Chapter Twelve: Sink the Lusitania!

The role of J. P. Morgan in providing loans to England and France in World War I; the souring of those loans as it became apparent that Germany would win; the betrayal of a British ship and the sacrifice of American passengers as a stratagem to bring America into the war; the use of American taxes to pay off the loans.

Since the latter part of the eighteenth century, the Rothschild Formula had controlled the political climate of Europe. Nations had increasingly confronted each other over border disputes, colonial territories, and trade routes. An arms race had been in progress for many years; large, standing armies had been recruited and trained; military alliances had been hammered together; all in preparation for war. The assassination of Ferdinand was not the cause but the trigger. It was merely the spark that lit the fuse that fired the first loaded cannon.

An Investment in War

The exigencies of war in Europe required England and France to go heavily into debt When their respective central banks and local merchant banks could no longer meet that need, the beleaguered governments turned to the Americans and selected the House of Morgan — acting as partners of the Rothschilds — to act as sales agent for their bonds. Most of the money raised in this fashion was quickly returned to the United States to acquire war-sensitive materials, and Morgan was selected as the U.S. purchase agent for those as well. A commission was paid on all transactions in both directions: once when the money was borrowed and again when it was spent. Furthermore, many of the companies receiving production contracts were either owned outright by Morgan holding companies or were securely within his orbit of bank control. Under such an arrangement it will not be surprising to learn, as we shall in a moment, that Morgan was not overly anxious to see hostilities come to a close. Even the most honorable of men can be corrupted by the temptation of such gigantic flows of cash.

Writing in the year 1919, just a few months after the end of the war, John Moody says:

Not only did England and France pay for their supplies with money furnished by Wall Street, but they made their purchases through the same medium … Inevitably the house of Morgan was selected for this important task Thus the war had given Wall Street an entirely new role. Hitherto it has been exclusively the headquarters of finance; now it became the greatest industrial mart the world had ever known. In addition to selling stocks and bonds, financing railroads, and performing the other tasks of a great banking center, Wall Street began to deal in shells, cannon, submarines, blankets, clothing, shoes, canned meats, wheat and the thousands of other articles needed for the prosecution of a great war.

The money began to flow in January of 1915 when the House of Morgan signed a contract with the British Army Council and the Admiralty. The first purchase, curiously, was for horses, and the amount tendered was $12 million. But that was but the first drop of rain before the deluge. Total purchases would eventually climb to an astronomical $3 billion. The firm became the largest consumer on earth, spending up to $10 million per day. Morgan offices at 23 Wall Street were mobbed by brokers and manufacturers seeking to cut a deal The bank had to post guards at every door and at the partners’ homes as well. Each month, Morgan presided over purchases which were equal to the gross national product of the entire world just one generation before.

Throughout all this, Morgan vigorously claimed to be a pacifist.

Nobody could hate war more than I do, he told the Senate Munitions Committee. But such professions of righteousness were difficult to accept. Lewinsohn comments: The 500 million dollar loan contracted in autumn 1915 brought to the group of bankers, at whose head Morgan was, a net profit of 9 million dollars … Again, in 1917, the French government paid to Morgan’s and other banks a commission of 1,500,000 dollars, and a further million in 1918.

Besides the issue of loans there was another source of profit: the purchase and sale of American stock which the Allies surrendered so that they could buy munitions in the States. It is estimated that in the course of the war some 2000 million [two billion] dollars passed in this way through Morgan’s hands. Even if the commission was very small, transactions of such dimensions would give him an influence on the stock market which would carry very real advantages …

His hatred against war did not prevent him, citizen of a neutral country, from furnishing belligerent powers with 4,400,000 rifles for a matter of $194,000,000… The profits were such as to compensate to some degree his hatred of warfare. According to his own account, he received, as agent of the English and French governments, a commission of 1% on orders totalling $3,000,000,000. That is, he received some $30,000,000… Besides these two chief principals, Morgan, however, also acted for Russia (for whom he did business amounting to $412,000,000) and for Italy and Canada (figures for his business with the last two not having been published) …

J. P. Morgan, and some of his partners in the bank, were at the time shareholders in companies that were … concerns which made substantial profits from the orders he placed with them … It is really astonishing that a central buying organization should have been confided to one who was buyer and seller at the same time.

Germany’s U-Boats Almost Won the War

But there were dark clouds gathering above Wall Street as the war began to go badly for the Allies. With the passage of time and the condensing of history, it is easy to forget that Germany and the Central Powers almost won the war prior to U.S. entry. Employing a small fleet of newly developed submarines, Germany was well on her way to cutting off England and her allies from all outside help. It was an amazing feat and it changed forever the concept of naval warfare. Germany had a total of twenty-one U-boats, but, because they constantly had to be repaired and serviced, the maximum number at sea was only seven at any one time. Yet, between 1914 and 1918, German submarines had sunk over 5,700 surface ships. Three-hundred thousand tons of Allied shipping were sent to the bottom every week. One out of every four steamers leaving the British Isles never returned. In later years, British Foreign Secretary, Arthur Balfour, wrote: At that time, it certainly looked as though we were going to lose the war, Robert Ferrell, in his Woodrow Wilson and World War J, concluded: The Allies approached the brink of disaster, with no recourse other than to ask Germany for terms. William McAdoo, who was Secretary of the Treasury at the time, says in his memoirs:

Across the sea came the dismay of the British — a dismay that carried a deepening note of disaster. There was a fear, and a well-grounded one, that England might be starved into abject surrender … On April 27, 1917, Ambassador Walter H. Page reported confidentially to the President that the food in the British Isles was not more than enough to feed the civil population for six weeks or two months.

Under these circumstances, it became impossible for Morgan to find new buyers for the Allied war bonds, neither for fresh funding nor to replenish the old bonds which were coming due and facing default. This was serious on several counts. If bond sales came to a halt, there would be no money to continue purchasing war materials. Commissions would be lost at both ends. Furthermore, if the previously-sold bonds were to go into default, as they certainly would if Britain and France were forced to accept peace on Germany’s terms, the investors would sustain gigantic losses. Something had to be done. But what? Robert Ferrell hints at the answer:

In the mid thirties a Senate committee headed by Gerald P. Nye of North Dakota investigated the pre-1917 munitions trade and raised a possibility that the Wilson administration went to war because American bankers needed to protect their Allied loans.

As previously mentioned by William McAdoo, the American ambassador to England at that time was Walter Hines Page, a trustee of Rockefeller’s social-engineering foundation called the General Education Board. It was learned by the Nye committee that, in addition to his government salary, which he complained was not high enough, Page also received an allowance of $25,000 a year (an enormous amount in 1917) from Cleveland Dodge, president of Rockefeller’s National City Bank. On March 15, 1917, Ambassador Page sent a telegram to the State Department outlining the financial crisis in England. Since sources of new capital had dried up, the only way to keep the war going, he said, was to make direct grants from the U.S. Treasury. But, since this would be a violation of neutrality treaties, the United States would have to abandon its neutrality and enter the war. He said:

I think that the pressure of this approaching crisis has gone beyond the ability of the Morgan Financial Agency for the British and French Governments … The greatest help we could give the Allies would be such a credit … Unless we go to war with Germany, our Government, of course, cannot make such a direct grant of credit.

The Morgan group had floated one-and-a-half billion dollars in loans to Britain and France. With the fortunes of war turning against them, investors were facing the threat of a total loss. As Ferdinand Lundberg observed: The declaration of war by the United States, in addition to extricating the wealthiest American families from a dangerous situation, also opened new vistas of profits.

Colonel House

One of the most influential men behind the scenes at this time was Colonel Edward Mandell House, personal adviser to Woodrow Wilson and, later, to F.D.R. House had close contacts with both J. P. Morgan and the old banking families of Europe. He had received several years of his schooling in England and, in later years, surrounded himself with prominent members of the Fabian Society. Furthermore, he was a man of great personal wealth, most of it acquired during the War Between the States. His father, Thomas William House, had acted as the confidential American agent of unknown banking interests in London. It was commonly believed he represented the Rothschilds. Although settled in Houston, Texas, the elder often remarked that he wanted his sons to know and serve England. He was one of the few residents of a Confederate state who emerged from the War with a great fortune.

It is widely acknowledged that Colonel House was the man who selected Wilson as a presidential candidate and who secured his nomination. He became Wilson’s constant companion, and the President admitted publicly that he depended on him greatly for instruction and guidance. Many of Wilson’s important appointive posts in government were hand selected by House. He and Wilson even went so far as to develop a private code so they could communicate freely over the telephone. The President himself had written: Mr. House is my second personality. He is my independent self. His thoughts and mine are one.

George Viereck, an admiring biographer of House, tells us:

House had the Texas delegation in his pocket … Always moving quietly in the background, he made and unmade several governors of Texas … House selected Wilson because he regarded him as the best available candidate …

For seven long years Colonel House was Woodrow Wilson’s other self. For six long years he shared with him all but the title of the Chief Magistracy of the Republic. For six years two rooms were at his disposal in the North Wing of the White House … It was House who made the slate for the Cabinet formulated the first policies of the Administration and practically directed the foreign affairs of the United States. We had, indeed, two Presidents for one!… Super-ambassador, he talked to emperors and kings as an equal. He was the spiritual generalissimo of the Administration. He was the pilot who guided the ship.

A Secret Agreement to Get The U.S. into War

As the presidential election neared for Wilson’s second term, Colonel House entered into a series of confidential talks with Sir William Wiseman, who was attached to the British embassy in Washington and who acted as a secret intermediary between House and the British Foreign Office. Charles Seymour writes: Between House and Wiseman there were soon to be few political secrets. his was upsetting to the Secretary of State, William Jennings Bryan. Mrs. Bryan, as co-author of her husband’s memoirs, writes:

While Secretary Bryan was bearing the heavy responsibility of the Department of State, there arose the curious conditions surrounding Mr. E.M. House’s unofficial connection with the President and his voyages abroad on affairs of State, which were not communicated to Secretary Bryan … The President was unofficially dealing with foreign governments.

What was the purpose of those dealings? It was nothing less than to work out the means whereby the United States could be brought into the war. Viereck explains:

Ten months before the election which returned Wilson to the White House in 1916 because he kept us out of war, Colonel House negotiated a secret agreement with England and France on behalf of Wilson which pledged the United States to intervene on behalf of the Allies.

On March 9, 1916, Woodrow Wilson formally sanctioned the undertaking. If an inkling of the conversations between Colonel House and the leaders of England and France had reached the American people before the election, it might have caused incalculable revulsions of public opinion …

From this conversation and various conferences with Sir Edward Grey grew the Secret Treaty, made without the knowledge and consent of the United States Senate, by which Woodrow Wilson and House chained the United States to the chariot of the Entente … After the War the text of the agreement leaked out. Grey was the first to tattle. Page discussed it at length. Colonel House tells its history. C. Hartley Grattan discusses it at length in his book, Why We FoughL But for some incomprehensible reason the enormous significance of the revelation never penetrated the consciousness of the American people.

The basic terms of the agreement were that the United States government would offer to negotiate a peaceful settlement between Germany and the Allies and would then put forth a specific proposal for the terms of that settlement. If either side refused to accept the proposal, then the United States would come into the war as an ally of the other side. The catch was that the terms of the proposal were carefully drafted so that Germany could not possibly accept them. Thus, to the world, it would look as though Germany was at fault and the United States was humanitarian. As Ambassador Page observed in a memorandum dated February 9, 1916:

House arrived from Berlin-Havre-Paris full of the idea of American intervention. First his plan was that he and I and a group of the British Cabinet (Grey, Asquith, Lloyd George, Reading, etc.) should at once work out a minimum programme of peace — the least that the Allies would accept, which, he assumed, would be unacceptable to the Germans; and that the President would take this programme and present it to both sides; the side that declined would be responsible for continuing the war … Of course, the fatal moral weakness of the foregoing scheme is that we should plunge into the War, not on the merits of the cause, but by a carefully sprung trick.

On the surface it is a paradox that Wilson, who had always been a pacifist, should now enter into a secret agreement with foreign powers to involve the United States in a war which she could easily avoid. The key that unlocks this mystery is the fact that Wilson also was an internationalist. One of the strongest bonds between House and himself was their common dream of a world government. They both recognized that the American people would never accept such a concept unless there were extenuating circumstances. They reasoned that a long and bloody war was probably the only event that could condition the American mind to accept the loss of national sovereignty, especially if it were packaged with the promise of put-ting an end to all wars in the future. Wilson knew, also, that, if the United States came into the war early enough to make a real difference on the battlefield and if large amounts of American dollars could be loaned to the Allied powers, he would be in a position after the war to dictate the terms of peace. He wrote to Colonel House: England and France have not the same views with regard to peace as we have by any means. When the war is over, we can force them to our way of thinking, because by that rime they will among other things be financially in our hands. And so Wilson tolerated the agony of mixed emotions as he plotted for war as a necessary evil to bring about what he perceived as the ultimate good of world government.

With the arrival of 1917, the President was planting hints of both war and world government in almost every public utterance. In a typical statement made in March of that year, he said: The tragic ents of the thirty months of vital turmoil through which we have just passed have made us citizens of the world. There can be no turning back. Our own fortunes as a nation are involved, whether we would have it so or not.

It was about this same time that Wilson called together the Democratic leaders of Congress to a special breakfast meeting at the White House. He told them that, in spite of public sentiment, there were many sound reasons for the country to enter the war and he asked them to help him sell this plan to Congress and the voters. Harry Elmer Barnes tells us:

These men were opposed to war and, hence, rejected his proposals somewhat heatedly. Wilson knew that it was a poor time to split the party just before an election, so he dropped the matter at once and, with Col. House, mapped out a pacifist platform for the coming campaign. Governor Martin Glynn of New York and Senator Ollie James of Kentucky were sent to the St. Louis convention to make keynote speeches, which were based on the slogan: He kept us out of war! … Before he had been inaugurated a second time, the Germans played directly into his hands by announcing the resumption of submarine warfare … It was fortunate for Britain and the bankers that the Germans made this timely blunder, as Great Britain had overdrawn her American credit by some $450,000,000 and the bankers were having trouble in floating more large private loans. It was necessary now to pass on the burden of financing the Entente to the Federal Treasury.

Selling War to The American People

Through secret agreements and trickery, America had been committed to war, but the political and monetary scientists realized that something still had to be done to change public sentiment. How could that be accomplished?

Wall Street control over important segments of the media was considerable. George Wheeler tells us: Around this time the Morgan firm was choosing the top executives for the old and troubled Harper & Brothers publishing house … In the newspaper field, Pierpont Morgan at this period was in effective control of the New York Sun,… the Boston News Bureau, Barron’s magazine, and the Wall Street Journal.

On February 9, 1917, Representative Callaway from Texas took the floor of Congress and provided further insight. He said:

In March, 1915, the J. P. Morgan interests, the steel, shipbuilding, and powder interests, and their subsidiary organizations, got together 12 men high up in the newspaper world and employed them to select the most influential newspapers in the United States and sufficient number of them to control generally the policy of the daily press … They found it was only necessary to purchase the control of 25 of the greatest papers … An agreement was reached; the policy of the papers was bought to be paid for by the month; an editor was furnished for each paper to properly supervise and edit information regarding the questions of preparedness, militarism, financial policies, and other things of national and international nature considered vital to the interests of the purchasers.

Charles S. Mellen of the New Haven Railroad testified before Congress that his Morgan-owned railroad had more than one-thousand New England newspapers on the payroll, costing about $400,000 annually. The railroad also held almost a half-million dollars in bonds issued by the Boston Herald. This web of control was multiplied by hundreds of additional companies which also were controlled by Morgan and other investment-banking houses.

In addition, the Morgan trust exercised media control by its power of advertising. Writing in 1937, Lundberg says: More advertising is controlled by the J. P. Morgan junta than by any single financial group, a factor which immediately gives the banking house the respectful attention of all alert independent publishers.

Morgan control over the media at that time is well documented, but he was by no means alone in this. During the 1912 hearings held by the Senate Privileges and Elections Committee, it was revealed that Representative Joseph Sibley from Pennsylvania was acting as a funnel for Rockefeller money to various cooperative Congressmen. A letter was introduced to the Committee written by Sibley in 1905 to John D. Archbold, the man at Rockefeller’s Standard Oil Company who provided the money. In that letter Sibley said: An efficient literary bureau is needed, not for a day or a crisis but a permanent healthy control of the Associated Press and kindred avenues. It will cost money but will be the cheapest in the end.

Lundberg comments further:

So far as can be learned, the Rockefellers have given up their old policy of owning newspapers and magazines outright, relying now upon the publications of all camps to serve their best interests in return for the vast volume of petroleum and allied advertising under Rockefeller control. After the J. P. Morgan bloc, the Rockefellers have the most advertising of any group to dispose of. And when advertising alone is not sufficient to insure the fealty of a newspaper, the Rockefeller companies have been known to make direct payments in return for a friendly editorial attitude.

It is not surprising, therefore, that a large part of the nation’s press, particularly in the East, began to editorially denounce Germany. The cry spread across the land to take up arms against the enemy of western civilization. Editors became eloquent on the patriotic duty of all Americans to defend world democracy. Massive preparedness demonstrations and parades were organized.

But it was not enough. In spite of this massive sales campaign, the American people still were not buying. Polls conducted at the time showed popular sentiment continuing to run ten-to-one in favor of staying out of Europe’s war. Clearly, what was needed was something both drastic and dramatic to change public opinion.

Morgan Control Over Shipping

Banking was not the only business in which Morgan had a strong financial interest. Using his control over the nation’s railroads as financial leverage, he had created an international shipping trust which included Germany’s two largest lines plus one of the two in England, the White Star Lines. Morgan had attempted in 1902 to take over the remaining British line, the Cunard Company, but was blocked by the British Admiralty which wanted to keep Cunard out of foreign control so her ships could be pressed into military service, if necessary, in time of war. The Lusitania and the Mauretania were built by Cunard and became major competitors of the Morgan cartel. It is an interesting footnote of history, therefore, that, from the Morgan perspective, the Lusitania was quite dispensable. Ron Chernow explains:

Pierpont assembled a plan for an American-owned shipping trust that would transpose his community of interest principle — cooperation among competitors in a given industry — to a global plane. He created … the world’s largest [fleet] under private ownership … An important architect of the shipping trust was Albert Ballin, whose Hamburg-Amerika Steamship Line, with hundreds of vessels, was the world’s largest shipping company … Pierpont had to contend with a single holdout, Britain’s Cunard Line … After the Boer War, the Morgan combine and Cunard exhausted each other in debilitating rate wars.

As stated previously, Morgan had been retained as the official trade agent for Britain. He handled the purchasing of all war materials in the United States and coordinated their shipping as well. Following in the footsteps of the Rothschilds of centuries past, he quickly learned the profitable skills of war-time smuggling. Colin Simpson, author of The Lusitania, describes the operation:

Throughout the period of America’s neutrality, British servicemen in civilian clothes worked at Morgan’s. This great banking combine rapidly established such a labyrinthine network of false shippers, bank accounts and all the paraphernalia of smuggling that, although they fooled the Germans, there were also some very serious occasions when they flummoxed the Admiralty and Cunard, not to speak of the unfortunate passengers on the liners which carried the contraband.

The Lusitania

The Lusitania was a British passenger liner that sailed regularly between Liverpool and New York. She was owned by the Cunard Company, which, as previously mentioned, was the only major ship line which was a competitor of the Morgan cartel. She left New York harbor on May 1, 1915, and was sunk by a German submarine off the coast of Ireland six days later. Of the 1,195 persons who lost their lives, 195 were Americans. It was this event, more than any other, that provided the advocates of war with a convincing platform for their views, and it became the turning point where Americans reluctantly began to accept, if not the necessity of war, at least its inevitability.

The fact that the Lusitania was a passenger ship is misleading. Although she was built as a luxury liner, her construction specifications were drawn up by the British Admiralty so that she could be converted, if necessary, into a ship of war. Everything from the horsepower of her engines and the shape of her hull to the placement of ammunition storage areas were, in fact, military designs. She was built specifically to carry twelve six-inch guns. The construction costs for these features were paid for by the British government. Even in times of peace, it was required that her crew include officers and seamen from the Royal Navy Reserve.

In May of 1913, she was brought back into dry dock and outfitted with extra armor, revolving gun rings on her decks, and shell racks in the hold for ammunition. Handling elevators to lift the shells to the guns were also installed. Twelve high-explosive cannons were delivered to the dry dock. All this is a matter of public record at the National Maritime Museum in Greenwich, England, but whether the guns were actually installed at that time is still hotly debated. There is no evidence that they were. In any event, on September 17, the Lusitania returned to sea ready for the rigors of war, and she was entered into the Admiralty fleet register, not as a passenger liner, but an armed auxiliary cruiser] From then on, she was listed in Jane’s Fighting Ships as an auxiliary cruiser and in the British publication, The Naval Annual, as an armed merchant man.

Part of the dry dock modification was to remove all the passenger accommodations in the lower deck to make room for more military cargo. Thus, the Lusitania became one of the most important carriers of war materials — including munitions — from the United States to England. On March 8,1915, after several close calls with German submarines, the captain of the Lusitania turned in his resignation. He was willing to face the U-boats, he said, but he was no longer willing to carry the responsibility of mixing passengers with munitions or contraband.

Churchill Sets A Trap

From England’s point of view, the handwriting on the wall was clear. Unless the United States could be brought into the war as her ally, she soon would have to sue for peace. The challenge was how to push Americans off their position of stubborn neutrality. How that was accomplished is one of the more controversial aspects of the war. It is inconceivable to many that English leaders might have deliberately plotted the destruction of one of their own vessels with American citizens aboard as a means of drawing the United States into the war as an ally. Surely, any such idea is merely German propaganda. Robert Ballard, writing in National Geographic, says: Within days of the sinking, German sympathizers in New York came up with a conspiracy theory. The British Admiralty, they said, had deliberately exposed Lusitania to harm, hoping she would be attacked and thus draw the U.S. into the war.

Let’s take a closer look at this conspiracy theory. Winston Churchill, who was First Lord of the Admiralty at that time, said:

There are many kinds of maneuvers in war … There are maneuvers in time, in diplomacy, in mechanics, in psychology; all of which are removed from the battlefield, but react often decisively upon it … The maneuver which brings an ally into the field is as serviceable as that which wins a great battle. The maneuver which gains an important strategic point may be less valuable than that which placates or overawes a dangerous neutral.

The maneuver chosen by Churchill was particularly ruthless. Under what was called the Cruiser Rules, warships of both England and Germany gave the crews of unarmed enemy merchant ships a chance to take to the lifeboats before sinking them. But, in October of 1914, Churchill issued orders that British merchant ships must no longer obey a U-boat order to halt and be searched. If they had armament, they were to engage the enemy, If they did not, they were to attempt to ram the sub. The immediate result of this change was to force German U-boats to remain submerged for protection and to simply sink the ships without warning.

Why would the British want to do such a stupid thing that would cost the lives of thousands of their own seamen? The answer is that it was not an act of stupidity. It was cold blooded strategy. Churchill boasted:

The first British countermove, made on my responsibility, … was to deter the Germans from surface attack. The submerged U-boat had to rely increasingly on underwater attack and thus ran the greater risk of mistaking neutral for British ships and of drowning neutral crews and thus embroiling Germany with other Great Powers.

To increase the likelihood of accidentally sinking a ship from a neutral Great Power, Churchill ordered British ships to remove their names from their hulls and, when in port, to fly the flag of a neutral power, preferably that of the United States. As further provocation, the British navy was ordered to treat captured U-boat crew members not as prisoners of war but as felons. Survivors, wrote Churchill, should be taken prisoner or shot — whichever is the most convenient. Other orders, which now are an embarrassing part of official navy archives, were even more ruthless: In a)] actions, white flags should be fired upon with promptitude.

The trap was carefully laid. The German navy was goaded into a position of shoot-first and ask questions later and, under those conditions, it was inevitable that American lives would be lost.

A Floating Munitions Depot

After many years of investigation, it is now possible to identify the cargo that was loaded aboard the Lusitania on her last voyage. It included 600 tons of pyroxyline (commonly called gun cotton), six-million rounds of ammunition, 1,248 cases of shrapnel shells (which may not have included explosive charges), plus an unknown quantity of munitions that completely filled the holds on the lowest deck and the trunkways and passageways of F deck. In addition, there were many tons of cheese, lard, furs and other items which were shown later to be falsely labelled. What they were is not now known, but it is certain they were at least contraband if not outright weapons of war. They were all consigned through the J. P. Morgan Company. But none of this was suspected by the public, least of all those hapless Americans who unknowingly booked a passage to death for themselves and their families as human decoys in a global game of high finance and low politics.

The German embassy in Washington was well aware of the nature of the cargo being loaded aboard the Lusitania and filed a formal complaint to the United States government, because almost all of it was in direct violation of international neutrality treaties. The response was a flat denial of any knowledge of such cargo. Seeing that the Wilson Administration was tacitly approving the shipment, the German embassy made one final effort to avert disaster. It placed an ad in fifty East Coast newspapers, including those in New York City, warning Americans not to take passage on the Lusitania. The ad was prepaid and requested to be placed on the paper’s travel page a full week before the sailing date. It read as follows:


TRAVELERS intending to embark on the Atlantic voyage are reminded that a state of war exists between Germany and her allies and Great Britain and her allies; that the zone of war includes the waters adjacent to the British Isles; that, in accordance with formal notice given by the Imperial German Government, vessels flying the flag of Great Britain, or of any of her allies, are liable to destruction in those waters and that travelers sailing in the war zone on ships of Great Britain or her allies do so at their own risk.


Washington, D.C., April 22, 1915.

Although the ad was in the hands of newspapers in time for the requested deadline, the State Department intervened and, raising the specter of possible libel suits, frightened the publishers into not printing it without prior clearance from State Department attorneys. Of the fifty newspapers, only the Des Moines Register carried the ad on the requested date. What happened next is described by Simpson:

George Viereck [who was the editor of a German-owned newspaper at that time and who had placed the ads on behalf of the embassy] spent April 26 asking the State Department why his advertisement had not been published. Eventually he managed to obtain an interview with [Secretary of State, William Jennings] Bryan and pointed out to him that on all but one of her wartime voyages the Lusitania had carried munitions. He produced copies of her supplementary manifests, which were open to public inspection at the collector’s office. More important, he informed Bryan, no fewer than six million rounds of ammunition were due to be shipped on the Lusitania the following Friday and could be seen at that moment being loaded on pier 54. Bryan picked up the telephone and cleared the publication of the advertisement. He promised Viereck that he would endeavor to persuade the President publicly to warn Americans not to travel. No such warning was issued by the President, but there can be no doubt that President Wilson was told of the character of the cargo destined for the Lusitania. He did nothing, but was to concede on the day he was told of her sinking that his foreknowledge had given him many sleepless hours.

It is probably true that Wilson was a pacifist at heart, but it is equally certain that he was not entirely the master of his own destiny. He was a transplanted college professor from the ivy-covered walls of Princeton, an internationalist at heart who dreamed of helping to create a world government and to usher in a millennium of peace. But he found himself surrounded by and dependent upon men of strong wills, astute political aptitudes, and powerful financial resources. Against these forces, he was all but powerless to act on his own, and there is good reason to believe that he inwardly suffered over many of the events in which he was compelled to participate. We shall leave it to others to moralize about a man who, by his deliberate refusal to warn his countrymen of their mortal peril, sends 195 of them to their watery graves. We may wonder, also, about how such a man can commit the ultimate hypocrisy of condemning the Germans for this act and then doing everything possible to prevent the American public from learning the truth. It would be surprising if the extent of his private remorse was not greater than merely a few sleepless hours.

The Final Voyage

But we are getting slightly ahead of the story. While Morgan and Wilson were setting the deadly stage on the American side of the Atlantic, Churchill was playing his part on the European side. When the Lusitania left New York Harbor on May 1, her orders were to rendezvous with a British destroyer, the Jnno, just off the coast of Ireland so she would have naval protection as she entered hostile waters. When the Lusitania reached the rendezvous point, however, she was alone, and the captain assumed they had missed each other in the fog. In truth, the Juno had been called out of the area at the last minute and ordered to return to Queenstown. And this was done with the full knowledge that the Lusitania was on a direct course into an area where a German submarine was known to be operating. To make matters worse, the Lusitania had been ordered to cut back on the use of coal, not because of shortages, but because it would be less expensive. Slow targets, of course, are much easier to hit. Yet, she was required to shut down one of her four boilers and, consequently, was now entering submarine-infested waters at only 75% of her potential speed.

As the Lusitania drew closer to hostile waters, almost everyone knew she was in grave danger. Newspapers in London were alive with the story of German warnings and recent sinkings. In the map room of the British Admiralty, Churchill watched the play unfold and coldly called the shots. Small disks marked the places where two ships had been torpedoed the day before. A circle indicated the area within which the U-boat must still be operating. A larger disk represented the Lusitania travelling at nineteen knots directly into the circle. Yet, nothing was done to help her. Admiral Coke at Queenstown was given perfunctory instructions to protect her as best he could, but he had no means to do so and, in fact, no one even bothered to notify the captain of the Lusitania that the rendezvous with the Juno had been canceled.

One of the officers present in the high-command map room on that fateful day was Commander Joseph Kenworthy, who previously had been called upon by Churchill to submit a paper on w hat would be the political results of an ocean liner being sunk with American passengers aboard. He left the room in disgust at the cynicism of his superiors. In 1927, in his book, The Freedom of the Seas, he wrote without further comment: The Lusitania was sent at considerably reduced speed into an area where a U-boat was known to be waiting and with her escorts withdrawn, Further comment is not needed.

Colonel House was in England at that time and, on the day of the sinking, was scheduled to have an audience with King George V. He was accompanied by Sir Edward Grey and, on the way, Sir Grey asked him: What will America do if the Germans sink an ocean liner with American passengers on board? As recorded in House’s diaries, he replied: I told him if this were done, a flame of indignation would sweep America, which would in itself probably carry us into the war. Once at Buckingham Palace, King George also brought up the subject and was even more specific about the possible target. He asked, Suppose they should sink the Lusitania with American passengers on board …

A Mighty Explosion, a Watery Grave

Four hours after this conversation, the black smoke of the Lusitania was spotted on the horizon through the periscope of the German submarine, 17-20. The ship came directly toward the U-boat, allowing it to full-throttle out of her path and swing around for a ninety-degree shot at her bow as she passed only 750 yards away. The torpedo struck nine feet below the water line on the starboard side slightly forward of the bridge. A second torpedo was readied but not needed. Quickly after the explosion of the impact, there was a second and much larger explosion that literally blew the side off of cargo hold number two and started the great ship immediately toward the bottom. And what a hole it must have been. The Lusitania, one of the largest ships ever built, sank in less than eighteen minutes!

Survivors among the crew who were working in the boiler rooms during the attack have attested that the boilers did not blow at that time. Simpson tells us:

The G torpedo had failed to blow in the inner bulkhead of No 1 boiler room, but just further forward something blew out most of the bottom of the bow of the ship. It may have been the Bethlehem Company’s 3-inch shells, the six million rounds of rifle ammunition or the highly dubious contents of the bales of furs or the small forty-pound boxes of cheese. Divers who have been down to the wreck unanimously testify that the bow was blasted by a massive internal explosion, and large pieces of the bow plating, buckled from the inside, are to be found some distance from the hull.

When a search team from the Woods Hole Oceanographic Institute surveyed the wreckage in the summer of 1993, they reported: When our cameras swept across the hold, we got a big surprise-There was no hole … We found no evidence that U-20’s torpedo had detonated an explosion, undermining one theory of why the liner sank.

It is difficult to share the team’s surprise. Photographs show that the wreck is resting on its starboard (right) side. Since that is where the torpedo struck, it is logical that the hole would not be visible. It would be on the side buried in the ocean floor. The team reported that they were able to inspect only part of the hull’s underside. That is because most of it — plus the entire starboard side — is buried in the muck. Since the torpedo struck only nine feet below the waterline, the hole would not logically be anywhere near the bottom of the hull but at a point midway between the main deck and the bottom In other words, it would be at the midpoint of the side that is now facing down. Failure to see the hole does not undermine the theory of internal explosion. It is exactly what one would expect.

In any event, it should be obvious that the Lusitania would not have gone to the bottom in eighteen minutes without a hole some-ivhere. Even the search team had to acknowledge that fact indirectly when it addressed the question of what might have caused the second explosion. In an obvious effort to avoid giving support to a conspiracy theory, the report concluded that the explosion probably was caused, not by munitions, but by coal dust.

In the final analysis, it makes little difference whether the explosion was caused by munitions or coal dust. The fact that it could have been caused by munitions is sufficient for the case.

A Hurried Cover-Up

An official inquiry, under the direction of Lord Mersey, was held to determine the facts of the sinking and to place the blame. It was a rigged affair from the beginning. All evidence and testimony was carefully pre-screened to make sure that nothing was admitted ffnto the record which would reveal duplicity on the part of British or American officials. Among the papers submitted to Lord Mersey prior to the hearings was one from Captain Richard Webb, one of the men chosen by the navy to assist in the cover up. It read: I am directed by the board of Admiralty to inform you that it is considered politically expedient that Captain Turner, the master of the Lusitania, be most prominently blamed for the disaster.

The final report was a most interesting document. Anyone reading it without knowledge of the facts would conclude that Captain William Turner was to blame for the disaster. Even so, Mersey attempted to soften the blow. He wrote: … blame ought not to be imputed to the captain … His omission to follow the advice in all respects cannot fairly be attributed either to negligence or incompetence. And then he added a final paragraph which, on the surface, appears to be a condemnation of the Germans but which, if read with understanding of the background, was an indictment of Churchill, Wilson, House and Morgan. He wrote:

The whole blame for the cruel destruction of life in this catastrophe must rest solely with those who plotted and with those who committed the crime.

Did Lord Mersey know that there could be a dual meaning to his Words? Perhaps not, but, two days after delivering his judgment, he wrote to Prime Minister Asquith and turned down his fee for services. He added: I must request that henceforth I be excused from pdministering His Majesty’s Justice. In later years, his only comment on the event was: The Lusitania case was a damn dirty business.

The Cry for War

The purposes of the Cabal would have been better served had an American ship been sunk by the Germans, but a British ship with 195 Americans drowned was sufficient to do the job. The players wasted no time in whipping up public sentiment. Wilson sent a note of outraged indignation to the Imperial German Government and this was widely quoted in the press.

By that time, Bryan had become completely disillusioned by the duplicity of his own government. On May 9, he sent a dour note to Wilson:

Germany has a right to prevent contraband going to the Allies and a sh ip carrying contraband should not rely upon passengers to protect her from attack-it would be like putting women and children in front of an army.

This did not deter Wilson from his commitment. The first note was followed by an even stronger one with threatening overtones which was intensely discussed at the Cabinet meeting on the first of June. McAdoo, who was present at the meeting, says:

I remember that Bryan had little to say at this meeting; he sat Uvoughout the proceedings with his eyes half closed most of the time After the meeting he told the President, as I learned later, that he could not sign the note … Bryan went on to say that he thought his usefulness as Secretary of State was over, and he proposed to resign. At the request of Wilson, McAdoo was dispatched to the Bryans’ home to persuade the Secretary to change his mind, lest his resignation be taken as a sign of disunity within the President’s Cabinet. Bryari agreed to think it over one more day but, the following morning his decision remained firm. In his memoirs, annotated by his wife, Mrs. Bryan reveals that her husband could not sleep that night He was so restless I suggested that he read a little till he should become drowsy. He had in his handbag a copy of an old book printed in 1829 and called A Wreath of Appreciation of Andrew Jackson. He found it very interesting.

What irony. In chapter seventeen we shall review the total war waged by President Jackson against the Bank of the United States, the predecessor of the Federal Reserve System, and we shall be reminded that it was Jackson who prophesied:

Is there no danger to our liberty and independence in a bank that in its nature has so little to bind it to our country? … [Is there not] cause to tremble for the purity of our elections in peace and for the independence of our country in war? … Controlling our currency, receiving our public monies, and holding thousands of our citizens in dependence, it would be more formidable and dangerous than a naval and military power of the enemy.

One can only wonder what thoughts went through Bryan’s mind as he recalled Jackson’s warning and applied it to the artificially created war hysteria that, at that very moment, was being generated by the financial powers on Wall Street and at the newly created Federal Reserve.

From England, Colonel House sent a telegram to President Wilson which he, in turn, read to his Cabinet It became the genesis of thousands of newspaper editorials across the land. He said piously:

America has come to the parting of the ways, when she must determine whether she stands for civilized or uncivilized warfare. We can no longer remain neutral spectators. Our action in this crisis will determine the part we will play when peace is made, and how far we may influence a settlement for the lasting good of humanity. We are being weighed in the balance, and our position amongst nations is being assessed by mankind.

In another telegram two days later, House reveals himself as the master psycho-politician playing on Wilson’s ego like a violinist stroking the strings of a Stradivarius. He wrote:

If, unhappily, it is necessary to go to war, I hope you will give the world an exhibition of American efficiency that will be a lesson for a century or more. It is generally believed throughout Europe that we are so unprepared and that it would take so long to put our resources into action, that our entering would make but little difference.

In the event of war, we should accelerate the manufacture of munitions to such an extent that we could supply not only ourselves but the Allies, and so quickly that the world would be astounded.

Congress could not resist the combined pressure of the press and the President On April 16, 1917, the United States officially declared war on the Axis powers. Eight days later, Congress dutifully passed the War Loan Act which extended $1 billion in credit to the Allies. The first advance of $200 million went to the British the next day and was immediately applied as payment on the debt to Morgan. A few days later, $100 million went to France for the same purpose. But the drain continued. Within three months the British had run up their overdraft with Morgan to $400 million dollars, and the firm presented it to the government for payment. The Treasury, however, was unable to put its hands on that amount of money without jeopardizing its own spendable funds and, at first, refused to pay. The problem was quickly solved, however, through a maneuver described at some length in Chapter Ten. The Federal Reserve System under Benjamin Strong simply created the needed money through the Mandrake Mechanism. The Wilson Administration found itself in an extremely awkward position, having to bail out J. P. Morgan, wrote Ferrell, but Benjamin Strong offered to help [Treasury-Secretary] McAdoo out of the difficulty. Over the following months in 1917-18 the Treasury quietly paid Morgan piecemeal for the overdraft. By the time the war was over, the Treasury had loaned a total of $9,466,000,000 including $2,170,000,000 given after the Armistice.

That was the cash flow they had long awaited. In addition to saving the Morgan loans, even larger profits were to be made from war production. The government had been secretly preparing for war for six months prior to the actual declaration. According to Franklin D. Roosevelt, then Assistant Secretary of the Navy, the Navy Department began extensive purchasing of war supplies in the Fall of 1916. Ferdinand Lundberg adds this perspective:

By no accident all the strategic government posts, notably those concerned with buying, were reserved for the Wall Street patriots. On the most vital appointments, Wilson consulted with Dodge [President of Rockefeller’s National City Bank], who … recommended the hitherto unknown [Bernard] Baruch, speculator in copper stocks, as chairman of the all-powerful War Industries Board …

As head of the War Industries Board, Baruch spent government funds at the rate of $10,000,000,000 annually … Baruch packed the War Industries Board and its committees with past and future Wall Street manipulators, industrialists, financiers, and their agents … who fixed prices on a cost-plus basis and, as subsequent investigations revealed, saw to it that costs were grossly padded so as to yield hidden profits …

The American soldiers fighting in the trenches, the people working at home,the entire nation under arms, were fighting, not only to subdue Germany, but to subdue themselves. That there is nothing metaphysical about this interpretation becomes clear when we observe that the total wartime expenditure of the United States government from April 6, 1917, to October 31, 1919, when the last contingent of troops returned from Europe, was $35,413,000,000. Net corporation profits for the period January 1,1916, to July, 1921, when wartime industrial activity was finally liquidated, were $38,000,000,000, or approximately the amount of the war expenditures. More than two-thirds of these corporation profits were taken by precisely those enterprises which the Pujo Committee had found to be under the control of the Money Trust.

The banking cartel was able, through the operation of the Federal Reserve System, to create the money to give to England and France so they, in turn, could pay back the American banks — exactly as was to be done again in World War II and again in the Big Bailout of the 1980s and ‘90s. It is true that, in 1917, the recently enacted income tax was useful for raising a sizable amount of revenue to conduct the war and also, as Beardsley Ruml pointed out a few years later, to take purchasing power away from the middle class. But the greatest source of funding came, as it always does in wartime, not from direct taxes, but from the hidden tax called inflation. Between 1915 and 1920, the money supply doubled from $20.6 billion to $39.8 billion. Conversely, during World War I, the purchasing power of the currency fell by almost 50%. That means Americans unknowingly paid to the government approximately one-half of every dollar that existed. And that was in addition to their taxes. This massive infusion of money was the product of the Mandrake Mechanism and cost nothing to create. Yet, the banks were able to collect interest on it all. The ancient partnership between the political and monetary scientists had performed its mission well.


To finance the early stages of World War I, England and France had borrowed heavily from investors in America and had selected the House of Morgan as sales agent for their bonds. Morgan also acted as their U.S. purchasing agent for war materials, thus profiting from both ends of the cash flow: once when the money was borrowed and again when it was spent. Further profits were derived from production contracts placed with companies within the Morgan orbit. But the war began to go badly for the Allies when Germany’s submarines took virtual control of the Atlantic shipping lanes. As England and France moved closer to defeat or a negotiated peace on Germany’s terms, it became increasingly difficult to sell their bonds. No bonds meant no purchases, and the Morgan cash flow was threatened. Furthermore, if the previously sold bonds should go into default, as they certainly would in the wake of defeat, the Morgan consortium would suffer gigantic losses.

The only way to save the British Empire, to restore the value of the bonds, and to sustain the Morgan cash flow was for the United States government to provide the money. But, since neutral nations were prohibited from doing that by treaty, America would have to be brought into the war. A secret agreement to that effect was made between British officials and Colonel House, with the concurrence of the President. From that point forward, Wilson began to pressure Congress for a declaration of war. This was done at the very time he was campaigning for reelection on the slogan He kept us out of war. Meanwhile, Morgan purchased control over major segments of the news media and engineered a nation-wide editorial blitz against Germany, calling for war as an act of American patriotism.

Morgan had created an international shipping cartel, including Germany’s merchant fleet, which maintained a near monopoly on the high seas. Only the British Cunard Lines remained aloof. The Lusitania was owned by Cunard and operated in competition with Morgan’s carteL The Lusitania was built to military specifications and was registered with the British Admiralty as an armed auxiliary cruiser. She carried passengers as a cover to conceal her real mission, which was to bring contraband war materials from the United States. This fact was known to Wilson and others in his administration, but they did nothing to stop it. When the German embassy tried to publish a warning to American passengers, the State Apartment intervened and prevented newspapers from printing it. When Lusitania left New York harbor on her final voyage, she was virtually a floating ammunition depot.

The British know that to draw the United States into the war would mean the difference between defeat and victory, and anything that could accomplish that was proper — even the coldly calculated sacrifice of one of her great ships with Englishmen aboard. But the trick was to have Americans on board also in order to create the toper emotional climate in the United States. As the Lusitania moved into hostile waters, where a German U-boat was known to be operating, First Lord of the Admiralty Winston Church ordered her destroyer protection to abandon her. This, plus the fact that she had been ordered to travel at reduced speed, made her an easy target. After the impact of one well placed torpedo, a mighty second explosion from within ripped her apart, and the ship that many believed could not be sunk, gurgled to the bottom in less than eighteen minutes.

The deed been done, and it set in motion great waves of revulsion against the Germans. These waves eventually flooded through Washington and swept the United States into war. Within days of the declaration, Congress voted $1 billion in credit for England and France. $200 million was sent to England immediately and was applied to the Morgan account. The vast quantity of money needed to finance the war was created by the Federal Reserve System, which means it was collected from Americans through that fully one-half of all they had saved. The infinitely higher cost in American blood was added to the bill.

Thus it was that the separate motives of such diverse personalities as Winston Churchill, J. P. Morgan, Colonel House, and Woodrow Wilson all found common cause in bringing America into World War I. Churchill maneuvered for military advantage Morean sought the profits of war, House schemed for political power, and Wilson Lamed of a chance to dominate a post-war League of Nations.