The Pentagon Makes a Play for Rare Earths

In taking a page out of Winston Churchill's playbook, where Britain acquired a 51% controlling interest in the Anglo-Persian Oil Company (now BP) on the eve of World War I, the Pentagon today made a $400 million dollar investment in rare earth miner/refiner MP Materials. The Pentagon on full exercise of its convertible preferred and warrants will own 14% of the company and become its largest shareholder. Paired with the investment is a long-term supply contract at fixed minimum prices thereby ensuring profitability. 

Rare earths are used to make highly sophisticated magnets that are used in advanced aircraft (think F-35) and guided missiles. At the present time the bulk of the rare earths used by the Pentagon and U.S. industry are imported from China, not the best of circumstances.

The Pentagon's logic behind the deal is identical to Churchill's over 100 years ago. As First Lord of the Admiralty Churchill was seeking a secure supply of oil for the Royal Navy. In addition to its investment, Britain secured a 20-year supply contract for Anglo-Persian's oil. 

As an aside, the preferred stock is convertible at $30.03 a share. MP Materials stock shot up to $44, so thus far the Pentagon is well ahead of the game.

My Review of Jill Eichler's "Mellon vs. Churchill"

 Duel over Debt

On the surface it appears that only a history/economics nerd would read Jill Eichler’s book on the inter-Allied debts arising out of World War I. However, Eichler discusses that history through the lens of its two main protagonists, Secretary of the Treasury Andrew Mellon (1921-1932) and Chancellor of the Exchequer Winton Churchill (1925-1929) It is through their eyes we see how complicated the debt duel was. 

At the end of World War I the allies owed the United States something over $10 billion with the bulk of the borrowings coming from Great Britain and France. Simply put, the allied viewed the debt as a cost of winning the war and therefore did not have to be repaid, while the United States viewed the debt a commercial transaction that had to be repaid. Making matters worse was that the United States in 1922 passed the Fordney-McCumber Tariff which made it more difficult for the Europeans to earn the need dollars to repay the debt. 

In the first round Mellon and then Chancellor of the Exchequer Stanly Baldwin renegotiated the $4.6 billion owed to the U.S. at 4.5% interest rate with a 25-year term, down to a phased 3% and 3.5% loan with a 62-year term in 1922. This took quite some doing on Mellon’s part to convince a recalcitrant Congress to accept the new terms. Nevertheless, Britain was very unhappy with the agreement and when Churchill became chancellor, he worked to further ease the burden. Later in 1926 Mellon negotiated a restructuring of the $4 billion French debt on easier terms than what Britain had agreed to. It took until 1929 for France to finally ratify the deal. France received better terms because Mellon viewed that their ability to pay was less than that of Britain.

Hanging in the background was the issue of German reparations. To Britain and France, the reparation was linked to the repayment of debt to the U.S., while the U.S. viewed it a separate issue. The Dawes Plan of 1924 which enabled U.S. loans to Germany which then were used to pay France and Britain who in turn paid the U.S... For full discussion of this and other inter-related issues see Liaquat Ahamed’s “The Lords of Finance” and Straumann’s “1931: Debt Crisis and the Rise of Hitler.” ( https://shulmaven.blogspot.com/2019/07/my-amazon-review-of-tobias-straumanns.html)

My criticism of Eichler is that she views the Dawes Plan in the light of history rather than how contemporaries experienced it. The Dawes Plan set off a boom in Germany and put Europe on the road to recovery in 1925. That along with the Locarno Treaty which established the borders of Western Europe engendered an uptick in confidence. That was true on the continent, but that was not true of Britain where Churchill returned to the gold standard and over-valued the pound at its pre-war level. Thus, Britain missed out on the boom. It was only with the 1929 stock market crash that the inherent flaws of the Dawes Plan became manifest. In the end most of the debts would never be repaid so it would have been much better had the slate were wiped clean in 1921. The world would be a much different place today had that happened.

Further, Eichler gives us a real sense of the high society that Mellon and Churchill moved in from London parties to excursions in Paris and the south of France. Three people in Mellon’s entourage would go on to bigger and better things. Assistant Secretary of the Treasury Russell Leffingwell would chair JP Morgan and the Council on Foreign Relations; Parker Gilbert who succeeded Leffingwell at treasury would go on to chair the Reparations Commission, and later Morgan Stanley (his son would also do that); and his son-in-law David Bruce would be an early hire in the OSS and later become a distinguished diplomat.

To sum up, Jill Eichler has tuned what could have been a nerdy story into an interesting history of some of the financial aspects of diplomacy of the 1920’s. 

My Review of Sonia Purnell's "Kingmaker: Pamela Harriman's Astonishing Life ...."

 Sex, Money, and Power

Pamela Harriman was born in 1920 into minor nobility as a Digby. She later, through her marriage to Randolph became a Churchill and through her marriage to Averell she became a Harriman. In the middle she married Hayward Leland a Broadway producer of “Sound of Music” fame. However, the real story as journalist/biographer Sonia Purnell tells it in her hagiographic biography is about how a once chubby girl uses are innate smarts and her sexual powers of seduction to have access to great wealth and be influential in the corridors of power in England, France, and the United States. 

Her marriage to the alcoholic and womanizing Randolph was destined to fail. Nevertheless, she so charmed his father Winston, that she was able to sit on many high-level meetings of state at his Chequers country estate. She also had his full permission to seduce Averell Harriman who was in charge of lend-lease aid to Britain. She was 21 and Harriman was 50. It was said that her high diplomacy took place between the sheets of the Dorchester Hotel, where Harriman put her up. After Harriman was reassigned to Moscow, she seduced Edward R. Murrow, the leading radio journalist in London at the time. Murrow almost divorced his wife for Pamela. Her affair with Murrow did not stop her from sleeping with Bill Paley, Murrow’s boss at CBS radio.

These affairs took place after Pamela gave birth to young Winston. She was far from the best of mothers and young Winston was shuttled between relatives and nannies. Her sexual liaisons and the affairs of state took precedence over her son.

The end of the war was a letdown for her, but soon she took up with Prince Aly Khan. Khan teaches her the Arabian arts of lovemaking which she will soon use with great affect. According to Purnell she became quite expert at oral sex.

After her affair with Khan, she started a long lasting on and off affair with Giorgio Agnelli of Italy’s Fiat automobile company. He along with Khan rained substantial gifts upon her including apartments and artwork. She later had an affair with Eli Rothschild of the Paris branch of the eponymous bank.

She moved to the United States upon her marriage to Hayward Leland. The marriage was not a happy one but it last until Leland’s death in 1971. After his death and the death of Harriman’s wife, the two are reunited after thirty years. Remember at this time Harriman was 80 and she was 50. Harriman, a scion of the Union Pacific fortune was a power broker in the Democratic Party. He introduced her to the Washington D.C. movers and shakers and their Georgetown mansion becomes the locus of high-level socio/political events.

By 1980 she was the doyenne of the Democratic Party. After Bill Clinton’s defeat in his reelection race for the Arkansas governorship, she took him under her wing and introduced him to the D.C. establishment. By the mid-1980’s she had a political action committee and was funding Democratic Senate races throughout the country. She became close to Sandy Berger and Richard Holbrooke who would become key figures in the Clinton Administration. She also went with Averell to Moscow to meet with the then Soviet leader Yuri Andropov and sensed that times were changing in Moscow.

As a reward for all of her efforts, Bill Clinton appointed her ambassador to France in 1993. There she became very close to French president Jacques Chirac. He spoke at her memorial. While in Paris she played a behind the scenes role in settling the Bosnian Wars.

All wasn’t sex and parties. She had an abortion, and her finances were totally mismanaged by Washington power broker Clark Clifford causing the Harriman family to sue her, as she was the executor of the Harriman estate. 

All I have to say is that her seductive powers jump right off the pages of this wonderful book. Purnell gives great credit to this remarkable woman.

My Amazon Review of Henry Hemming's "Agents of Influence...."

Churchill’s Man in New York

On the 36^th floor in the Rockefeller Center International Building (630 5^th Avenue) at the elevator bank for the offices of Capital Research there is a small plaque commemorating the work of William Stephenson for his efforts to bring the United States into the war against Nazi Germany. It was out of those offices in 1940 and 1941 that Stephenson ran a vast apparatus to influence an isolationist America to enter the war. 

Henry Hemming tells the story of how a boy who was born in Winnipeg, Canada’s red-light district grew up to be a World War I ace flier, established a successful business in the booming 1920s British radio industry which then morphed into a European-wide investment company. The information network that he established caught the eye of MI-6 led to his recruitment to head-up British efforts in the United States. What makes the book especially interesting is that William Stephenson was the author’s grandfather’s godfather. So in a way through family lore, Hemming is connected to his protagonist.

It is in New York that Stephenson establishes a far reaching network that encompasses the pro-intervention Century Group, Wendell Willkie and future advertising mogul David Ogilvy who was then working for the Gallup Poll. His most important connection was with Bill Donovan whom he convinces of the need for the U.S. to establish a centralized intelligence agency and it is with that connection Stephenson gets access to the White House. Stephenson schools Donovan on the art of intelligence. Donovan initially establishes the Office of Information Coordination, which morphs into the Office of Strategic Services and then in 1947 becomes the CIA.

Stephenson faces off against his German counterpart Hans Thomsen who out of the German Embassy was in the business of funding pro-German groups, funding supportive Congressmen, most notably Hamilton Fish of New York and feeding speech and newspaper article ideas to the pro-German aviator Charles Lindbergh.  

We see that in 1941 Stephenson engaged in the same tricks that the Russians used in the 2016 elections.  He generates “fake news”, funds pro-intervention groups, sabotages pro-German and anti-intervention groups, forges documents and plants articles in the New York Herald Tribune which for all practical purposes became an arm of British intelligence. Along the way we meet song writer and expert forger Eric Mashwitz and Ian Fleming who would later write the James Bonds spy novels.

Hemming, utilizing recently declassified sources, tells Stephenson’s life story with great verve. It still remains a wonder how Stephenson pulled everything together and managed to move American public opinion, along with the facts on the ground and in the Atlantic, towards intervention prior to Pearl Harbor.

For the full Amazon URL see: https://www.amazon.com/review/R17KRNE7A0VOBM/ref=pe_1098610_137716200_cm_rv_eml_rv0_rv

My Amazon Review of Daniel Todman's "Britain's War: Into Battle, 1937-1941"

A Comprehensive Look at Britain Going to War

History professor Daniel Todman has written an encyclopedic look at what the effects were of the onset of World War II and its actual beginning on the people of Britain. Aside from the broad geopolitical history which is well known, Todman details the internal politics of both the Conservative and Labour parties as well as discussing the day-to-day lives of the British people. It is a long book for the lay reader, 816 pages in the print edition, but the reader is rewarded. Still I would have preferred a shorter book, hence four stars, not five. Moreover for readers interested in a very accessible view into the lives of the average Brit during the war I would recommend the British television series, “Foyle’s War” available on Netflix.

Todman begins his book with the coronation of George VI in May 1937 and ends with twin debacles at the start of the Pacific War at Pearl Harbor and sinking of the prides of the British fleet off Singapore by carrier based Japanese aircraft in December 1941. It is a lot of history to cover and at home aside from the collapse of the old industrial regions of the north, the British economy was doing relatively well in the 1930s being governed by moderate conservative policies. For all practical purposes Labour was frozen out. However as the war clouds grow in Europe the British economy is put on a war footing increasing taxation and putting much activity under the command and control of the government. This is Labour’s opening to power.

With the collapse of France, Chamberlain resigns and Churchill becomes Prime Minister to rally the country after Dunkirk. The key Labour ministers in the government are Ernest Bevan and Clement Atlee. Their long term goals are to bring socialism to Great Britain. They succeed in 1945 so much so that their policies hold back the country for the next 30 years. (My comment, not the author’s.) Churchill’s goal is to preserve the British Empire; at this he fails. He also fails in the sense the liberal reform wing of the Conservative Party headed by Eden and Macmillan end up in control. Nevertheless he certainly wins the main fight in defeating the Nazis.

Todman has given us an excellent work of history and for the real history buff I highly recommend it, a little less so for the average lay reader.

For the full Amazon URL see: https://www.amazon.com/review/R22PZV5A785B1K/ref=pe_1098610_137716200_cm_rv_eml_rv0_rv