 1935), pp. 104-13, 375-89, 411-12.

11. Fisher was also a partner of James H. Rand, Jr., in a card-index manufacturing firm. I. Fisher, Stabilised Money (1935), pp. 387-88; Irving Norton Fisher, My Father Irving Fisher (New York: Comet Press, 1956), pp. 220ff.

12. See B. M. Anderson, Economics and the Public Welfare (1949), pp. 232ff.

13. See Lionel Robbins, The Great Depression (New York: Macmillan 1934), pp. 89-99. See also B. M. Anderson, Economics and the Public Welfare (1949), pp. 244ff.; and Frederic Benham, British Monetary Policy (London: P.S. King & Son, 1932), pp. 1-45.

14. L. Robbins, The Great Depression (1934), pp. 100-121.

15. See M. N. Rothbard, America’s Great Depression, pp. 284-99; H. Parker Willis, “A Crisis in American Banking,” in H.P. Willis and J. M. Chapman, eds., The Banking Situation (New York: Columbia University Press, 1934) pp. 3-120.

16. I. Fisher, Stabilised Money (1935), pp. 108-09, 118-22, 413-14; Jordan Schwarz, ed., 1933: Roosevelt’s Decision: The United States Leaves the Gold Standard (New York: Chelsea House, 1969), pp. 44-60, 116-120.

17. J. Schwarz, 1933: Roosevelt’s Decision (1969), p. 27-35.

18. I. N. Fisher, My Father Irving Fisher (1956), pp. 273-76.

19. Herbert Feis, “1933: Characters in Crisis,” in J. Schwarz, 1933: Roosevelt’s Decision (1969), pp. 150-51. Feis was a leading economist for the State Department.

20. Arthur M. Schlesinger, Jr., The Coming of the New Deal (Boston: Houghton Mifflin, 1959), p. 202.

21. The New York Times, April 19, 1933. Quoted in Joseph E. Reeve, Monetary Reform Movements (Washington, D.C.: American Council on Public Affairs, 1943), p. 275.

22. J. Schwarz, 1933: Roosevelt’s Decision (1969), p. xx.

23. I. Fisher, Stabilised Money (1935), pp. 355-56.

24. On Douglas, see J. Schwarz, 1933: Roosevelt’s Decision (1969), pp. 135-36, 143-44, 154-58; and A. M. Schlesinger, Jr., The Coming of the New Deal (1959), pp. 196-97 and passim. Douglas resigned as Budget Director in 1934; his critical assessment of the New Deal can be found in his The Liberal Tradition (New York: D. Van Nostrand, 1935).

25. L. Robbins, The Great Depression (1934), p. 123; J. Schwarz, 1933: Roosevelt’s Decision (1969), p. 144.

26. Leo Pasvolsky, Current Monetary Issues (Washington D.C.: The Brookings Institution, 1933), p. 14.

27. L. Pasvolsky, Current Monetary Issues (1933), p. 59.

28. Robert H. Ferrell, American Diplomacy in the Great Depression (New York: W.W. Norton, 1957), pp. 263-64.

29. L. Pasvolsky, Current Monetary Issues (1933), p. 70. Also see A. M. Schlesinger, Jr., The Coming of the New Deal (1959), pp. 213-16; R. H. Ferrell, American Diplomacy in the Great Depression (1957), p. 266.

30. L. Pasvolsky, Current Monetary Issues, pp 71-72.

31. L. Pasvolsky, pp. 72-74.

32. L. Pasvolsky, pp. 74-76, 158-60, 163-66.

33. A. M. Schlesinger, Jr., The Coming of the New Deal, pp. 213-16; L. Pasvolsky, pp. 80-82.

34. The full text of the Roosevelt message can be found in L. Pasvolsky, pp. 83-84, or R. H. Ferrell, American Diplomacy in the Great Depression (1957), pp. 270-72.

35. A. M. Schlesinger, Jr., p. 224. For Baruch’s private views, see Margaret Colt, Mr. Baruch (Boston: Houghton Mifflin, 1957), pp. 432-34.

36. A. M. Schlesinger, Jr., p. 224; R. H. Ferrell, pp. 273 ff.

37. On the Tripartite Agreement, see Raymond F. Mikesell, United States Economic Policy and International Relations (New York: McGraw-Hill, 1952), pp. 55-59; W.H. Steiner and E. Shapiro, Money and Banking (New York: Henry Holt, 1941), pp. 85-87, 92-93; and B. H. Anderson (1949), pp. 414-20.

38. Lloyd C. Gardner, Economic Aspects of New Deal Diplomacy (Madison, Wisc.: University of Wisconsin Press, 1964), p. 107.

39. For revisionist emphasis on this economic basis for the American drive toward war with Germany, see Lloyd C. Gardner, Economic Aspects of New Deal Diplomacy, op.cit., pp. 98-108; Lloyd C. Gardner, “The New Deal, New Frontiers, and the Cold War: A Re-examination of American Expansion, 1933-1945,” in David Horowitz, ed., Corporations and the Cold War (New York: Monthly Review Press, 1969), pp. 105-41; William Appleman Williams, The Tragedy of American Diplomacy (Cleveland: World Pub. Co., 1959), pp. 127-47; Robert Freeman Smith, “American Foreign Relations, 1920-1942,” in Barton J. Bernstein, ed., Towards a New Past (New York: Pantheon Books, 1968), pp. 245-62; Charles Callan Tansill, Back Door to War (Chicago: Henry Regnery, 1952), pp. 441-42.

40. Thus, see Douglas Miller, You Can't Do Business With Hitler (Boston, 1941), esp. pp. 73-77; and Michael A. Heilperin, The Trade of Nations (New York: Alfred Knopf, 1947), pp. 114-17. Miller was commercial attaché at the U.S. Embassy in Berlin throughout the 1930s.

41. For an explanation of the workings of the German barter agreements, see Ludwig von Mises, Human Action (New Haven: Yale University Press, 1949), pp. 796-99. Also on the agreements, see Hjalmar Schacht, Confessions of ‘The Old Wizard’ (Boston: Houghton Mifflin, 1956), pp. 302-05.

42. Lloyd C. Gardner, Economic Aspects of New Deal Diplomacy (1964), p. 98.

43. R. F. Smith, “American Foreign Relations, 1920-1942,” in B. J. Bernstein, ed., Towards a New Past (1968), pp. 247; L. C. Gardner, Economic Aspects of New Deal Diplomacy (1964), p. 99.

44. L. C. Gardner, “The New Deal, New Frontiers, and the Cold War,” in D. Horowitz, ed., Corporations and the Cold War (1969), p. 118.

45. C. C. Tansill, Back Door to War (1952), p. 441.

46. R. F. Smith, “American Foreign Relations, 1920-1942,” in B. J. Bernstein, ed., Towards a New Past (1968), op. cit., p. 247.

47. L. C. Gardner, Economic Aspects of New Deal Diplomacy, pp. 59-60.

48. L. C. Gardner, Economic Aspects of New Deal Diplomacy, ibid., pp. 103. It might be noted that in the spring of 1936, Secretary Hull refused to settle for a bilateral deal to sell Germany a large store of American cotton; Hull denounced the idea as “blackmail.” The predictable result was that in the next couple of years the sources of raw cotton imported into Germany shifted sharply from the United States to Brazil and Egypt, which had been willing to make barter sales of cotton. Ibid., p. 104; Arthur Schweitzer, Big Business in the Third Reich (Bloomington, Ind.: Indiana University Press, 1964), p. 316.

49. Francis Neilson, The Tragedy of Europe (Appleton, Wisc.: C. C. Nelson Publishing Co., 1946), vol. 5, p. 289. For a brief but illuminating study of German-American trade and currency hostility in the 1930s leading to World War II, see Thomas H. Etzold, Why America Fought Germany in World War II (St. Louis: Forums in History, Forum Press, 1973).

50. Cordell Hull, Memoirs (New York, 1948), vol. 1, p. 81.

51. Richard N. Gardner, Sterling-Dollar Diplomacy (Oxford: Clarendon Press, 1956), p. 141.

52. The Times (London), October 11, 1940. Quoted in F. Neilson, The Tragedy of Europe (1946), vol. 5, p. 286.

53. R. Gardner, Sterling-Dollar Diplomacy (1956), p. 76.

54. R. F. Smith, “American Foreign Relations, 1920-1942,” in B. J. Bernstein, ed., Towards a New Past (1968), p. 252; Gabriel Kolko, The Politics of War: The World and United States Foreign Policy, 1943-1945 (New York: Random House, 1968), pp. 243-44.

55. G. Kolko, The Politics of War (1968), pp. 264, 485ff.; Lloyd C. Gardner, Architects of Illusion: Men and Ideas in American Foreign Policy, 1941-1949 (Chicago: Quadrangle Books, 1970), pp. 113-38.

56. L. Gardner, “New Deal, New Frontiers” (1969), p. 120.

57. R. Gardner, Sterling-Dollar Diplomacy, pp. 42ff.; L. Gardner, Economic Aspects of New Deal Diplomacy (1964), pp. 275-80.

58. R. F. Smith, “American Foreign Relations, 1920-1942” (1968), p. 252; G. Kolko, The Politics of War (1968), pp. 248-49.

59. G. Kolko, The Politics of War (1968), pp. 249-51.

60. R. Gardner, Sterling-Dollar Diplomacy, pp. 71ff., 95-99.

61. We do not deal here with the other institution established at Bretton Woods, the International Bank for Reconstruction and Development, which, in contrast to the International Monetary Fund, comes under commercial and financial, rather than monetary policy.

62. Winant to Hull, April 12, 1944. In R. Gardner, Sterling-Dollar Diplomacy, p. 123. Also see ibid., pp. 110-121.

63. An elaboration of the banker-oriented criticisms of the Fund may be found in B. H. Anderson (1949), pp. 578-89.

64. Henry W. Berger, “Senator Robert A. Taft Dissents from Military Escalation,” in Thomas G. Paterson, ed., Cold War Critics: Alternatives to American Foreign Policy in the Truman Years (Chicago: Quadrangle Books, 1971), pp. 174-75, 198. Taft also strongly opposed the government’s guaranteeing of private foreign investments, such as were involved in the International Bank program. Ibid. Also see G. Kolko, The Politics of War (1968), pp. 256-57; L. Gardner, Economic Aspects of New Deal Diplomacy (1964), p. 287; and R. F. Mikesell, United States Economic Policy and International Relations (1952), pp. 199 f.

65. R. Gardner, Sterling-Dollar Diplomacy, pp. 136-37; R. F. Mikesell, United States Economic Policy and International Relations (1952), pp. 134 ff.

66. On the American debate over Bretton Woods, see R. Gardner, Sterling-Dollar Diplomacy, pp. 129-43; on Bretton Woods, also see R. F. Mikesell (1952), op. cit., pp. 129-35, 138ff., 142ff., 149-42, 155-58, 163-70.

67. G. Kolko, The Politics of War (1968), p. 294.

68. The removal of such classical pro-gold standard economists as Henry Hazlitt from his post as editorial writer for the New York Times, and of Dr. B. M. Anderson from the Chase National Bank, coincided with the accommodation of the financial community to the new system.

69. We might mention the influence of such economists as Ludwig Erhard, Alfred Muller-Armack, and Wilhelm Röpke in Germany, President Luigi Einaudi in Italy, and Jacques Rueff in France, who had played a similar hard-money role in the 1920s and early 1930s.

About the Author

Murray N. Rothbard (1926–1995) was an American economist, historian and political theorist. For 22 years he taught economics at the New York Polytechnic Institute in Brooklyn, and from 1986 until his death he was a professor of economics at the University of Nevada, Las Vegas. His remarkable output – covering economic theory, politics, political theory, philosophy, sociology and history – included more than 20 books and thousands of articles, essays, speeches and reviews, both popular and scholarly, that appeared in a wide range of journals, newsletters and newspapers. Widely regarded as a leading “libertarian” intellectual of his age, he was a fierce critic of the modern “welfare-warfare” state.

This article was first published in Watershed of Empire: Essays on New Deal Foreign Policy, pages 19-64, a book edited by Leonard P. Liggio and James J. Martin. It was issued in 1976 by Ralph Myles, Publisher (Colorado Springs).

Posted by the Institute for Historical Review, April 2021.

 

[Apollonian]

Collusion: Franklin Roosevelt, British Intelligence, and the Secret Campaign to Push the US Into War

By Mark Weber
February 2020

Link: http://ihr.org/other/RooseveltBritishCollusion

We’ve heard a lot recently about alleged secret and illegal collaboration by prominent Americans with foreign governments. Collusion is widely regarded as so malign and disgraceful that any official who cooperates with a foreign power in an underhanded way is considered unfit to hold public office. In particular, politicians and media commentators have been charging that devious cooperation by Donald Trump with the government of Ukraine or Russia renders him unfit to be President.

However valid such accusations may be, secretive and unlawful collusion by an American leader with a foreign power that subverts the US political process is not new. The most far-reaching and flagrant case was by President Franklin Roosevelt in 1940-41.

The stage for this had been set some months earlier. In September 1939, Germany and then Soviet Russia attacked Poland. Two days after the German assault, Britain and France declared war against Germany.

Following the defeat of Poland after barely five weeks of fighting, the German leader appealed to Britain and France for peace. Hitler’s plea was rejected. After British and French leaders made clear their determination to continue the war, Germany struck in the West in May 1940. Military and political leaders in Britain and France were confident that their forces would prevail. After all, those two countries had more soldiers, more artillery, more tanks and armored vehicles, and vastly more impressive and numerous naval vessels, than did the Germans. Nonetheless, in just six weeks German forces subdued France and forced the British to flee to their island nation. / 1

Hitler then launched yet another peace initiative. In a dramatic July 19, 1940, appeal for an end to the conflict, he stressed that his proposal did not in any way harm vital British interests or violate British honor. This offer was also rejected, and Prime Minister Winston Churchill vowed to continue the war. / 2

Privately, though, he and all other high-level British officials knew that their country’s resources were hopelessly inferior to those of Germany and her allies, and that Britain’s only hope for “victory” required somehow bringing the United States into the war. In a one-on-one conversation during this period Randolph Churchill pointedly asked his father just how Britain could possibly beat Germany. “With great intensity,” he later recalled, Winston Churchill replied: “I shall drag the United States in.” / 3

From mid-1940 onwards, bringing the US into war was a priority British government objective. The great problem, though, was that the great majority of Americans wanted to keep their country neutral, and avoid any direct involvement in the European conflict. Millions remembered with bitterness the deceit by which the US had entered the world war of 1914-1918, and the betrayal of the solemn, noble-sounding pledges made during those years by US President Wilson and the leaders of Britain and France.

Roosevelt secretly supported Churchill’s efforts. Even before the outbreak of war in September 1939, the President was already working, behind the scenes, to encourage Britain to make war against Germany, with the goal of “regime change” there. / 4 America’s most influential newspapers, magazines and radio commentators shared Roosevelt’s hostile attitude toward Hitler’s Germany, and they supported his campaign for war by putting out stories designed to persuade the public that Germany was a grave danger. Even prior to the outbreak of war in Europe, for example, the country’s most influential illustrated weekly, Life magazine, published a major article headlined “America Gets Ready to Fight Germany, Italy, Japan.” Readers were told that Germany and Italy “covet … the rich resources of South America,” and warned that “fascist fleets and legions may swarm across the Atlantic.” / 5

In the months before December 1941, when the US formally entered the war in the wake of the Japanese attack on Pearl Harbor, President Roosevelt did everything he could to get America into the global conflict without actually declaring war. He proceeded with caution and cunning, because his measures were often contrary to US law, and without Congressional or Constitutional mandate. Roosevelt also acted with ever more brazen disregard for international law and America’s legal standing as a neutral country. As part of his campaign, he sought to convince the public that Hitler’s Germany threatened the US.

“The Nazi masters of Germany,” he announced in a December 1940 radio address, “have made clear that they intend not only to dominate all life and thought in their own country, but also to enslave the whole of Europe, and then to use the resources of Europe to dominate the rest of the world ...” In August 1941, the President met with British premier Churchill to pledge US support for war against Germany. They issued a joint declaration, the “Atlantic Charter,” that laid out the ambitious and noble-sounding war aims of the two countries. / 6

Roosevelt and Churchill at their historic “Atlantic Charter” meeting off the coast of Newfoundland, August 1941

In a nationally-broadcast address two weeks later, Roosevelt told Americans that “... our fundamental rights – including the rights of labor – are threatened by Hitler’s violent attempt to rule the world,” and pledged that “we shall do everything in our power to crush Hitler and his Nazi forces.” / 7 In another radio address on September 11 the President announced a “shoot-on-sight” order to US naval warships to attack German and Italian vessels on the high seas.

In spite of these and other hostile measures, German leaders fervently sought to avoid conflict with the US. Hitler ordered German submarines to avoid any clash with American forces, and to use their weapons only in self-defense and as a final resort. So belligerent were US actions against Germany and her allies, and so blatant was US disregard for the country’s officially neutral status, that Admiral Harold Stark, US Chief of Naval Operations, warned the Secretary of State that Hitler “has every excuse in the world to declare war on us now, if he were of a mind to.” / 8

As part of Churchill’s effort to bring the US into the war, in 1940 his government established an agency that came to be known as the British Security Coordination (BSC), which managed operations in North and South America of Britain’s key intelligence bureaus, including MI5, MI6, the Special Operations Executive, and the Political Warfare Executive.

BSC operations were headed by William Stephenson. Born in Canada, he had distinguished himself as a flier with British forces during the First World War, and afterwards became a highly successful businessman in England. From its central offices on two floors of the Rockefeller Center building on Fifth Avenue in New York City, the BSC at its height supervised the work of more than two thousand full- and part-time employees, agents and operatives. These included linguists, cipher and crytology experts, intelligence agents, propaganda specialists, people skilled in business and finance, and operatives in a range of other fields. Nearly a thousand were active in New York, while more than that number worked in Washington, DC, Los Angeles, San Francisco and Seattle, as well as in Canada, Mexico City, Havana, and other centers in Latin America. “The scale and audacity” of British intelligence activivities in the US between June 1940 and December 1941, concludes one historian, “were without parallel in the history of relations between allied democracies.” / 9

William Stephenson

At the end of World War II, Stephenson arranged for an official history of the British Security Coordination to be written, based on its voluminous files and records. Just twenty copies of this secret and very restricted work were produced, and then the entire archive of BSC documents and papers was gathered together and burned. / 10

In the years that followed, some information about BSC operations came to public attention in a few widely-read books. But it was not until 1999 – more than half a century after the end of World War II – that the full text was finally published. This important primary source, titled British Security Coordination: The Secret History of British Intelligence in the Americas, 1940-1945, throws light on the carefully hidden record of collusion between the Roosevelt White House and a foreign government.

Not long after William Stephenson arrived in the US to begin work, Prime Minister Churchill informed President Roosevelt of Stephenson’s assignment. After a briefing on the BSC’s planned operations, Roosevelt said: “There should be the closest possible marriage between the FBI and British intelligence.” The president also communicated his views on this to the British ambassador in Washington. / 11 Roosevelt arranged for Stephenson’s agency to work closely with William Donovan, a highly trusted colleague of the President who went on to establish and head the wartime Office of Strategic Services, which after the war became the CIA, the Central Intelligence Agency.

William Donovan

As the official BSC history acknowledges, BSC operations “could not have come into being at all without American approval on the highest level.” The official history goes on: “The climax of that offensive was reached some six months before Pearl Harbor when BSC secured, through the establishment of the organization which eventually came to be known as the Office of Strategic Services, an assurance of full American participation and collaboration with the British in secret activities directed against the enemy throughout the world.” / 12

Moreover, “Inasmuch as the cause of American intervention was symbolized in the foresight and determination of the President himself, the ultimate purpose of all BSC’s Political Warfare was to assist Mr Roosevelt’s own campaign for preparedness. This was not merely an abstract conception, for WS [William Stephenson] kept in close touch with the White House and as time went on the president gave clear indication of his personal concern both to encourage and take advantage of BSC’s activities.” / 13

This cooperation with British intelligence by the President and other high-ranking US officials, as well as with the FBI, the US federal government’s main domestic security and police agency, was quite illegal. Such collusion by the nominally neutral US to further the war aims of a foreign government was contrary to both US law and universally accepted international norms. Accordingly, the White House kept this collaboration secret even from the State Department.

Incidentally, the official BSC history acknowledges the role of Donovan in a little known but important chapter of World War II history. On March 25, 1941, Yugoslavia joined the Axis alliance with Germany, Italy and other European countries. Two days later, a group of Serbian officers led by General Dusan Simovic, carried out a putsch in Belgrade, the Yugoslav capital, that violently overthrew the country’s legal government. Ten days later the new regime signed a treaty of friendship with the Soviet Union.

How did this sudden “regime change” come about? Several months earlier, during a visit to Belgrade in January 1941, William Donovan was in the Yugoslav capital as an agent of President Roosevelt and of the British government. During a crucial meeting and conversation with General Simovic, he set the stage for the “regime change” overthrow of the country’s government. The official BSC history puts it this way: “In Yugoslavia, Donovan paved the way for the coup d’état which resulted at the eleventh hour in Yugoslav resistance to, instead of acquiescence in, German aggression. He interviewed General Simovic, who asked him whether Britain could hold out against the Nazis and whether the United States would enter the war ... He answered both questions in the affirmative; and at his persuasion Simovic agreed to organize the revolution which a few months later overthrew the pro-German government of Prince Paul.” / 14

William Stephenson is honored for his wartime service with the US “Medal of Merit,” presented by William Donovan at a ceremony in 1946

A major task of the BSC – as the official history reports – was “to organize American public opinion in favour of aid to Britain.” As part of what the BSC called “political warfare designed to influence American public opinion,” BSC agents were “placing special material in the American press.” Stephenson’s operatives were very active in prodding, cajoling and steering the US media to foment fear and hatred of Germany, and to encourage public support for Roosevelt’s ever more overt campaign of military backing for Britain, and later for Soviet Russia.

“Of particular value,” the BSC history notes, was the cooperation of the publisher of the New York Post, the editor of the New York daily PM, the publisher of the New York Herald Tribune, the publisher of the Baltimore Sun, and the president of the New York Times, as well as the country’s most influential columnists, including Walter Lippman, Drew Pearson, and Walter Winchell. Pearson’s column alone appeared in 616 newspapers with a combined readership of more than twenty million. In working “to bring the United Sates into the `shooting’ war by attacking isolationism and fostering interventionism,” the BSC “was able to initiate internal propaganda through its undercover contacts with selected newspapers, such as the New York Times, the New York Herald Tribune, the New York Post, and the Baltimore Sun; with newspaper columnists and radio commentators; and with various political pressure organizations.”

The BSC worked closely with a specially created news service. Set up in July 1940, the “Overseas News Agency” was a supposedly legitimate and trustworthy enterprise. Actually, and as the BSC history notes, this was “a branch of the Jewish Telegraph[ic] Agency, owned in part by the rich New York Jew who controlled the liberal and vehemently anti-Nazi New York Post.”

As the official history goes on to explain: “After a series of secret negotiations, BSC agreed to give ONA [Overseas News Agency] a monthly subsidy in return for promise of cooperation in certain specific ways ... It’s value ... lay in its ability not only to channel propaganda outwards but to assure wide dissemination of material originated by BSC and intended for internal consumption. In April 1941, the ONA clients within the United States already numbered more than forty-five English language papers, which included such giants as the New York Times ... It afforded a useful instrument for rapid dissemination abroad of subversive propaganda originated by BSC in the United States.” / 15

The Jewish-run ONA agency soon became an important distributor of “fake news” as part of the widening campaign to smear and discredit National Socialist Germany, and to promote public support for US involvement in war against Germany and her allies. As one historian put it: “From the start, attacking Nazi Germany was a higher priority for ONA than hewing to the truth.” ONA articles influenced many millions of Americans, appearing in such major daily papers as the New York Times, the New York Herald Tribune, the San Francisco Chronicle, the Philadelphia Inquirer, and The Washington Post. / 16

Here are a few examples:

In August 1940 an ONA report cited anonymous “qualified Czech sources” to inform Americans that “Czechoslovak girls and young women have been transported from the [Czech] Protectorate to German garrison towns to become white slaves.” It went on to tell readers that “Nazi officials, dispatching these trainloads of prospective white slaves to the Reich, informed husbands and relatives that the women `will be entrusted with the important work of amusing German soldiers, in order to keep up the morale of the troops’.” / 17

In February 1941 American newspapers carried a sensational ONA report claiming that the US was threatened by “fascist bands” in the Caribbean country of Haiti, which had become a dangerous center of Nazi activity. Germans were supposedly preparing that county as a base for attacks on Florida, the Panama Canal, and Puerto Rico. / 18 In June 1941 an ONA report appearing in newspapers across the US told of a daring British parachute raid within Germany that had succeeded in capturing 40 German pilots. This and similar stories were meant to encourage Americans to believe that the British had the skill and resolve to defeat Germany and her allies. But the raid never happened. This “fake news” story was conceived in London by the MI6 agency, and was written by a British agent. / 19

In August 1941, an ONA item in the New York Post told readers that “Hitler is not at the Russian front, but at Berchtesgaden suffering from a severe nervous breakdown.” The article went on to assert that the German leader’s personal physician had recently traveled to Switzerland to consult with the famed psychiatrist Carl Jung to discuss “the rapid deterioration of Hitler’s mental condition,” which was supposedly characterized by delusional rages. / 20 That same month, The New York Times published a report of the Overseas News Agency telling readers that in the Middle East the recent death of a 130-year-old Bedouin soothsayer was widely regarded as “a sign of a coming defeat for Hitler.” / 21

Stephenson’s BSC also rigged public opinion polls to give the impression that Americans were more willing to join Britain and the Soviet Union in war against Germany than was actually the case. Polls that showed American unhappiness with British policies, such as Britain’s imperial rule in India, were suppressed. As a result, one historian cautions, many surveys of American public opinion during this period “should be seen for what they were: at worst they were flatly rigged, at best they were tweaked and massaged and cooked – advocacy polls without the advocate being visible.” / 22

An important British propaganda outlet during this period was radio station WRUL, an American short-wave broadcaster based in Long Island, New York. With 50,000 watts of power, its reach was unsurpassed by any other station either in the US or Europe. “By the middle of 1941,” the official BSC history reports, “station WRUL was virtually, though quite unconsciously, a subsidiary of BSC, sending out covert British propaganda all over the world ... Daily broadcasts went out in no less than twenty-two different languages ...” / 23

In its efforts to influence the American public, the British had formidable competition. News, photos and contextual information provided by German agencies was more timely and detailed, and consequently better appreciated and more effective, than what Britain provided. The German “news agencies, Transocean and DNB, were always first with the headlines,” the BSC history acknowledged. / 24

In two confidential telegrams sent to London in April 1941, Stephenson wrote frankly about the unsatisfactory situation: “Close examination of US press during past fortnight indicates almost complete failure [to] prevent Axis monopoly of war news coverage ... most journals ... carry predominance of Axis news ... [and] photographs ... few if any British photographs appear ... Axis news reports reach here more quickly than ours ... rapidly followed by copious flow of descriptive material, photographs and films ... Transocean and DNB keep up flow and build up stories even in quiet periods ... invariably beat our news to headlines ... US newsmen here say Germans show far better sense of news and timing ... infinitely better understanding US psychology.” / 25

As the BSC official history goes on to explain, “these warnings went unheeded, and accordingly WS [William Stephenson] decided to take action on his own initiative” by waging a “covert war against the mass of American groups which were organized throughout the country to spread isolationism and anti-British feeling.” This included coordination with vehemently anti-German organizations that were pushing for US involvement in war against Germany. BSC was especially keen to counter the formidable influence and effectiveness of the America First Committee. As the official history notes, “because America First was a particularly serious menace, BSC decided to take more direct action.” It took measures to “disrupt” America First rallies, and to “discredit” America First speakers. “Such activities by BSC agents and cooperating pro-British committees were frequent, and on many occasions America First was harassed and heckled and embarrassed.”

Gerald Nye

British intelligence agents also worked to elect candidates who favored US intervention in the European war, to defeat candidates who advocated neutrality, and to silence or destroy the reputations of Americans who were deemed to be a menace to British interests. An important target of BSC operations was US Senator Gerald Nye, an influential critic of the President’s campaign for war. Once, when he was getting ready to address a meeting in Boston, a BSC-backed group called “Fight for Freedom” “passed out 25,000 handbills attacking him as an appeaser and as a Nazi-lover.” / 26

Another political figure whom BSC operatives sought to discredit was US Representative Hamilton Fish, a vigorous critic of Roosevelt’s war policy. Fish was particularly effective because he was intelligent, well educated, and exceptionally knowledgeable about international relations, with extensive first-hand understanding of European affairs. British agents funded Fish’s election opponents, published pamphlets suggesting he was pro-Hitler, released a faked photo of Fish with the head of the pro-Nazi German American Bund, and planted stories saying that he was getting financial aid from German agents. Such underhanded activities was important in finally removing him from Congress in the November 1944 elections. The BSC history notes that while Fish “attributed his defeat to Reds and Communists. He might – with more accuracy – have blamed BSC.” / 27

Hamilton Fish

Fortune tellers were also used by British intelligence to sway public opinion. Such propaganda, the official BSC history notes, is effective only with people who are not very discerning or sophisticated. The BSC begins its description of these operations with condescending remarks about American gullibility:

“A country that is extremely heterogeneous in character offers a wide variety of choice propaganda methods. While it is probably true that all Americans are intensely suspicious of propaganda, it is certain that a great many of them are unusually susceptible to it even in its most patent form ... The United States is still a fertile field for outré practices. It is unlikely that any propagandist would seriously attempt to influence politically the people of England, say, or France through the medium of astrological predictions. Yet in the United States this was done with effective if limited results.” / 28

In the summer of 1941 the BSC employed Louis de Wohl, who is described in the BSC history as a “bogus Hungarian astrologer.” He was directed to issue predictions to show that Hitler’s “fall was now certain.” At public meetings, in radio appearances, in interviews, and in widely distributed press items, he “declared that Hitler’s doom was sealed.” De Wohl, who was presented as an “astro-philosopher,” also sought to discredit Charles Lindbergh, the much admired American aviator who was also a prominent spokesman for the America First Committee and an effective critic of Roosevelt’s war policies. De Wohl claimed that Lindbergh’s first son, who had been kidnapped and killed in 1932, was actually still alive and living in Germany, where he was being trained as a future Nazi leader. “There is little doubt,” the BSC history concludes, that the work of de Wohl “had a considerable effect upon certain sections of the [American] people.” / 29

British agents also publicized the equally absurd predictions of an Egyptian astrologer who claimed that within four months Hitler would be killed, as well as similarly fantastic predictions of a Nigerian priest named Ulokoigbe. As Stephenson and his BSC colleagues intended, American newspapers eagerly picked up and spread such nonsense to millions of readers. / 30

The BSC also set up a center that fabricated letters and other documents, as well as an organization that excelled in spreading expedient rumors. British agents illegally interecpted and copied US mail. They carried out wiretapping to get embarrassing information on those it wished to discredit, and leaked the results of its illegal surveillance. One important target was the French embassy in Washington, DC, which was wiretapped and burgled by Stephenson’s agents. / 31

Ernest Cuneo

An important figure in all this was Ernest Cuneo, a publicist, lawyer, and intelligence operative who played a key role as liaison between Stephenson’s BSC, the White House, Donovan’s agency, the FBI, and the media. He later described the scope of British operations in a memo. The BSC, he wrote, “ran espionage agents, tampered with the mails, tapped telephones, smuggled propaganda into the country, disrupted public gatherings, covertly subsidized newspapers, radios, and organizations, perpetrated forgeries – even palming one off on the president of the United States (a map that out-lined Nazi plans to dominate Latin America) – violated the aliens registrations act, shanghaied sailors numerous times, and possibly murdered one or more persons in this country.” / 32

A high point of British-White House collusion, and of the BSC campaign to influence American public opinion, came on October 27, 1941. While Franklin Roosevelt was not the first or the last American president to deliberately mislead the public, rarely has a major political figure given a speech as loaded with brazen falsehood as he did in his address on that date. His remarks, delivered to a large gathering at the Mayflower Hotel in Washington, DC, were broadcast live over nationwide radio. / 33

In a nationally broadcast address of Oct. 27, 1941, President Roosevelt claimed to have documents proving German plans to take over South America and abolish all the world’s religions.

----------------------------------------------[END OF PART ONE; SEE PART 2, BELOW]-----------------------------------------------

 

[Apollonian]

------------------------------------------[HERE'S PART 2 TO ABOVE]---------------------------------------------------------

After giving a highly distorted review of recent US-German relations, Roosevelt made a startling announcement. He said: “Hitler has often protested that his plans for conquest do not extend across the Atlantic Ocean ... I have in my possession a secret map, made in Germany by Hitler’s government – by the planners of the new world order. It is a map of South America and a part of Central America as Hitler proposes to reorganize it.” This map, the President explained, showed South America, as well as “our great life line, the Panama Canal,” divided into five vassal states under German domination. He said: “That map, my friends, makes clear the Nazi design not only against South America but against the United States as well.”

Roosevelt went on to announce another startling revelation. He told his listeners that he also had in his possession “another document made in Germany by Hitler’s government. It is a detailed plan to abolish all existing religions – Catholic, Protestant, Mohammedan, Hindu, Buddhist, and Jewish alike” which Germany will impose “on a dominated world, if Hitler wins.”

“The property of all churches will be seized by the Reich and its puppets,” he continued. “The cross and all other symbols of religion are to be forbidden. The clergy are to be forever silenced under penalty of the concentration camps ... In the place of the churches of our civilization, there is to be set up an international Nazi church – a church which will be served by orators sent out by the Nazi government. In the place of the Bible, the words of Mein Kampf will be imposed and enforced as Holy Writ. And in place of the cross of Christ will be put two symbols – the swastika and the naked sword.”

“Let us well ponder,” he said, “these grim truths which I have told you of the present and future plans of Hitlerism.” All Americans, he went on, “are faced with the choice between the kind of world we want to live in and the kind of world which Hitler and his hordes would impose on us.” Accordingly, he said, “we are pledged to pull our own oar in the destruction of Hitlerism.”

The full story about these documents did not emerge until many years later. The map cited by the President did exist, but it was a forgery produced by British intelligence. Stephenson had passed it on to Donovan, who had it delivered to the President. The other “document” cited by Roosevelt, purporting to outline German plans to abolish the world’s religions, was even more fanciful than the “secret map.”

The “secret map” cited by President Roosevelt as proof of German plans to take over South America was produced by British intelligence and passed on to the White House by William Donovan.

It’s not clear if Roosevelt himself knew that the map was a fake, or whether he was taken in by the British fraud and actually believed it to be authentic. In this case we don’t know if the President was deliberately lying to the American people, or was merely a credulous dupe and tool of a foreign government.

The German government responded to the President’s speech with a statement that categorically rejected his accusations. The purported secret documents, it declared, “are forgeries of the crudest and most brazen kind.” Furthermore, the statement went on: “The allegations of a conquest of South America by Germany and an elimination of the religions of the churches in the world and their replacement by a National Socialist church are so nonsensical and absurd that it is superfluous for the Reich government to discuss them.” / 34 German propaganda minister Joseph Goebbels also responded to Roosevelt’s claims in a widely read commentary. The American president’s “absurd accusations,” he wrote, were a “grand swindle” designed to “whip up American public opinion.” / 35

That the President’s claims were absurd on their face should have been obvious to any discerning and reasonably well-informed person. Assertions that Germany was planning to take over South America were clearly fantastic given that, first, Germany had been unable or unwilling even to launch an invasion of Britain, and, second, that German forces at that moment were fully engaged in a titanic clash with Soviet Russia, a conflict that would ultimately end with the victory of the Red Army.

Roosevelt’s claim that Hitler was bent on quashing the world’s religions was not just a falsehood; it was nearly the opposite of the truth. At the same time he was telling Americans that Hitler’s Germany threatened religious life in their country and the rest of the world, President Roosevelt and his government were organizing military aid to the one country that was ruled by an openly atheist regime, the Soviet Union. While Roosevelt was speaking, military forces of Germany, Italy, Romania, Finland, Hungary and other European countries were battling to bring down the anti-religious Bolshevik state. Millions of Ukrainians, Russians, Lithuanians, Belarusians, and others who had already been freed from Soviet rule were, with German support, opening churches and restoring the traditional religious life that had been so brutally suppressed by the Stalinist regime.

During the war years, Germany’s Protestant and Catholic churches not only received government financial support, they were packed with worshipers. In Catholic regions of the Reich, notably in Bavaria and Austria, crucifixes were displayed in many public buildings, including courtrooms and school classrooms. The government of one country that was closely allied with Hitler’s Germany during World War II, Slovakia, was actually headed by a Roman Catholic priest.

In 1941 few Americans could believe that their President would so deliberately and emphatically deceive them, especially about matters of the gravest national and global importance. Millions accepted Roosevelt’s alarmist claims as true. After all, whom should any decent, patriotic citizen believe?: Their President, or the government of a foreign country that much of the American media told them was a mendacious regime dedicated to brutally imposing oppressive rule over the United States and the entire planet?

The Roosevelt-British propaganda campaign of 1940-41 was based on a great falsehood: the claim that Hitler was trying to “take over the world.” Actually, it was not Germany that launched war against Britain and France, but rather the reverse. It was Churchill, later joined by the US President, who rejected all German initiatives to end the terrible war. Demanding “unconditional surrender,” they insisted on the complete capitulation of Germany, including “regime change” elimination of the country’s government.

The legacy of President Roosevelt’s secretive and unlawful collusion with a foreign government, including his sanctioning of crimes by British and US agents, are relevant for our time. That’s especially true because Roosevelt is widely regarded as one of the greatest and most admirable of America’s past leaders. He is, for example, one of the very few persons whose image appears on US coins. Roads, streets, schools and other learning centers across the country bear his name.

His legacy should concern those who today are understandably unhappy with the routinely partisan and often polemical presentation of news and information in the mainstream media. The way that “fake news” and slanted, sensationalized information were given to the public in 1940-41 by the mainstream media, in secret collaboration with the White House and a foreign government, tells us much about how news and opinion can be manipulated in our country, and by whom.

In 1990 The New York Times issued a kind of apology for having published, decades earlier, the reporting of its once highly regarded correspondent in Moscow. In 1932 Walter Duranty’s dispatches from the Soviet Union earned him America’s highest award for journalistic achievement, the Pultizer Prize. Only years later did it become clear that Duranty’s portrayal of life in the USSR amounted to a deliberate whitewashing of reality. In particular he concealed the famine, starvation, and deaths of millions, especially in Ukraine, due to the Stalinist regime’s brutal “collectivization” of the vast country’s rural and farming population. Although reporting by major American newspapers in 1940-41 about Roosevelt administration’s policies for war was similarly distored and misleading, neither the The New York Times, The Washington Post, nor any other paper has been moved to issue a comparable apology.

President Roosvelt, Prime Minister Churchill and premier Stalin, at the historic “Big Three” conference in Yalta, February 1945

.

President Richard Nixon is today widely regarded as a disgraced figure who deserved impeachment for trying to cover up the “Watergate” break-in. President Trump, many say, should likewise be punished for breaking the law. If that’s true, how then should we regard Franklin Roosevelt? His deceit and crimes – which are routinely ignored, excused or justified – vastly overshadow the misdeeds of Nixon and Trump.

Those who admire Franklin Roosevelt seem to believe that presidential deception and misconduct are justified if the perpetrator’s motives or goals are good. One influential scholar who has expressed this view is American historian Thomas A. Bailey. He acknowledged Roosevelt’s record, but sought to justify it. “Franklin Roosevelt repeatedly deceived the American people during the period before Pearl Harbor,” he wrote. “He was like the physician who must tell the patient lies for the patient’s own good ... The country was overwhelmingly noninterventionist to the very day of Pearl Harbor, and an overt attempt to lead the people into war would have resulted in certain failure and an almost certain ousting of Roosevelt in 1940, with a complete defeat of his ultimate aims.” / 36

Prof. Bailey went on with a further justification: “A president who cannot entrust the people with the truth betrays a certain lack of faith in the basic tenets of democracy. But because the masses are notoriously shortsighted and generally cannot see danger until it is at their throats, our statesmen are forced to deceive them into an awareness of their own long-run interests. This is clearly what Roosevelt had to do, and who shall say that posterity will not thank him for it?”

In spite of all the rhetoric we hear about “our democracy” and “government of the people,” it seems that our leaders do not really believe that American-style democracy works as it’s supposed to. They don’t trust the people to “handle the truth.” The defenders of the Roosevelt legacy apparently believe that, at least sometimes, political leaders can and must break the law, violate the Constitution, and deliberately deceive the people for what a supposedly enlightened elite believes is in the nation’s “real” best interest, and for what it regards as a “higher” and worthy cause.

Roosevelt set a precedent for similarly deceitful and unlawful behavior by later presidents. Senator J. William Fulbright, a prominent critic of President Lyndon Johnson’s deception and disregard for law and the Constitution during the Vietnam war remarked that “FDR’s deviousness in a good cause made it much easier for LBJ to practice the same kind of deviousness in a bad cause.” / 37

“After a generation of presidential wars,” observed historian Joseph P. Lash, “it is possible to see that, in the hands of Roosevelt’s successors, the powers that he wielded as commander in chief to deploy the army, navy and air force as he deemed necessary in the national interest and to portray clashes in distant waters and skies as enemy-initiated led the nation into the Vietnam quagmire.” / 38

J. William Fulbright

Roosevelt’s methods seem to have become firmly entrenched in modern American political life. President George W. Bush, for one, followed in Roosevelt’s path when he and other high-level officials in his administration, with support from the mainstream media, deceived the American people to make possible the 2003 US invasion of Iraq. “I used to puzzle over the question of how American democracy could be adapted to the kind of role we have come to play in the world,” Senator Fulbright said in 1971. “I think I now know the answer: it cannot be done.” / 39

While many Americans today yearn for honest and ethical political leaders, transparent governance, and “real” democracy, such hopes are likely to remain elusive as long as the mainstream media, educators and politicians continue to portray Franklin Roosevelt as an exemplary President, and his administration as a paragon of leadership, while successfully suppressing or justifying his record of deceit and wrongdoing.



End Notes

1. Basil H. Liddell-Hart, The Second World War (New York: Putnam, 1971), pp. 17-22, 66; Clive Ponting, 1940: Myth and Reality (Chicago: 1993), pp. 79-80; Niall Ferguson, The War of the World (New York: Penguin, 2006), pp. 387-390; William Carr, Poland to Pearl Harbor (1986), pp. 93, 96.

2. Patrick J. Buchanan, Churchill, Hitler and `The Unnecessary War’ (New York: Crown, 2008), pp. 361-366; John Charmely, Churchill’s Grand Alliance (Harcourt Brace, 1996), pp. 82-83, 178; Clive Ponting, 1940: Myth and Reality (1993), p. 124; Friedrich Stieve, What the World Rejected: Hitler’s Peace Offers, 1933-1939.

3. Martin Gilbert, Finest Hour: Winston Churchill,1939-41 (1984), p. 358. Quoted in: Jon Meacham, Franklin and Winston (2004), p. 51; M. Hastings, Winston’s War, 1940-1945 (2010), p. 25.

4. Joseph P. Lash, Roosevelt and Churchill (1976), pp. 23-31; M. Weber, “President Roosevelt’s Campaign to Incite War in Europe,” The Journal of Historical Review, Summer 1983.

5. “America Gets Ready to Fight Germany, Italy, Japan,” Life, Oct. 31, 1938.
( http://mk.christogenea.org/content/it-was-planned-way-3-years-previously-page-1 )

6. Roosevelt “fireside chat” radio address of Dec. 29, 1940. ; Regarding the “Atlantic Charter,” see: William H. Chamberlin, America’s Second Crusade (1950 and 2008); Benjamin Colby, ‘Twas a Famous Victory (1975).

7. Roosevelt Labor Day radio address, Sept. 1, 1941.

8. Joseph P. Lash, Roosevelt and Churchill (1976), pp. 360, 415, 429; Stark memo to Secretary Hull, Oct. 8, 1941. Quoted in: J. P. Lash, Roosevelt and Churchill (1976), p. 426.

9. Thomas E. Mahl, Desperate Deception: British Covert Operations in the United States, 1939-44 (1999), p. 16; Steven T. Usdin, Bureau of Spies: The Secret Connections Between Espionage and Journalism in Washington (Prometheus, 2018), pp. 101-104; Lynne Olson, Those Angry Days (New York: Random House, 2013), p. 117; William Boyd, “The Secret Persuaders,” The Guardian (Britain), Aug. 19, 2006.

10. Nigel West (introduction) in: William Stephenson, ed., British Security Coordination (New York: 1999), pp. xi, xii.

11. W. Stephenson, ed., British Security Coordination (1999), p. xxv.

12. W. Stephenson, ed., British Security Coordination (1999), pp. xxxvi, xxxiii.

13. W. Stephenson, ed., British Security Coordination (1999), p. 16.

14. W. Stephenson, ed., British Security Coordination (1999), p. 14.

15. W. Stephenson, ed., British Security Coordination (1999), pp. 58, 59.

16. Steven T. Usdin, Bureau of Spies (2018), esp. pp. 135-140, 325-327; P. J. Grisar, “Sharks Defending Britain From Nazis? How ‘Fake News’ Helped Foil Hitler,” Forward, Oct. 22, 2018; Menachem Wecker, “The true story of a Jewish news agency that peddled fake news to undo Hitler.” Religion News Service, October 1, 2018

17. Steven T. Usdin, Bureau of Spies (2018), p. 135.

18. S. T. Usdin, Bureau of Spies (2018), pp. 138-139, 326 (n.).

19. Larry Getlen, “The Fake News That Pushed US Into WWII,” New York Post, Oct. 3, 2019, pp. 20-21.

20. S. T. Usdin, Bureau of Spies (2018), p. 142.

21. Steven T. Usdin, Bureau of Spies (2018), pp. 139, 326 (n.); Menachem Wecker, “The true story of a Jewish news agency that peddled fake news to undo Hitler.” RNS, Oct. 1, 2018

22. Thomas E. Mahl, Desperate Deception (1999), pp. 70-86; S. T. Usdin, Bureau of Spies (2018), pp. 113-116, 154-155; W. Stephenson, ed., British Security Coordination (1999), pp. 81-84.

23. W. Stephenson, ed., British Security Coordination (1999), pp. 59, 60, 61.

24. W. Stephenson, ed., British Security Coordination (1999), p. 68.

25. W. Stephenson, ed., British Security Coordination (1999), p. 69.

26. W. Stephenson, ed., British Security Coordination (1999), p. 74.

27. W. Stephenson, ed., British Security Coordination (1999), pp. 74, 80; T. E. Mahl, Desperate Deception (1999), pp. 107-135; Steven T. Usdin, Bureau of Spies (2018), pp. 119-127; Christopher Woolf, “How Britain Tried to Influence the US Election in 1940,” PRI, Jan. 17, 2017.

28. W. Stephenson, ed., British Security Coordination (1999), pp. 102.

29. W. Stephenson, ed., British Security Coordination (1999), pp. 102-103, 104; S. T. Usdin, Bureau of Spies (2018), p. 139.

30. W. Stephenson, ed., British Security Coordination (1999), p. 103.

31. W. Stephenson, ed., British Security Coordination (1999), pp. 104, 105, 107, 109; Steven T. Usdin, Bureau of Spies (2018), pp. 102, 140, 145-148.

32. Thomas E. Mahl, Desperate Deception: British Covert Operations in the United States, 1939-44 (1999), pp. 16, 193; Michael Williams, “FDR’s Confidential Crusader,” Warfare History Network. Jan. 17, 2019.

33. John F. Bratzel, Leslie B. Rout, Jr., “FDR and The ‘Secret Map’,” The Wilson Quarterly (Washington, DC), New Year’s 1985, pp. 167-173; Ted Morgan, FDR: A Biography (New York: Simon and Schuster, 1985), pp. 602, 603, 801 (notes); Mark Weber, “Roosevelt’s `Secret Map’ Speech,” The Journal of Historical Review, Spring 1985.

34. “The Reich Government’s Reply To Roosevelt’s Navy Day Speech,” The New York Times, Nov. 2, 1941; Documents on German Foreign Policy, 1918-1945. Series D, Vol. XIII, (Washington, DC: 1954), pp. 724-725 (Doc. No. 439 of Nov. 1, 1941).

35. Joseph Goebbels, “Kreuzverhör mit Mr. Roosevelt,” Das Reich, Nov. 30, 1941. Nachdruck (reprint) in Das eherne Herz (1943), pp. 99-104. English translation: “Mr. Roosevelt Cross-Examined.”
( http://research.calvin.edu/german-propaganda-archive/goeb2.htm )

36. Thomas A. Bailey, The Man in the Street: The Impact of American Public Opinion on Foreign Policy. (New York: 1948), pp. 11-13. Quoted in: W. H. Chamberlin, America’s Second Crusade (Indianapolis: Amagi/ Liberty Fund, 2008), p. 125.

37. Joseph P. Lash, Roosevelt and Churchill, 1939-1941 (New York: 1976), pp. 9, 10, 420, 421; Address by Fulbright, April 3, 1971. Published in: Congressional Record - Senate, April 14, 1971, p. 10356.
( https://www.govinfo.gov/content/pkg/GPO-CRECB-1971-pt8/pdf/GPO-CRECB-1971-pt8-4-1.pdf )

38. J. Lash, Roosevelt and Churchill (1976), p. 421.

39. Address by Fulbright, April 3, 1971. Congressional Record - Senate, April 14, 1971, p. 10356.



Bibliography / For Further Reading

Nicholson Baker, Human Smoke: The Beginnings of World War II, the End of Civilization. New York: Simon & Schuster, 2008

Harry Elmer Barnes, ed., Perpetual War for Perpetual Peace. Institute for Historical Review, 1993

William Boyd, “The Secret Persuaders,” The Guardian (Britain), August 19, 2006.
( https://www.theguardian.com/uk/2006/aug/19/military.secondworldwar )

John F. Bratzel and Leslie B. Rout, Jr., “FDR and The ‘Secret Map’,” The Wilson Quarterly (Washington, DC), New Year’s 1985 (Vol. 9, No. 1), pp. 167-173.

Anthony Cave Brown, The Last Hero: Wild Bill Donovan. New York: Times Books, 1982

Patrick J. Buchanan, Churchill, Hitler and `The Unnecessary War’: How Britain Lost Its Empire and the West Lost the World. New York: Crown, 2008.

William H. Chamberlin, America’s Second Crusade. Chicago: 1950; Indianapolis: 2008

William H. Chamberlin, “How Franklin Roosevelt Lied America Into War.”
( http://www.ihr.org/jhr/v14/v14n6p19_Chamberlin.html )

John Charmley, Churchill’s Grand Alliance: The Anglo-American Special Relationship, 1940-1957. Harvest/ Harcourt Brace, 1995.

Benjamin Colby, ‘Twas a Famous Victory. Arlington House, 1975

David Cole, “Tyler Kent and the Roosevelt Whistle-Blow Job,” Taki’s Mag, Nov. 19, 2019.
( https://www.takimag.com/article/tyler-kent-and-the-roosevelt-whistle-blow-job/ )

Jennet Conant, The Irregulars: Roald Dahl and the British Spy Ring in Wartime Washington. Simon & Schuster, 2008.

Robert Dallek, Franklin D. Roosevelt and American Foreign Policy, 1932-1945. New York: Oxford University Press, 1979.

Hunter DeRensis, “The Campaign to Lie America Into World War II,” The American Conservative, December 7, 2019
( https://www.theamericanconservative.com/articles/the-campaign-to-lie-america-into-world-war-ii/ )

James Duffy. Lindbergh vs. Roosevelt. Regnery, 2010.

Larry Getlen, “The Fake News That Pushed US Into WWII,” New York Post, Oct. 3, 2019.
( https://nypost.com/2019/10/02/the-fake-news-that-pushed-us-into-world-war-ii/ )

P. J. Grisar, “Sharks Defending Britain From Nazis? How ‘Fake News’ Helped Foil Hitler,” Forward, Oct. 22, 2018.
( https://forward.com/culture/412422/...-from-nazis-how-fake-news-helped-foil-hitler/ )

Henry Hemming, Agents of Influence: A British Campaign, a Canadian Spy, and the Secret Plot to Bring America into World War II. PublicAffairs, 2019.

Robert Higgs, “Truncating the Antecedents: How Americans Have Been Misled About World War II.” March 18, 2008.
( http://www.lewrockwell.com/higgs/higgs77.html )

Herbert C. Hoover, Freedom Betrayed: Herbert Hoover’s Secret History of the Second World War and its Aftermath (George H. Nash, ed.). Stanford University, 2011.

David Ignatius, “Britain’s War in America: How Churchill’s Agents Secretly Manipulated the U.S. Before Pearl Harbor, The Washington Post, Sept. 17, 1989, pp. C-1, C-2.

Tyler Kent, “The Roosevelt Legacy and The Kent Case.” The Journal for Historical Review. Summer 1983 (Vol. 4, No. 2), pages 173-203. With Introduction by Mark Weber.
( http://www.ihr.org/jhr/v04/v04p173_Kent.html )

Warren F. Kimball, The Juggler: Franklin Roosevelt as Wartime Statesman. Princeton University Press, 1991

Charles C. Kolb. Review of: W. S. Stephenson, ed., British Security Coordination: The Secret History of British Intelligence in the Americas 1940-1945. H-Diplo, H-Net Reviews. December 1999.
( http://www.h-net.org/reviews/showrev.php?id=3623 )

Thomas E. Mahl, Desperate Deception: British Covert Operations in the United States, 1939-44. Brassey’s, 1999.

Jerome O’Connor, “FDR’s Undeclared War,” Naval History (U.S. Naval Institute), Feb. 1, 2004.
( http://historyarticles.com/undeclared-war/ )

Joseph E. Persico, Roosevelt’s Secret War: FDR and World War II Espionage. Random House, 2001.

“The Reich Government’s Reply To Roosevelt’s Navy Day Speech,” The New York Times, Nov. 2, 1941. ( http://ibiblio.org/pha/policy/1941/411101a.html )

Bruce M. Russett, No Clear and Present Danger: A Skeptical View of the U.S. Entry into World War II. New York: Harper & Row, 1972

Friedrich Stieve. What the World Rejected: Hitler’s Peace Offers, 1933- 1939.
( http://ihr.org/other/what-the-world-rejected.html )

Steven T. Usdin, Bureau of Spies: The Secret Connections Between Espionage and Journalism in Washington. Prometheus, 2018

Steve Usdin, “When a Foreign Government Interfered in a U.S. Election - In 1940, by Britain,” Politico, Jan. 16, 2017.
( https://www.politico.com/magazine/s...erfered-in-a-us-electionto-reelect-fdr-214634 )

Mark Weber, “The ‘Good War’ Myth of World War Two.” May 2008.
( http://www.ihr.org/news/weber_ww2_may08.html )

Mark Weber, “Roosevelt’s `Secret Map’ Speech,” The Journal of Historical Review, Spring 1985 (Vol. 6, No. 1), pp. 125-127.
( http://www.ihr.org/jhr/v06/v06p125_Weber.html )

Menachem Wecker, “The true story of a Jewish news agency that peddled fake news to undo Hitler.” Religion News Service, October 1, 2018
( https://religionnews.com/2018/10/01...agency-that-peddled-fake-news-to-undo-hitler/ )

Michael Williams, “FDR’s Confidential Crusader,” Warfare History Network. Jan. 17, 2019.
( https://warfarehistorynetwork.com/2019/01/22/fdrs-confidential-crusader-2/ )

Christopher Woolf, “How Britain Tried to Influence the US Election in 1940,” Public Radio International, January 17, 2017
( https://www.pri.org/stories/2017-01-17/how-britain-tried-influence-us-election-1940

 

[Apollonian]

America's ‘Second Crusade’ in Retrospect

Looking Back at the U.S. Role in World War Two

By William Henry Chamberlin

Link: http://www.ihr.org/jhr/v14/v14n6p22_Chamberlin.html

William Henry Chamberlin

America's Second Crusade belongs to history. Was it a success? Over two hundred thousand Americans perished in combat and almost six hundred thousand were wounded. There was the usual crop of postwar crimes attributable to shock and maladjustment after combat experience. There was an enormous depletion of American natural resources in timber, oil, iron ore, and other metals. The nation emerged from the war with a staggering and probably unredeemable debt in the neighborhood of one quarter of a trillion dollars. Nothing comparable to this burden has ever been known in American history.

Were these human and material losses justified or unavoidable? From the military standpoint, of course, the crusade was a victory. The three Axis nations were completely crushed. American power on land and at sea, in the air and in the factory assembly line, was an indispensable contribution to this defeat.

But war is not a sporting competition, in which victory is an end in itself. It can only be justified as a means to achieve desirable positive ends or to ward off an intolerable and unmistakable threat to national security. When one asks for the fruits of victory five years after the end of the war, the answers sound hollow and unconvincing.

Consider first the results of the war in terms of America's professed war aims: the Atlantic Charter and the Four Freedoms. Here surely the failure has been complete and indisputable. Wilson failed to make his Fourteen Points prevail in the peace settlements after World War I. But his failure might be considered a brilliant success when one surveys the abyss that yawns between the principles of the Atlantic Charter and the Four Freedoms and the realities of the postwar world.

After World War I there were some reasonably honest plebiscites, along with some arbitrary and unjust territorial arrangements. But the customary method of changing frontiers after World War II was to throw the entire population out bag and baggage – and with very little baggage.

No war in history has killed so many people and left such a legacy of miserable, uprooted, destitute, dispossessed human beings. Some fourteen million Germans and people of German stock were driven from the part of Germany east of the Oder-Neisse line, from the Sudeten area of Czechoslovakia, and from smaller German settlements in Hungary, Yugoslavia, and Rumania.

Millions of Poles were expelled from the territory east of the so-called Curzon Line and resettled in other parts of Poland, including the provinces stolen from Germany. Several hundred thousand Finns fled from parts of Finland seized by the Soviet Union in its two wars of aggression. At least a million East Europeans of various nationalities Poles, Russians, Ukrainians, Yugoslavs, Letts, Lithuanians, Estonians – became refugees from Soviet territorial seizures and Soviet tyranny.

Not one of the drastic surgical operations on Europe's boundaries was carried out in free consultation with the people affected. There can be no reasonable doubt that every one of these changes would have been rejected by an overwhelming majority in an honestly conducted plebiscite.

The majority of the people in eastern Poland and the Baltic states did not wish to become Soviet citizens. Probably not one person in a hundred in East Prussia, Silesia, and other ethnically German territories favored the substitution of Polish or Soviet for German rule. What a mockery, then, has been made of the first three clauses of the Atlantic Charter: "no territorial aggrandizement," "no territorial changes that do not accord with the freely expressed wishes of the peoples concerned," "the right of all peoples to choose the form of government under which they will live."

The other clauses have fared no better. The restrictions imposed on German and Japanese industry, trade, and shipping cannot be reconciled with the promise "to further the enjoyment by all States, great or small, victor or vanquished, of access, on equal terms, to the trade and to the raw materials of the world."



President Roosevelt and Prime Minister Churchill sing "Onward Christian Soldiers" during their August 10, 1941, meeting on board a British battleship anchored off of Newfoundland.

In the great conflict then raging between Germany and the other Axis nations, on one side, and the British Empire and Soviet Russia, on the other, the United States was officially still neutral. Nevertheless, and violating both international law and repeated pledges to the American people, Roosevelt had already plunged the United States into the war. At this meeting he publicly committed the US to "the final destruction of the Nazi tyranny." Just weeks earlier, and on his order, US forces had occupied Iceland.

At this meeting Roosevelt and Churchill announced the "Atlantic Charter," which proclaimed "the right of all peoples to choose the form of government under which they will live." The Allied leaders were never sincere about such pledges. Britain was already violating it in the case of India and other imperial dominions, and later Roosevelt and Churchill would betray it in the case of Poland, Hungary and other European nations.

The terrific war destruction and the vindictive peace have certainly not helped to secure "for all, improved labor standards, economic advancement and social security."

In the year 1950, five years after the end of the Second Crusade, "all men in all lands" are not living "out their lives in freedom from fear and want." Nor are "all men traversing the high seas and oceans without hindrance."

The eighth and last clause of the Atlantic Charter holds out the prospect of lightening "for peace-loving peoples the crushing burden of armaments." But this burden has become more crushing than it was before the crusade took place. The "peace-loving peoples" have been devoting ever larger shares of their national incomes to preparations for war.

All in all, the promises of the Charter seem to have evaporated in a wraith of Atlantic mist.

Nor have the Four Freedoms played any appreciable part in shaping the postwar world. These, it may be recalled, were freedom of speech and expression, freedom of religion, and freedom from fear and want. But one of the main consequences of the war was a vast expansion of Communist power in eastern Europe and in East Asia. It can hardly be argued that this has contributed to greater freedom of speech, expression, and religion, or, for that matter, to freedom from want and fear.

The fate of Cardinal Mindzenty, of Archbishop Stepinac, of the Protestant leaders in Hungary, of the many priests who have been arrested and murdered in Soviet satellite states, of independent political leaders and dissident Communists in these states, offers eloquent testimony to the contrary.

In short, there is not the slightest visible relation between the Atlantic Charter and the Four Freedoms and the kind of world that has emerged after the war. Woodrow Wilson put up a struggle for his Fourteen Points. There is no evidence that Franklin D. Roosevelt offered any serious objection to the many violations of his professed war aims.

It may, of course, be argued that the Atlantic Charter and the Four Freedoms were unessential window dressing, that the war was not a crusade at all, but a matter of self-defense and national survival. However, there is no proof that Germany and Japan had worked out, even on paper, any scheme for the invasion of the American continent.

In his alarmist broadcast of May 27, 1941, Roosevelt declared: “Your Government knows what terms Hitler, if victorious, would impose. I am not speculating about all this... They plan to treat the Latin American countries as they are now treating the Balkans. They plan then to strangle the United States of America and the Dominion of Canada.”

But this startling accusation was never backed up by concrete proof. No confirmation was found even when the Nazi archives were at the disposal of the victorious powers. There has been gross exaggeration of the supposed close co-operation of the Axis powers. General George C. Marshall points this out in his Report on the Winning of the War in Europe and the Pacific [Simon & Schuster, pp. 1-3], published after the end of the war. This report, based on American intelligence reports and on interrogation of captured German commanders, contains the following statements:

No evidence has yet been found that the German High Command had any over-all strategic plan...
When Italy entered the war, Mussolini's strategic aims contemplated the expansion of his empire under the cloak of German military success. Field Marshal Keitel reveals that Italy's declaration of war was contrary to her agreement with Germany. Both Keitel and Jodl agree that it was undesired...
Nor is there evidence of close strategic coordination between Germany and Japan. The German General Staff recognized that Japan was bound by the neutrality pact with Russia but hoped that the Japanese would tie down strong British and American land, sea and air forces in the Far East.
In the absence of any evidence so far to the contrary, it is believed that Japan also acted unilaterally and not in accordance with a unified strategic plan.
Not only were the European partners of the Axis unable to coordinate their plans and resources and agree within their own nations how best to proceed, but the eastern partner, Japan, was working in even greater discord. The Axis as a matter of fact existed on paper only. [Italics supplied.]

So, in the judgment of General Marshall, the Axis did not represent a close-knit league, with a clear-cut plan for achieving world domination, including the subjugation of the American continent. It was a loose association of powers with expansionist aims in Europe and the Far East.

Of course the United States had no alternative except to fight after Pearl Harbor and the German and Italian declarations of war. But the Pearl Harbor attack, in all probability, would never have occurred if the United States had been less inflexible in upholding the cause of China. Whether this inflexibility was justified, in the light of subsequent developments in China, is highly questionable, to say the least.

The diplomatic prelude to Pearl Harbor also includes such fateful American decisions as the imposition of a virtual commercial blockade on Japan in July 1941, the cold-shouldering of Prince Konoye's overtures, and the failure, at the critical moment, to make any more constructive contribution to avoidance of war than Hull's bleak note of November 26.

The war with Germany was also very largely the result of the initiative of the Roosevelt Administration. The destroyer deal, the lend-lease bill, the freezing of Axis assets, the injection of the American Navy, with much secrecy and double-talk, into the Battle of the Atlantic: these and many similar actions were obvious departures from neutrality, even though a Neutrality Act, which the President had sworn to uphold, was still on the statute books.

It is sometimes contended that the gradual edging of the United States into undeclared war was justified because German and Japanese victory would have threatened the security and well-being of the United States, even if no invasion of this hemisphere was contemplated. This argument would be easier to sustain if the war had been fought, not as a crusade of "a free world against a slave world," but as a cold-blooded attempt to restore and maintain a reasonable balance of power in Europe and in Asia.

Had America's prewar and war diplomacy kept this objective in mind, some of the graver blunders of the Second Crusade would have been avoided. Had it been observed as a cardinal principle of policy that Soviet totalitarianism was just as objectionable morally and more dangerous politically and psychologically than the German and Japanese brands, the course of American policy would surely have been different. There would have been more favorable consideration for the viewpoint artlessly expressed by Senator Truman when he suggested that we should support Russia when Germany was winning and Germany when Russia was winning.

It was the great dilemma of the war that we could not count on winning the war without Russia and certainly could not hope to win the peace with Russia. But there was at least a partial solution for this dilemma. One of the ablest men associated with the American diplomatic service suggested this to me in a private conversation: "We should have made peace with Germany and Japan when they were too weak to be a threat to us and still strong enough to be useful partners in a coalition against the Soviet Union."

But such realism was at a hopeless discount in a crusading atmosphere. The effect of America's policy was to create a huge power vacuum in Europe and in Asia, and to leave the Soviet Union the one strong military power in both these continents. Then the United States belatedly began to offer resistance when the Soviet leaders acted precisely as anyone might have expected them to act in view of their political record and philosophy.

An old friend whom I met in Paris in 1946, a shrewd and witty British journalist, offered the following estimate of the situation which followed the Second Crusade: "You know, Hitler really won this war – in the person of Stalin."

President Roosevelt declared in his speech of May 27, 1941: "We will accept only a world consecrated to freedom from want and freedom from terrorism." The war into which he was steadily and purposefully steering his country was apparently supposed to assure such a world.

The argument that "we cannot live in a totalitarian world" carried weight with many Americans who were not impressed by lurid pictures of the Germans (who were never able to cross the narrow English Channel) suddenly frog-leaping the Atlantic and overrunning the United States. Both in the hectic days of 1940-41 and in the cooler retrospect of 1950 it seems clear that a Nazi Germany, dominant in Europe, and a militarist Japan, extending its hegemony in Asia, would be unpleasant neighbors and would impose disagreeable changes in the American way of life.

It could plausibly be argued that in such a world we should have to assume a heavy permanent burden of armament, that we should have to keep a constant alert for subversive agents, that our trade would be forced into distorted patterns. We would be exposed to moral corruption and to the erosion of our ideals of liberty because the spectacle of armed might trampling on right would be contagious.

These dangers of totalitarianism were real enough. But it was a disastrous fallacy to imagine that these dangers could be exorcised by waging war and making peace in such fashion that the power of another totalitarian state, the Soviet Union, would be greatly enhanced.

Failure to foresee the aggressive and disintegrating role which a victorious Soviet Union might be expected to play in a smashed and ruined Europe and Asia was the principal blunder of America's crusading interventionists. Those who secretly or openly sympathized with communism were at least acting logically. But the majority erred out of sheer ignorance and wishful thinking about Soviet motives and intentions. They were guilty of a colossal error in judgment and perspective, and almost unpardonable error in view of the importance of the issues at stake.

After Pearl Harbor and the German declaration of war, the United States, of course, had a stake in the success of the Red Army. This, however, does not justify the policy of one-sided appeasement which was followed at Teheran and Yalta.

If one looks farther back, before America's hands were tied diplomatically by involvement in the conflict, there was certainly no moral or political obligation for the United States and other western powers to defend the Soviet Union against possible attacks from Germany and Japan. The most hopeful means of dealing with the totalitarian threat would have been for the western powers to have maintained a hands-off policy in eastern Europe.

In this case the two totalitarian regimes might have been expected to shoot it out to their hearts' content. But advocates of such an elementary common-sense policy were vilified as appeasers, fascist sympathizers, and what not. The repeated indications that Hitler's ambitions were Continental, not overseas, that he desired and intended to move toward the east, not toward the west, were overlooked.

Even after what General Deane called "the strange alliance" had been concluded, there was room for maneuvering. We could have been as aloof toward Stalin as Stalin was toward us. There is adequate evidence available that the chance of negotiating a reasonable peace with a non-Nazi German government would have justified an attempt, but the "unconditional surrender" formula made anything of this sort impossible. With a blind optimism that now seems amazing and fantastic, the men responsible for the conduct of American foreign policy staked everything on the improbable assumption that the Soviet Government would be a cooperative do-gooder in an ideal postwar world.

The publicist Randolph Bourne, a caustic and penetrating critic of American participation in its First Crusade, observed that war is like a wild elephant. It carries the rider where it wishes to go, not where he may wish to go.

Now the crusade has ended. We have the perspective of five years of uneasy peace. And the slogan, "We are fighting so that we will not have to live in a totalitarian world," stands exposed in all its tragic futility. For what kind of world are we living in today? It is not very much like the world we could have faced if the crusade had never taken place, if Hitler had been allowed to go eastward, if Germany had dominated eastern Europe and Japan eastern Asia? Is there not a "This is where we came in" atmosphere, very reminiscent of the time when there was constant uneasy speculation as to where the next expansionist move would take place. The difference is that Moscow has replaced Berlin and Tokyo. There is one center of dynamic aggression instead of two, with the concentration of power in that one center surpassing by far that of the German-Japanese combination. And for two reasons their difference is for the worse, not for the better.

First, one could probably have counted on rifts and conflicts of interest between Germany and Japan which are less likely to arise in Stalin's centralized empire. Second, Soviet expansion is aided by propaganda resources which were never matched by the Nazis and the Japanese.

How does it stand with those ideals which were often invoked by advocates of the Second Crusade? What about "orderly processes in international relations," to borrow a phrase from Cordell Hull, or international peace and security in general? Does the present size of our armaments appropriation suggest confidence in an era of peace and good will? Is it not pretty much the kind of appropriation we would have found necessary if there had been no effort to destroy Nazi and Japanese power?

Secret agents of foreign powers? We need not worry about Nazis or Japanese. But the exposure of a dangerously effective Soviet spy ring in Canada, the proof that Soviet agents had the run of confidential State Department papers, the piecemeal revelations of Soviet espionage in this country during the war – all these things show that the same danger exists from another source.

Moral corruption? We have acquiesced in and sometimes promoted some of the most outrageous injustices in history: the mutilation of Poland, the uprooting of millions of human beings from their homes, the use of slave labor after the war. If we would have been tainted by the mere existence of the evil features of the Nazi system, are we not now tainted by the widespread prevalence of a very cruel form of slavery in the Soviet Union?

Regimentation of trade? But how much free trade is there in the postwar world? This conception has been ousted by an orgy of exchange controls, bilateral commercial agreements, and other devices for damming and diverting the free stream of international commerce.

Justice for oppressed peoples? Almost every day there are news dispatches from eastern Europe indicating how conspicuously this ideal was not realized.

The totalitarian regimes against which America fought have indeed been destroyed. But a new and more dangerous threat emerged in the very process of winning the victory. The idea that we would eliminate the totalitarian menace to peace and freedom while extending the dominion of the Hammer and Sickle has been proved a humbug, a hoax, and a pitiful delusion.

Looking back over the diplomatic history of the war, one can identify ten major blunders which contributed very much to the unfavorable position in which the western powers find themselves today. These may be listed as follows:

(1) The guarantee of "all support in their power" which the British Government gave to Poland "in the event of any action which clearly threatened Polish independence." This promise, hastily given on March 31, 1939, proved impossible to keep. It was of no benefit to the Poles in their unequal struggle against the German invasion. It was not regarded as applicable against Russia when the Soviet Union invaded and occupied eastern Poland, with the full understanding and complicity of Hitler.

All this ill-advised guarantee accomplished was to put Great Britain and France into war against Germany, to the great satisfaction of Stalin, for an objective which the western powers could not win. Poland was not freed even after the United States entered the war and Hitler was crushed. It was only subjected to a new tyranny, organized and directed from Moscow.

There is no proof and little probability that Hitler would have attacked the west if he had not been challenged on the Polish issue. The guarantee, more than any other single action, spoiled the best political opportunity the western powers possessed in 1939. This was to canalize German expansion eastward and to keep war out of the West.

(2) The failure of the American Government to accept Konoye's overtures for a negotiated settlement of differences in the Far East. The futility of the crusade for China to which the American Government committed itself becomes constantly more clear.

(3) The "unconditional surrender" slogan which Roosevelt tossed off at Casablanca in January 1943. This was a godsend to Goebbels and a tremendous blow to the morale and effectiveness of the underground groups which were working against Hitler. It weakened the American and British position in relation to Russia, since Stalin did not associate himself with the demand. It stiffened and prolonged German resistance.



Churchill, Roosevelt and Stalin at the February 1945 Yalta Conference. At this meeting, the Allied coalition leaders decided the fate of millions of people around the world.

(4) The policy of "getting along" with Stalin on a basis of all-out appeasement. The Soviet dictator was given everything he wanted in the way of munitions and supplies and was asked for nothing in return, not even an honest fulfillment of the Atlantic Charter, of which he was a cosignatory. The disastrous bankruptcy of this policy is evident from one look at the geographical, political, and moral map of the world today.

(5) Failure to invade the Balkans, as Churchill repeatedly urged. This mistake was the result partly of the policy of appeasing Stalin and partly of the narrowly military conception of the war which dominated the thinking of the War Department. There was a tendency to regard the war as a kind of bigger football game, in which victory was all that mattered.

(6) The public endorsement by Roosevelt and Churchill in September 1944 of the preposterous Morgenthau Plan for the economic destruction of Germany. To be sure, the full extravagance of this scheme was never put into practice, but enough of its vindictive destructionist spirit got into the Potsdam Declaration and the regulations for Military Government to work very great harm to American national interests and European recovery.

(7) The bribing of Stalin, at China's expense, to enter the Far Eastern war and the failure to make clear, until the last moment, that unconditional sur render, for Japan, did not mean the elimination of the Emperor. These were grave mistakes, fraught with fateful consequences for American political interests in the Orient. Had the danger from Russia, the undependability of China, and the desirability of enlisting Japan as a satellite ally been intelligently appreciated, a balance of power far more favorable to the United States would now exist in East Asia.

(8) The failure, for political reasons, to exploit the military opportunities which opened up in the last weeks of the struggle in Europe, notably the failure to press on and seize Berlin and Prague. Closely linked with this error was the failure to insist on direct land access to Berlin in the negotiations about the postwar occupation of Germany.

(9) The persistent tendency to disregard the advice of experts and specialists, and base American foreign policy on "hunches" inspired by amateurs and dilettantes. Conspicuous examples of unfitness in high places were Harry Hopkins as adviser on Russia, Edward R. Stettinius as Secretary of State, Henry Morgenthau, Jr., as policy framer on Germany, and Edwin W. Pauley as Reparations Commissioner. A parallel mistake was the laxness which permitted American and foreign Communist sympathizers to infiltrate the OWI, OSS, and other important strategic agencies.

(10) The hasty launching, amid much exaggerated ballyhoo, of the United Nations. The new organization was not given either a definite peace settlement to sustain or the power which would have made it an effective mediator and arbiter in disputes between great powers. It was as if an architect should create an elaborate second story of a building, complete with balconies, while neglecting to lay a firm foundation.

These were unmistakable blunders which no future historical revelations can justify or explain away. In these blunders one finds the answer to the question why complete military victory, in the Second Crusade as in the First, was followed by such complete political frustration. Perhaps the supreme irony of the war's aftermath is that the United States becomes increasingly dependent on the good will and co-operation of the peoples against whom it waged a war of political and economic near extermination, the Germans and the Japanese, in order to maintain any semblance of balance of power in Europe and in Asia.

Primary responsibility for the involvement of the United States in World War II and for the policies which characterized our wartime diplomacy rests with Franklin D. Roosevelt. His motives were mixed and were probably not always clear, even to himself. Frances Perkins, Secretary of labor in his Cabinet and a personal friend, described the President as "the most complicated human being I ever knew."

Certainly Roosevelt was far from being a simple and straightforward character. In an age when Stalin, Hitler, and Mussolini played the role of the popular tyrant, of the dictator whose grip on his people is maintained by a mixture of mass enthusiasm and mass terrorism, Roosevelt showed what could be done in achieving very great personal power within the framework of free institutions. His career after his election to the presidency stamps him as a man of vast ambition, capable, according to Frances Perkins, of "almost childish vanity."

There were probably three principal motives that impelled Roosevelt to set in motion the machinery that led America into its Second Crusade. First was this quality of ambition. What role could be more tempting than that of leader of a wartime global coalition, of ultimate world arbiter? Second was the necessity of finding some means of extricating the American economy from a difficult position. Third was a conviction that action against the Axis was necessary. This conviction was greatly strengthened by the first two motives.

Roosevelt's first Administration, which began at the low point of a very severe depression, was a brilliant political success. He was re-elected in 1936 by an enormous majority of popular and electoral votes. But dark clouds hung over the last years of his second term of office. For all the varied and sometimes contradictory devices of the New Deal failed to banish the specter of large-scale unemployment. There were at least ten million people out of work in the United States in 1939.

The coming of the war in Europe accomplished what all the experimentation of the New Deal had failed to achieve. It created the swollen demand for American munitions, equipment, supplies of all kinds, foodstuffs which started the national economy on the road to full production and full employment.

There was the same economic phenomenon at the time of the First World War. The vast needs of the Allies meant high profits, not only for munitions makers (later stigmatized as "merchants of death"), but for all branches of business activity. It brought a high level of farm prices and industrial wages. As the Allies ran out of ready cash, loans were floated on the American market. The United States, or at least some American financial interests, acquired a direct stake in an Allied victory.

Now, the purely economic interpretation of our involvement in World War I can be pressed too far. There is neither evidence nor probability that Wilson was directly influenced by bankers or munitions makers. He had given the German Government a public and grave warning of the consequences of resorting to unlimited submarine warfare. When the German Government announced the resumption of such warfare, Wilson, with the assent of Congress, made good his warning.

Yet the lure of war profits (not restricted, it should be noted, to any single class of people) did exert a subtle but important influence on the evolution of American policy in the years 1914-17. It worked against the success of the mediation efforts launched by House as Wilson's confidential emissary. The British and French governments counted with confidence on the absence of any strong action to back up periodic protests against the unprecedented severity of the blockade enforced against Germany. The American economy had become very dependent on the flow of Allied war orders.

After the end of the war, after depression and repudiation of the greater part of the war debts, the majority of the American people reached the conclusion that a war boom was not worth the ultimate price. This feeling found expression in the Neutrality Act. Roosevelt himself in 1936 described war profits as "fools' gold."

Yet the course of American economic development in World War II followed closely the pattern set in World War I. First the Neutrality Act was amended to permit the sale of munitions. Then, as British assets were exhausted, the lend-lease arrangement was substituted for the war loans of the earlier period. As an economic student of the period [Broadus Mitchell in Depression Decade] says:

The nation did not emerge from the decade of the depression until pulled out by war orders from abroad and the defense program at home. The rescue was timely and sweet and deserved to be made as sure as possible. Whether the involvement of the United States in the war through progressive departure from neutrality was prompted partly by the reflection that other means of extrication from economic trouble had disappeared, nobody can say. No proponent did say so. Instead, advocates of "all-out aid to Britain," convoying of allied shipping and lend-lease took high ground of patriotism and protection of civilization.

There can be no reasonable doubt that the opposition of business and labor groups to involvement in the war was softened by the tremendous flood of government war orders. It is an American proverb that the customer is always right. Under lend-lease and the immense program of domestic arms expansion the government became the biggest customer.

Ambition certainly encouraged Roosevelt to assume an interventionist attitude. He unmistakably enjoyed his role as one of the "Big Three," as a leading figure at international conferences, as a mediator between Stalin and Churchill. There is a marked contrast between Roosevelt's psychology as a war leader and Lincoln's.

The Civil War President was often bowed down by sorrow over the tragic aspects of the historic drama in which he was called to play a leading part. His grief for the men who were dying on both sides of the fighting lines was deep and hearty and unaffected. One finds little trace of this mood in Roosevelt's war utterances. There is no Gettysburg Address in Roosevelt's state papers. The President's familiar mood is one of jaunty, cocksure, sometimes flippant, self-confidence.

Another trait in Roosevelt's personality which may help to explain the casual, light-hearted scrapping of the Atlantic Charter and the Four Freedoms is a strong histrionic streak. If he originated or borrowed a brilliant phrase, he felt that his work was done. He felt no strong obligation to see that the phrase, once uttered, must be realized in action.

When did Roosevelt decide that America must enter the war? There was a hint of bellicose action in his quarantine speech of October 5, 1937. Harold Ickes claims credit for suggesting the quarantine phrase, which did not appear in earlier drafts of the speech which had been prepared in the State Department. It was like Roosevelt to pick up and insert an image which appealed to him. However, the quarantine speech met such an unfavorable reception that it led to no immediate action.

Various dates are suggested by other observers. Supreme Court Justice Felix Frankfurter, who enjoyed substantial influence and many contacts in Administration circles, asserted in a Roosevelt memorial address at Harvard University in April 1945: “There came a moment when President Roosevelt was convinced that the utter defeat of Nazism was essential to the survival of our institutions. That time certainly could not have been later than when Mr. Sumner Welles reported on his mission to Europe [March 1940].”

That Roosevelt may have been mentally committed to intervention even before the war broke out is indicated by the following dispatch from Maurice Hindus in the New York Herald Tribune of January 4, 1948:

Prague – President Eduard Benes of Czechoslovakia told the late President Franklin D. Roosevelt on May 29, 1939, that war would break out any day after July 15 of that year, with Poland as the first victim, and Mr. Roosevelt, in reply to a question as to what the United States would do, said it would have to participate because Europe alone could not defeat Adolf Hitler.

A suggestion by Assistant Secretary of State A. A. Berle that Roosevelt should have become the leader of the free world against Hitler is believed to have influenced the President's psychology. [Davis and Lindley, How War Came, p. 65.]

Admiral James O. Richardson, at that time Commander in Chief of the Pacific fleet, talked at length with Roosevelt in the White House on October 8, 1940. He testified before the Congressional committee investigating Pearl Harbor [Report of the Congressional Joint Committee, Part I, p. 266] that he had asked the President whether we would enter the war and received the following answer:

He [Roosevelt] replied that if the Japanese attacked Thailand, or the Kra peninsula, or the Netherlands East Indies, we would not enter the war, that if they even attacked the Philippines he doubted whether we would enter the war, but that they could not always avoid making mistakes and that as the war continued and the area of operation expanded sooner or later they would make a mistake and we would enter the war.

It is clear from these varied pieces of evidence that the thought of war was never far from Roosevelt's mind, even while he was assuring so many audiences during the election campaign that "your government is not going to war." During the year 1941, as has been shown in an earlier chapter [of America's Second Crusade], he put the country into an undeclared naval war in the Atlantic by methods of stealth and secrecy. This point was made very clear by Admiral Stark, then Chief of Naval Operations, in his reply to Representative Gearhart during the Pearl Harbor investigation:

Technically or from an international standpoint we were not at war, inasmuch as we did not have the right of belligerents, because war had not been declared. But actually, so far as the forces operating under Admiral King in certain areas were concerned, it was against any German craft that came inside that area. They were attacking us and we were attacking them.

Stark also testified that, by direction of the President, he ordered American warships in the Atlantic to fire on German submarines and surface ships. This order was issued on October 8, 1941, two months before Hitler's declaration of war.

It is scarcely possible, in the light of this and many other known facts, to avoid the conclusion that the Roosevelt Administration sought the war which began at Pearl Harbor. The steps which made armed conflict inevitable were taken months before the conflict broke out.

Some of Roosevelt's apologists contend that, if he deceived the American people, it was for their own good. But the argument that the end justified the means rests on the assumption that the end had been achieved. Whether America's end in its Second Crusade was assurance of national security or the establishment of a world of peace and order or the realization of the Four Freedoms "everywhere in the world," this end was most certainly not achieved.

America's Second Crusade was a product of illusions which are already bankrupt. It was an illusion that the United States was at any time in danger of invasion by Nazi Germany. It was an illusion that Hitler was bent on the destruction of the British Empire. It was an illusion that China was capable of becoming a strong, friendly, western-oriented power in the Far East. It was an illusion that a powerful Soviet Union in a weakened and impoverished Eurasia would be a force for peace, conciliation, stability, and international co-operation. It was an illusion that the evils and dangers associated with totalitarianism could be eliminated by giving unconditional support to one form of totalitarianism against another. It was an illusion that a combination of appeasement and personal charm could melt away designs of conquest and domination which were deeply rooted in Russian history and Communist philosophy.

The fruit harvested from seeds of illusion is always bitter.

---

From The Journal of Historical Review, Nov.-Dec. 1994 (Vol. 14, No. 6), pages 22-30. Excerpted from the concluding chapter of America's Second Crusade (1962 softcover ed., pages 337-353).

About the Author

William Henry Chamberlin (1897-1969) was an American historian and journalist.

He was born in Brooklyn, New York, and reared in Philadelphia. After high school and college education he went into journalism. His worldview as a young man was idealistic and strongly leftist. The youthful Chamberlin moved to Moscow where he served as the correspondent in Russia of the daily Christian Science Monitor. Later he also served as Moscow correspondent of the liberal British daily Manchester Guardian. It didn't take long for Chamberlin to lose his youthful enthusiasm for Marxism and the Bolshevik experiment. For the rest of his life, he was a bitter opponent of Communism, and particularly of the form it took in Soviet Russia.

Beginning with Soviet Russia, a volume published in 1930, Chamberlin began writing books exposing what he regarded as the evil and fraud of Soviet Communism. His principal works about Russia in the early 1930s also included The Soviet Planned Economic Order, which appeared in 1931, and Russia's Iron Age, which came out in 1934. Perhaps his most impressive work was The Russia Revolution: 1917-1921, a scholarly two-volume study first published in 1935. For years it remained the best single English-language work covering the overthrow of the Tsarist regime, the Bolshevik takeover, the Russian Civil War, and the consolidation of Soviet power.

After twelve years of outstanding work as a journalist in Soviet Russia, in 1935 The Christian Science Monitor transferred him to the Far East, from where he reported until 1939, when he was transferred to France. Following the French declaration of war against Germany, and the subsequent defeat and occupation of France, he returned to the United States.

Between 1937 and 1940 appeared additional books by Chamberlin, including Collectivism: A False Utopia, two acclaimed books about Japan, as well as a somewhat autobiographical work, Confessions of an Individualist. During the early 1950s he wrote a regular column for The Wall Street Journal.

Along with many other thoughtful Americans, Chamberlin was disgusted by the role played by the United States in the Second World War. He gave eloquent and scathing voice to his bitterness in his most important work in the postwar period, America's Second Crusade, a 372-page historical study that was originally published in 1950.

 

[Apollonian]

History: here is the interesting story of the yr., about the "traitor king"--Ed VIII of England, who married an American, so had to abdicate, but otherwise was loyal German, loyal to white Christians, hated kike filth, & admired & respected unc' Adolf, & knowingly & willingly passed info to Germans

----------------------------------------------------------------------------------------------------------

Traitor King: The Scandalous Exile of the Duke & Duchess of Windsor Paperback – November 8, 2022​

by Andrew Lownie (Author)
4.2 4.2 out of 5 stars 3,487 ratings

Link: https://www.amazon.com/Traitor-King...s&sprefix=traitor+king,stripbooks,120&sr=1-1/

As the history of the House of Windsor increasing comes under scrutiny, here is the story of the Duke and Duchess of Windsor's glittering lives after Edward VIII abdicated the throne—lives that were riddled with treachery and betrayal.

A Town & Country "Must Read Book"

December 11, 1936. The King of England, Edward VIII, has given up his crown, foregoing his duty for the love of Wallis Simpson, an American divorcée. Their courtship has been dogged by controversy and scandal, but with Edward's abdication, they can live happily ever after.

But do they? Beginning this astonishing dual biography at the moment that most biographers turn away, bestselling historian Andrew Lownie reveals the dramatic lives of the Windsors post-abdication. This is a story of a royal shut out by his family and forced into exile; of the Nazi attempts to recruit the duke to their cause; and of why the duke, as Governor of the Bahamas, tried to shut down the investigation into the murder of a close friend. It is a story of a couple obsessed with their status, financially exploiting their position, all the while manipulating the media to portray themselves as victims.

The Duke and Duchess of Windsor were, in their day, the most glamorous exiles in the world, flitting from sumptuously appointed mansions in the south of France to luxurious residences in Palm Beach. But they were spoiled, selfish people, obsessed with their image, and revelling in adulterous affairs. Drawing upon previously unexplored archives, Lownie shows in dramatic fashion how their glittering world was riddled with treachery and betrayal—and why the royal family never forgave the duke for choosing love over duty.