The following is an excerpt from my own research and writings.

This is a short excerpt from a much larger study which examined the
effort of US leaders and elites to face and cope with the emerging
international crisis in the years just prior to US entry into WWII.  The
Council on Foreign Relations' Study of American Interests in the War and
the Peace was a fundamental and crucial element of that effort.

A careful examination of the following also will provide an astute
reader with an indication of the early origins of the later, post-war
Grand Strategy of Containment which was applied to the Soviet Union, as
well as an understanding of why the Far East, and Southeast Asia in
particular, became so important in the minds of subsequent US policy
elites.  And there is an amazingly prescient intimation of the Cold War
in the last few sentences of this excerpt.

As an aside, anyone wishing to argue that the following simply proves
the contention that the CFR is a conspiracy aimed at global conquest or
some such thing is hereby invited to explain where the analysis
developed in the CFR memorandums was inaccurate or incorrect, and what a
more viable approach for the US to the problem of a powerful Nazi
Germany controlling the Eurasian landmass might have been.  In short,
what was the alternative to the analysis and strategy being developed
and proposed by the Council's War and Peace Study Project?  Was their
assessment of the situation realistic (given their perspective and
time--not based on the benefit of hindsight).  Did an alternative,
isolationist paradigm offer a different or better alternative strategy
for coping with the threat of Nazi Germany?

As always, the author welcomes inquires and questions relating to this
research.

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

     When the War and Peace Study Project was launched in September of
1939, Germany appeared to be a dangerous but manageable problem for the
Western allies.  The military collapse of the Western democracies in the
early summer of 1940 radically altered the international picture,
however, and American policy makers were forced to focus on the
possibility of an antagonistic Nazi Germany predominant on the European
continent, making it imperative that an "intensive development of
American defenses and immediate consideration of the economic political
consequences of a possible German victory" be undertaken. (Department of
State, Post-War Policy Planning: 1939-1945, p 28.).

     Even before the fall of France, Council study groups concluded that
a self-sufficient Western Hemispheric bloc isolated from the rest of the
world was possible only at the cost of major readjustments in the
American economy and the economies of the Latin American nations.  In
War and Peace Study memorandum E-B12, discussed during the Economic and
Financial Group's fifth meeting on June 7, 1940, two problems were seen
to be inherent in a policy of strictly hemispheric defense: first, the
difficulty of creating substitute production for lost imports; and,
second, developing within the Western Hemisphere a capacity for
absorbing those commodities which previously had been exported to other
markets.  E-B12 noted that if the four Western European democracies
(Britain, France, Holland, and Belgium) and their dependencies were tied
to the Western Hemispheric trade bloc, a more satisfactory situation
would result since these countries absorbed a significant amount of the
New World's--particularly South American--agricultural surpluses. 
Moreover, their colonial dependencies were important sources for vital
strategic resources.  On the whole, the study group was deeply
pessimistic regarding the long-term viability of a strictly Western
Hemispheric defense.

     These calculations were rendered largely irrelevant with the fall
of France and the Low Countries, eliminating any possibility of their
involvement in a Western Hemispheric trade bloc and leaving Germany
supreme on the continent--thereby seriously complicating the problem
faced by the study groups. (E-B12, American Interests in the War and
Peace, Council on Foreign Relations Study Memorandum, June 7, 1940).

     On June 28, two new study papers were examined.  The first, E-B15,
surveyed America's international trade patterns.  It found that while
trade with Europe had remained relatively "static" since the turn of the
century, American economic interaction with the Western Hemisphere and
the Far East had grown dramatically.  The memo concluded that "our trade
with Europe has been shown to be declining both relatively and
absolutely since the early 1920's and relatively over the last fifty
years."  Given the existing trends in import requirements and production
of exports, E-B15 suggested, "a far more favorable outlook appears to
exist for our trade with the Western Hemisphere and the Far East." 
According to the memorandum, this would remain true unless adverse
trends in the case of European trade were reversed and favorable trends
in Western Hemisphere and Far Eastern trade were to change for the
worse; neither of which conditions was seen as likely. (E-B15, American
Interests in the War and Peace, Council on Foreign Relations Study
Memorandum, June 28, 1940).

     The second document under consideration at the June 28th meeting
was numbered E-B16: "Alternative Outcomes of the War, American Interests
and Re-orientation."  This paper sought to examine the economic
implications of a variety of different outcomes to the war, and the
consequences for American interests and policy.  Six alternative
outlines were proposed:

     (1)  a continental German victory, involving the conquest of  France,

     (2)  a sweeping German victory, involving the conquest of England,

     (3)  an allied victory culminating in a post-war military regime,

     (4)  European social revolution,

     (5)  a "liberal" Allied victory, and

     (6)  a world federation under Anglo-American leadership.

Of these alternatives, the study group took the first two quite
seriously as they represented both current conditions and a situation
that seemed imminently possible.  The last four alternatives were
considered not because they were seen as probable or even likely, but
because they offered an opportunity to contrast and compare the
consequences for American interests that might result from different
post-war circumstances.

     The study group concluded that the first alternative, a continental
German victory which included the conquest of France (the existing
situation) must of necessity lead to a firm Anglo-American military and
economic alliance.  They assumed Germany would rigorously control the
economies of subservient states and arbitrarily set advantageous terms
of trade.  This outcome would require a major defense build-up on the
part of the Anglo-American bloc in order to balance German power and the
ability to do this effectively, it was believed, would depend to a
considerable degree on relations with Japan.

     The study group also considered the role of Russia under these
circumstances.  If Germany should attack the Soviet Union, E-B16
suggested, the Anglo-American bloc would then be in a much stronger
position to extend its influence over China and, in fact, "might reduce
the Japanese Empire to a subordinate position in the Anglo-American
system."   Should Germany be victorious over the Soviet Union, "a
corresponding expansion of the Anglo-American bloc into the Orient would
become virtually a necessity for continued survival and security."   The
analysis presciently suggested that:

     "Either development, whether in terms of the extension of  German
hegemony over Russia through military conflict and the corresponding
extension of Anglo-American hegemony over Asia on the other side, or the
friendly rapprochement of German-Russian interests into a workable
alliance and economic bloc together with a similar development of the
Anglo-American-Japanese area, points to the division of the world into
two great political and economic entities, each almost wholly
self-sufficient with a bare minimum of trade between the two giant
political and economic blocs."

     The memorandum went on to consider the implications of a German
victory which included the conquest of England.  Should the British and
French fleets fall under German control it would become "extremely
difficult if indeed not dangerous for the United States to seek to
maintain military and economic control over the whole of the Western
Hemisphere."   In the face of such a sweeping German victory, according
to the group's analysis:

     "Only...a strong Anglo-American alliance...or possibly a
Dominion-American military and economic alliance...  would it seem
feasible to attempt to hold the whole of South America."

     Failure to organize such a coalition would cause the U.S. sphere of
influence to shrink to the limits of the North American continent,
Central America and the Caribbean Basin area, perhaps including parts of
the northern coast of Latin America.  While this region "would still
prove highly self-sufficient and self-contained", an economic bloc
limited to this small area nonetheless would suffer from severe
constraints.  Although the Council study group suggested that a German
victory of this magnitude might conceivably threaten Japan and the
Soviet Union to such a degree that they might then cooperate with each
other or the United States, E-B16 observed "the various possibilities
inherent in the situation are so shifting and varied that the outcome
would depend very largely upon the direction taken by determined
leadership in the United States and Japan." (E-B16, American Interests
in the War and Peace, Council on Foreign Relations Study Memorandum,
June 28, 1940)

     At their eighth meeting, on September 6, 1940, the Economic and
Financial Group turned to the question of what bargaining power a
Western Hemispheric trade bloc would have vis-a-vis a German-dominated
European trade bloc.  A memorandum entitled "The Future Position of
Germany and the United States in World Trade", presented the nature of
the data being examined and three supplementary memos examined: (1) the
foreign trade needs of a German-dominated Europe; (2) the consequences
of integrating the Western Hemisphere and the Pacific region into a
single economic bloc; and (3) the foreign trade position of Europe in
terms of crude materials and foodstuffs.

     The Council's data suggested that in terms of achieving economic
self-sufficiency continental Europe would require the least readjustment
and the Western Hemisphere would require "very nearly the most" (the
Pacific area being slightly worse off).   As far as the economic
situation of a Western Hemisphere-Pacific Area trade bloc, the study
group determined that although such an integration "would substantially
improve the trade situation for the United States", it "would not be as
advantageous for the southern countries of the Western Hemisphere,"
primarily because of the substantial export competition between those
nations and Australia, New Zealand and India. On the other hand, the
memo noted that a trade bloc of the Western Hemisphere and "only the
countries of southeastern Asia" was much more complimentary. (E-B18,
"The Future Position of Germany and the U.S. in World Trade: Supplement
I--Foreign Trade Needs of a German-Dominated Europe", Studies of
American Interests in the War and the Peace, Economic and Financial
Series, 6 September 1940).

     Memorandum E-B19, titled "The War and United States Foreign Policy:
Needs of Future United States Foreign Policy", was discussed at the
tenth Economic and Financial Group session on October 19th.  Alluding to
the "present relatively favorable war situation," E-B19 discussed the
bases for the CFR study group's assessment of the current situation and
suggested the essentials of a positive policy for the United States.

     The memo started by describing "striking changes in the direction
and nature of national interests" since the turn of the century, and
particularly since the end of the First World War. Two examples were
discussed in some detail, the trend toward increased urbanization and a
shift away from an agriculturally based economy toward
"mechanized-and-mass-production industries."

     As a result of these factors, suggested the memorandum, "the
foreign trade interests of the United States have undergone marked
'directional' and 'qualitative' changes."  An examination of trade
patterns indicated a significant increase in the importance of the
Western Hemisphere and Asia for U.S. trade, and a rapid diminishment of
America's economic interaction with Europe.

     E-B19 also noted two outstanding features of the current war
situation:  1) the complete domination of Continental Europe by Germany,
and 2) the continued resistance of Britain.  As a consequence of the
second condition, the further territorial expansion of Germany was, at
least for the time being, contained.  In the opinion of the Council
study group, this left "a great residual area potentially available to
us and upon the basis of which United States foreign policy may be
framed."   Observing that American policy thus far had been formulated
only with respect to a small part of the non-German area--the Western
Hemisphere--E-B19 suggested that the U.S. would have considerable
freedom of action in that portion of the world which Britain's continued
resistance protected from German penetration.

     The policy prescriptions proposed in E-B19 were predicated on
assumptions that were clearly spelled out in a supplement to the
memorandum, the focus being specifically directed toward:

     "the problem of maximizing the economic area of which the United
States would be a part, and yet attempting to hold to a minimum the
problems of military defense."

On the basis of previous studies, the group argued that:

     "An area, small in extent and therefore closely approaching
isolation for the United States, may well be defended militarily at
minimum expense.  The saving on military expense or effort may, however,
perhaps be more than offset by the economic costs of restriction or
adjustment to that smaller area.  Stated in another way, the costs of
transition for the United States will be greater if the area in which
its economy functions is smaller.  In contrast, enlargement of the
economic area for the United States diminishes these so-called costs of
transition, but increases the scope of necessary military commitments
and costs."


     Memorandum E-B19 argued in no uncertain terms the importance to
U.S. interests of an active extension of American involvement beyond a
narrowly conceived hemispheric defense:

     "For the United States alone the importance of the preservation of
the markets of the United Kingdom is perhaps not of outstanding
importance but this is not the case for the economies of the countries
of southern South America, southeastern Asia, and Oceania.  Thus the
desire of the United States for its own sake to unify the Western
Hemisphere in any economic way seems to depend  upon the preservation of
the markets of the United Kingdom.  In other words, some form of
integration of the Western Hemisphere and the Pacific area serves very
well indeed the needs of the United States but it does not serve the
needs of other economies.  It appears this can be done only by the
preservation for them of their vital market--the United Kingdom.  If the
United States plans to defend the total security of the Western
Hemisphere at a minimum economic cost, that defense must be predicated
upon the preservation of the United Kingdom markets for the important
Western Hemisphere producing-areas other than the United States."

     Even given an equality of physical resources, a doubtful assumption
according to E-B19, the long-term ability of an isolated Western
Hemisphere to maintain military equality, not to mention superiority,
vis-a-vis an antagonistic Eurasia was questionable.

     The difficulties for American policy posed by an aggressively
expansionist Japan, especially in southeastern Asia, were also addressed
in E-B19, which noted that any "threat to the preponderance of power in
the non-German area" would have to be dealt with through peaceful means
if possible, but that the status quo in the Far East "in the future
might be maintained only by the use or display of force."   The Council
group presented two choices for U.S. policy:  "(1) a policy of isolation
or (2) a policy of militant and economic leadership in the present
non-German world."   E-B19 proposed, however, that the preservation of
the most favorable balance of power, assuming a "cool and calculated
policy", would appear to result in a "slightly different first
alternative."   This would involve whatever expenditures for hemispheric
defense and economic adjustments to isolation as were necessary to
support clear military invulnerability, combined with the provision of
any aid to Britain which would reduce the future expansion of German
military power.  This "slightly different" approach neatly sidestepped
the question of an increasingly imperialistic Japan, and implicit in the
program as described was the assumption that the entire non-German world
could be politically and economically integrated as an effective
counter-weight to the German dominated system.  The members of the Study
Group recognized, however, that obtaining Japan's cooperation in such a
scheme was highly problematic and only assertive U.S. leadership could
create the kind of non-German economic bloc necessary for America's
long-term security.

     Under the assumption that German access to the rest of the world
could be precluded, and that ultimately some sort of "modus vivendi or
armed truce" would develop, the CFR study declared it "essential that
the United States be assured of the continuation of the effective power
to blockade."  In the words of the memorandum:

     "The maintenance of such control is necessary in order that the
military power of Continental Europe shall not be developed, relative to
the non-German world, in order that the economic power of that Continent
shall not alienate certain sections of the non-German world by
preferential trading arrangements, and, finally, in order that Germany
may not impose unfavorable terms of trade upon the countries of the
non-German world area."

     In short, German power and influence would have to be 'contained'
indefinitely and it was likely the United States would have to actively
participate in such a "blockade" or "successor" arrangement throughout
the presumed period of "armed peace."  (E-B19, "The War and United
States Foreign Policy: Needs of Future United States Foreign Policy",
Studies of American Interests in the War and the Peace, Economic and
Financial Series, 19 October 1940 and also E-A10, Memo of Discussion:
Tenth Meeting Economic and Financial Group, Studies of American
Interests in the War and the Peace, 19 October 1940).

     The implications were not lost on the members of the CFR's War and
Peace Study Project.  A Political Study memorandum discussed the
feasibility of the strategy outlined in E-B19, noting that while the
balance of power system which had long existed in Europe was by no means
perfect, it had helped "to keep the peace on numerous occasions when war
might otherwise have resulted."  The international system foreseen by
E-B19, however, would replace that earlier European balance of power,
with only "two outstanding rivals in the world" and leaving only the
possibility of one side gaining preponderance over the other. 
Consequently, it could well be that:

     "...having once become the stronger of the two dominant powers in
the world, it would be necessary for us to continue increasing our
economic and military might ad infinitum, lest the German area succeed
in closing the war-potential gap so clearly outlined in the economic
memorandum.  In other words, such an alignment doubtless would bring
with it ceaseless effort, on the one side, to maintain this
preponderance unchanged, and on the other, to reverse it completely.  It
were better to fight at once, than to face the prospect of such a
prolonged and feverish armed truce."


(P-B13, "The Political Feasibility of the Proposals Advanced in
Memorandum E-B19: Needs of Future United States Foreign Policy", Studies
of American Interests in the War and the Peace, Political Series, 10
November 1940).