MARCH 2017

MARCH  2017
The Last Time a Republican Reigned in Big Business - 1903

Translate

Amazon Contextual Product Ads

Saturday, October 18, 2008

AFTER THE CRASH

I bring to your attention Mr. Andrew William Mellon, a scarecrow of a man whose life reads like a Balzac novel. He is virtually forgotten today, but he should be remembered. First, he is one of the men who brought you the Great Depression; second, he is the man who invented “trickle down economics”, which may yet bring you the next depression; third, his name has appeared on more dollar bills than anybody, with the possible exception of George Washington; and fourth his obsession with money was so great that its poison has leached into our own time, for Andrew William Mellon was the 'prater profectio' of the “vast right wing conspiracy.” Suffice it to say that if Freud had ever met Andrew Mellon, psychiatry would be a recognized science today. Andrew was lucky enough to be born at a time and a place (Industrializing Pittsburg – “hell with the lid off”) and to a Scrooge-like father (who “…disapproved of those possessed of festive dispositions”) both of which characteristics gave Andrew an advantage over the rest of humanity. His father was a successful banker, and when Andrew was 17 he loaned the boy enough cash - at reasonable interest rates - so that he could found his own lumber company, following the mantra, “What would father do?” After paying daddy back and making a small fortune of his own, Andrew sold out because he felt the market was about to take a downturn – which it promptly did. Andrew then joined with his father and brother in founding a bank, T. Mellon & Sons. In 1882 Andrew became the President and primary shareholder. Using it as a base, and his connections with the Pittsburg elite of Carnegie and Rockefeller, Andrew helped form ALCOA, B.F. Goodrich, Gulf Oil, Heinz Foods and dozens of other corporate giants in the dawning 20th century. He was, by 1899, the fourth richest man in America. But he was still living with his parents and eating porridge for dinner. Surly life had something warmer to offer Andrew than an “Oedipal competition” with his father that he could never win.It did. But Andrew screwed it up. In 1900 the 45 year old Andrew tried to escape his desolate fate by marrying the vivacious 19 year old Nora Mary McMullen, of the Scottish Guinness Brewing fortune McMullen’s. But instead of Nora providing Andrew with a way out, he dragged her into his miserable life. She tried to make dirty, foul Pittsburg a home. Nora had a daughter in 1901 and a son in 1907, but she also had occasional liaisons with an old boyfriend, the debonair and dashing Captain George Alfred Curphey. It was obvious that Nora was even more desperately miserable in Pittsburg than Andrew had been. But even after Andrew bought Curphey off for $20,000, Nora eventually ran away to England with him. In the end, after having refused Nora’s desolate pleas for a divorce for a decade, in 1912 Andrew charged her with adultery and fought her in court for custody of their children. He won, but that just meant that now he and the children were all miserable.
By 1920 Andrew had become so brittle that one biographer has described him as a “dried-up dollar bill waiting to be blown away”. And this was the man the new President, Warren G. Harding, named as his Secretary of the Treasury. And why not: if you believed in the power of unfettered capitalism then why not place its future in the hands of one of its most successful capitalists? After resigning from the sixty boards of company directors he sat upon, Andrew accepted the post. Of course he still maintained close contact with the family bank, now under the stewardship of his brother. The entire modern Republican economic game plan was on display while Andrew Mellon ran Treasury through the terms of Presidents Harding, Calvin Coolidge and Herbert Hoover. Through the entire decade of the 1920’s the economy grew at 7% per year, while unemployment remained between just three and four percent.(Sound familar?) Mellon moved to quickly retire much of the World War One debt, cutting it by $10 billion. He also pushed hard to cut the upper income tax rate from 77% to 24%, and cut taxes for middle class Americans at the same time, although by not nearly as much. He also reduced the Estate Tax, (known in current Republican circles as the “Death Tax”). But more importantly he moved to improve the “efficiency” of government. Remember this was when the largest civilian department in the government was the Post Office. In 1920 federal spending was $1,329.77 per person. By 1927, after seven years of Andrew Mellon efficency at Treasury, that spending had fallen to $180.57 per citizen - for the Post Office, the Navy, the Army, everything. So if Mellon was getting everything he wanted in 1929, what went wrong? As one historian has explained, “Between 1923 and 1929 manufacturing output per person-hour increased by 32 percent, but workers’ wages grew by only 8 percent. Corporate profits shot up by 65 percent" (Sound familar?)"… In 1929 60% of families were living on less than $1,500 a year….” And then, the Revenue Act of 1926 cut the taxes of those making $1 million or more by more than 2/3rd . As a result by 1929 the top 1/10th of 1% had an income equal to that of the bottom 42%. Another historian observed that, "The Mellon tax policy, placing its emphasis on relief for millionaires…made the mal-distribution of income…even worse." The middle class of Americans had been squeezed out of existence by 1929. And since Federal budgets had been progressively cut year after year, the economic health of the nation became dependent solely on the swing of business cycles, until the money in circulation contracted past the point where the economy could recover from the next stumble. The market fell from a high of 294 points in early October 1929, to 230.07 points on October 29th. Without cash moving through the system “Industrial production fell by nearly 45% between the years 1929 and 1932. Home-building dropped by 80%...” Does any of this sound familiar? One wag put it to verse; “Mellon pulled the whistle, Hoover rang the bell, Wall Street gave the signal, And the country went to hell.” Mellon saw what was happening, but favored what he called a “liquidationist” approach to the problem. (Sound familar, again?) As was recently tried again in the case of Lehman Brothers, Mellon believed that weak banks then (and weak brokerage firms now) should be allowed to fail. Mellon called it “weeding out”. What that strategy produced, in 1929 and in 2008, was panic selling, when confident investors realized they could be the next loser if their bank failed, and acted accordingly. In the public’s mind Mellon, who was by then 70 years old, had become the face of the “old system”. During 1930 and 1931 Hoover saw to it that Andrew Mellon spent much of his time in Europe with the thankless job of trying to get ex-allies to repay wartime debts. It was during this time that the Hoover administration, still following Andrew Mellon’s approaches, drove the economy from recession into depression, eventually dropping the market, on July 8 1932, to an all time low of just 41.22 points. And rightly or wrongly, in the public’s mind, Andrew Mellon bore most of the responsibility for the disaster. It was his business philosophy that had led to the crash, even if it wasn’t his philosophy alone. Finally, in February of 1932, Andrew agreed to step down from Treasury, and accept the post of Ambassador to England. He served for just one year and then resigned. In 1937 the Roosevelt administration opened “The Mellon Tax Case”, investigating Andrew and his ties to the family bank. Eventually the Mellon Bank settled for $668,000 (equivalent to $9,552,000 in 2007). But by then, Andrew was dead, on August 27, 1937. And though his estate had been hurt by the massive tax settlement, and even though Andrew had spent the last years of his life giving away much of the wealth he had accumulated, Andrew still managed to hold on to enough so that in 2007 the various trusts that Andrew created saw that his grandson, 75 year old Richard Mellon-Scaife, was still collecting about $45 million a year, some of which was used to finance the impeachment campaing agaisnt President Bill Clinton in 1998.
As Honor de Balzac wrote in his novel, “Father Goriot”, “Behind every great fortune…is a crime that has yet to be discovered.”
- 30 -

Wednesday, October 15, 2008

THERE'S A WAR ON!

I find it instructive that the citizens of Halifax, Nova Scotia have never obsessed over how the disaster of December 6th, 1917 could have happened to them. They have asked the obvious questions, but have been willing to quickly accept that they would never know the whole truth. In part this was because so many of those responsible were already dead, and in part because it was a time and a place where obsessions could not be tolerated. There was a war on, as the saying goes, and that explained the unexplainable, as you would know if you have ever considered the full implications of that phrase; “There’s a war on.”

Halifax exists because it is one of the largest, best protected ice free harbors in the world, a gift of the Sackville River. The Sackville rises in the center of “New Scotland” near Mt. Unijacke and meanders its way for 25 miles south eastward, spilling from one lake to another until it reaches the head of The Bedford Basin.

Here the Slackville disappears into a drowned river valley, a protected anchorage four miles long by two miles wide. At its southern end is “The Narrows”, which closes to a little under a mile wide. In 1917 the town of Halifax, home to 50,000, rose on the steep hills along the west side of the Narrows, while the suburb of Dartmouth, with a population of 6,500, occupied the east shore.And beyond the bottleneck of The Narrows was Halifax Harbor, which opened to the North Atlantic. The ocean here is warmed by the nearby Gulf Stream Current, and the Great Circle commercial route is just one hour sailing time out to sea. That combination, the harbor and the nearby Great Circle Route, made Halifax a convenient place to rest and load coal before challenging the North Atlantic, or to recover after a harrowing voyage to the new world. And during World War One the Bedford Basin was the logical place for allied convoys to form up in hidden safety.

Early on the morning of Thursday, December 6, 1917 there were some fifteen cargo ships crowded into the Basin and several Royal Navy warships in Halifax harbor.

But atypical of all of these ships was the Steam Ship Monte Blanc; 3,121 tons, 320 feet long, and inbound for Bedford Basin. At any other time she would have been a pariah, and expected to unoad her cargo outside the port, on McNab's Island. But there was a war on.

The SS Mont Blanc was just out of New York carrying 2,300 tons of the explosive trinitrophenol (TNP), 200 tons of trintritoluene (TNT), 10 tons of gun cotton and 300 rounds of small arms ammunition. In addition she had 36 tons of the high octane Bezol fuel piled about her decks in 50 gallon drums. In short the ship was a floating bomb. And as the Monte Blanc approached The Narrows she found herself head-on to the outbound 5,043 ton, 430 foot long Norwegian SS IMO, running ballast, outbound for New York to load humanitarian supplies for occupied Belgium. As the two ships approached they each signaled by ship's horns their intention to maintain course and speed. Then without warning the Mount Blanc turned to the right, as if moving to dock at a pier on the Halifax shore. Seeing this, the Imo desperatly reversed her engines, intending to slow and give the Mount Blanc room. But the reverse spin on Imo’s propeller pulled her into the center of The Narrows, and directly into the path of the looming Monte Blanc.

It was 8:45 A.M., local time. The towns of Halifax and Dartmouth were just starting their work days. Large crowds stopped to watch as the two ships sounded their horns in alarm and drew inexorably together. Workers at the new rail yards up the harbor were drawn to the excitment in the harbor. Everyone in town, it seemed, stopped what they were doing witness the drama unfolding.

As if in slow motion the two ships struck. The Imo’s prow sliced into the starboard bow of the Monte Blanc. Benzol drums were thrown about Monte Blanc’s deck, spilling the corrosive fuel. Mont Blanc’s cargo hold was penetrated. For a long moment the two ships hung there in the middle of The Narrows. Then, as the Imo backed away, the scrapping of crumpled metal against metal threw sparks. A fire quickly broke out aboard the Monte Blanc, ignited or fed by the Benzol, sending grey smoke skyward. Within 10 minutes the Mont Blanc’s forty man crew had been forced to take to life boats, shouting in French a warning for the Imo’s crew about their volital cargo. But none of the Imo's crew spoke French. The drifting burning hulk now brushed past Halifax’s pier six, setting it afire as she passed. The Canadian Navy tug and mine sweeper "Stella Maris" joined the Imo in attempting to throw water on the fires, and the "Stella Maris" also sent a boat crew to attempt to take the abandoned wreak under tow.

Meanwhile the Box 83 alarm at the Halifax Fire Department sent men and equipment racing toward the harbor and the burning dock. They arrived there just after nine A.M., forcing their way through the growing crowd along the shore, all drawn there by the spectacular show.

But even now a few knew what was really going on. Mr. P. Vince Coleman, a dispatcher for the Inter-Colonial Railway yards just a few hundred yards inshore from the piers not only saw the accident but knew of the Monte Blanc’s deadly cargo as well. He and other workers in the yards ran for their lives. But then Coleman remembered that a train loaded with 300 passengers from Saint John’s was due to arrive in a few moments. He ran back to his post and tapped out the following message on the telegraph key, “Stop trains. Munitions ship on fire. Approaching pier six. Goodbye.” Every operator up and down the line heard that message. Then, precisely at 9:04:35 the line went dead.

In that instant, in a single white hot flash, the 3,000 ton Mont Blanc was converted into shrapnel - jagged sections of iron weighing from slivers to half a ton. They were ripped from the hull and sent spinning away at supersonic speeds. Part of the Mont Blanc’s anchor landed two and a half miles away.

At the center of the blast the temperature exceeded 9,000 degrees Fahrenheit, instantly converting the 40 degree sea water in The Narrows to steam. First a high pressure shockwave raced through the air at 500 feet a second, flattening everything within 4 square miles. Then a fireball took just 20 seconds to rise a mile into the air, where an enterprising photographer snapped a picture from thirteen miles away.

Then a tidal wave 36 feet high swept back and forth across The Narrows, sweeping away everything onshore in its path. An entire Innuit village of 22 families on the Dartmourth shore was drowned by the wave. Windows were shattered 10 miles away. Buildings shook 78 miles distant. And the explosion was heard in Cape Breton, 225 miles to the east. Out of the tug Stella Maris’ crew of 24, only five survived. On board the Imo, the captain, the harbor pilot and five crew members were killed. The 430 foot long Imo was thrown against the Dartmouth shore like a toy in a bathtub, her bottom ripped out. Every other ship in Halifax harbor suffered casualities and damage.

Of the ten firemen who had just arrived at the dock, nine were killed, including the Fire Chief and Deputy Chief. The sole survivor, engine driver Billy Wells wrote, “The first thing I recalled after the explosion was standing quite a distance from the fire engine…the explosion had blown off all my clothes as well as the muscles from my right arm.”

At least 2,000 people had been killed, and 9,000 wounded, not counting the Innuit dead. (Native Americans, quite simply, did not count.)More than 1,000 of those who witnessed the explosion were blinded by flying glass and slivers of wood and steel. Nova Scotia lost more citizens in that one instant than were killed in her army and navies in combat in all the rest of World War One.Slowly rescuers began to move into the devastated square mile, removing the dead, comforting the wounded and searching for survivors in the rubble of their homes and businesses. Then, as darkness began to fall that night, “…almost as if Fate, unconvinced the exploding chemicals…had struck a death blow to Halifax, was now calling upon nature to administer the coup de grace…”. It began to snow. The worst blizzard in ten years buried the shocked port in several feet of snow and condemned untold injured to death by freezing. Every year, the city of Halifax donates a Christmas tree to the city Boston, as thanks for the assistance that was rushed to them in the weeks after the explosion. And every year, on December 6th, from 8:50 A.M., to 9:25 A.M., there is a Memorial Service held at Fort Needham in Halifax to remember the victims of the largest man made explosion on earth ... superseded only by the first atomic bomb test in 1945, when there was another war on.

- 30 -

Monday, October 13, 2008

BLIND AMBITION

I believe that ambitious people tend to be unhappy people. Take Gaius Julius Caesar Octavianus Augustus as an example, (or Caesar Augustus, for short) ,who was the first Roman Emperor, beginning about 27 B.C. He was the most ambitious man of his age. He invented the Roman Empire. And he lived longer than all but a couple of the Emperors who followed him. And he had a big funeral in 14 A.D. That's something you get only if you are very ambitious.

Augustus’s last words were, “Did you like the performance?” To which my response is, “In retrospect, it was just okay” because the show ended with two emperors, and in a huge bloody confusing mess which I shall now attempt to explain as best I can. Suffice it to say that if Augustus had seen how sorry his empire would end he might have rolled over in his grave, if the barbarians hadn’t scattered his ashes in 420 A.D. as they burned Rome the first time. That is just one of the ways they earned the title of barbarians. Anyway, the really messy part starts with Julius Nepos.Nepos was governor of Dalmatia and he got the job as Western Emperor in 474 A.D. because he was married to the niece of Leo I, the Byzantium Emperor, and because he was willing to pay for an army to defeat Glycerius, the guy who had knocked off the previous western Emperor. In fact Nepos is Latin for nephew, and - what a surprise - is also the root of the term “nepotsm”, which tells you almost everything you need to know about this schmuck.

Nepos was supposed to bring peace and order to the capital of the Western Empire, which was then at Ravenna, Italy, and boy did he ever screw that up. He started out badly by not killing Glycerius, but instead shipped him off to Salona, the largest port in Dalmatia, where he figured his spies could keep an eye on him. Nepos even made the guy a Bishop in the Church, assuming, I guess, this act of charity would win Glycerius’ loyalty. But as they say in the Emperor business, no good deed goes unpunished.Caesar Augustus (him again) had established the port of Ravenna in the first century B.C. as the home for the Roman fleet. By the fourth century, with the barbarians carrying off half the forum in a fire sale, the capital had been moved first to Milan, and then to the port city because Ravenna was surrounded by swamps and marshes, which offered protection from the invading hordes, of which there were plenty around at the time. But so low had Rome fallen by that time that the next invading hoards didn’t even have to invade, because they were already there. Half the army Nepos used to defeat Glyceriys was made up of German barbarians – er, I mean mercenaries, about 30,000 of them, led at this opportune moment by an ambitious German commander, married to a Roman woman. His name was Orestes, and although he had been secretary to Attila the Hun, he does not seem to have been very bright: just ambitious. And that is probably why Nepos figured that Orestes would not catch on when the new Emperor ordered Orestes to march off to Gaul with all of his German mercenaries. I suspect it was Orestes wife who explained to him what Nepos was really up to, getting the Germans out of Italy and out of the way. Wives have a way of pointing out to husbands when they are being particularly dense. Anyway, it was probably she who suggested that Orestes should offer the Germans their own villas and farms in Italy, which would be stolen from the Roman patricians who owned them. So he did.

Which is why, on August 28, 475, the Germans marched off not to Gaul but to Ravenna. Nepos could have stayed and fought, but then he would not have been Nepos. The schmuck jumped ship in the harbor and sailed home for Dalmatia, taking his purple robes with him. And Orestes walked into the capital, where, instead of crowning himself emperor, he put the crown on his son’s head. And again I suspect this was his wife’s idea.

The twelve year old boy was crowned Emperor Romulus Augustus, on October 31, 475 – what would eventually become Halloween, for anybody with a sense of irony. Of course Orestes was still the power behind the throne (Romulus was 12 years old), which is why the graffiti artists labeled their new Emperor “Romulus Augustulus”, which is the Latin diminutive version of the name – meaning “Little Romulus”. It was the kind of sly, nasty political joke which graffiti artists had been scrawling on the alley walls of Rome for a thousand years. It’s further proof of the old adage that historians spend centuries struggling to learn from dusty records and scratches on walls what they could have discovered in five minutes by talking to the any guy on any streetcorner in ancient Rome. And one of histories’ greatest mysteries, unexplained by the dusty records, is why, having won such power and wealth so easily, Orestes then went back on the promise to his mercenaries and refused to hand over the patrician’s lands to them. Did he think all 30,000 Germans were not going to notice?
They noticed. And quickly rose up under their new commander, Odoacer. And this time they were joined by a lot of the Roman soldiers, and together, in 476, they all marched on Ravenna. Unlike Nepose, brave, couragous, dull headed slow thinking Orestes didn’t have the common sense to run. He was captured just outside the city, and duly executed. Thus fares most dolts in history.

And on September 4, 476 A.D. “Little Romulus” handed over his crown to Odoacer. Romulus was, according to most historians, the last Roman Emperor, having been emperor for barely 10 months. His puberty lasted longer than his nobility. Some stories say that Odoacer gave Romulus a pension, but that seems a little unlikely to me. Odoacer was not a stupid man. I think he likely packed up the little-last Emperor and his entire family and shipped them off to prison in Campania, in Southern Italy. And I have to say I hope Romulus was contented there. You see, history seems at times to be the story of ambitious people getting everybody else into trouble, and this kid never had a chance to be ambitious, even if he were so inclined.The truth is, almost nobody got out of this particular story by natural causes. Poor old Nepos was murdered by his own servants, probably in the pay of Glycerius, on April 25, 480 A.D. Odoacer rushed in to fill the political vacuum, repaying Glycerius by appointing him Archbishop of Milan. And Odoacer settled down to run his little empire.

But such land grabs attracted the suspicions of the new Byzantium Emperor, Zeno, who, being Emperor, was suspicious of anybody as ambitious as himself. So he offered a pile of gold to the King of the Ostrogoths, Theodoric, if he would cut Odoacer down to size. Theodoric laid siege to Ravenna for three long years. Finally, with both armies suffering from hunger and plague, Theodoric offered Odoacer a truce, which Odoacer agreed to. However, at the celebratory banquet on February the second, 493 A.D., Odoacer said something offensive and without warning Theodoric fell on Odoacer and strangled him with his bare hands. I guess Ocoacer had never heard of the Trojan horse. The repetition here is a bit depressing, I agree.

Little Romulus would outlive most of them but only because he was younger. Legend says he died about 509 A.D., not yet 35 years old, but still residing in his prison outside of Naples. And considering the fate of all the ambitious people in this story, that was a long if not happy, life. Amino Domina, Roman Empire.


- 30 -

Blog Archive

Amazon Deals