(Due to arrive Melbourne-19.12.25)
My dear P.M.,
I enclose copy of what I think is a very valuable report dealing with America. The bulk of the report consists of 'vitalised' statistics-a simply worded exposition of what some of America's more important recorded figures of her industrial development mean-what they signify for America and the reaction they must have on Great Britain.
If you haven't time to read it all, please read Article 10 on Pages 11 and 12.
If an Imperial Conference does materialise next year, I hope you will consider the proposal to either come or go by the United States. If you did it on your way to England, it would not run the danger of being crowded out by unforeseen circumstances as happened last time.
Hipwood , the Permanent Head of the Mercantile Marine Branch of the Board of Trade, told Hankey  a very curious story lately. A manufacturing firm in this country was tendering for the supply of certain material to Japan, the contract being for five years. The British firm took the advice of its Japanese adviser in Japan as to the contract and was advised by him to have a War Clause. When he was asked why this was considered necessary, he said that in his opinion the old order was changing in Japan and that the young Japanese party were coming to the fore, and that in the opinion of a great many people, war with the United States was inevitable in the course of the next two or three years. This all sounds rather childish and improbable, but it comes from a responsible source.
Even Captain Egerton, the Director of Plans at the Admiralty (who is something of a fire-eater himself), with whom Hankey discussed the story, thinks it is very far fetched.
Lampson  gives me an interesting account of Mussolini at Locarno. He says that he is quite obviously playing a part in public-chest out, eyes opened very wide so that the whites show, head thrown back with a jerk when he booms out an instruction or an opinion. Lampson says that Scialoja  and his other lieutenants positively snap to attention at his slightest word, so the pose has its effect. But in private or round a table amongst a few men with whom it is unnecessary or perhaps unwise to be anything but friendly, he is quite different and is a pleasant, if rather nervy, man. He says he has a decidedly unhealthy appearance-considerably more so than 18 months ago, but even so he can hardly credit that he is suffering from the awful diseases with which Nitti  credits him. Although one hears that the later stages of one of these complaints is frequently accompanied by rather supernatural mental and physical vigour, which is a prelude to the disease attacking the brain.
In great confidence. Amery's  Private Secretary telephoned me yesterday to say that Mr. E. F. L. Wood.  (Viceroy designate) had received a congratulatory telegram from Edmund Jowett , but unfortunately Wood hadn't the least idea who Jewett was! I told him who he was and a suitable reply is to be sent.
The combined Admiralty and War Office attack on the question of a separate Air Ministry and Air Force opened last Thursday at a session of the Colwyn Committee. This Colwyn Committee is a technical Committee to enquire into economies in the Fighting Services under the Chairmanship of Lord Colwyn , a capable business peer created by Lloyd George. 
Hankey is in the confidence of all three parties and is frequently very entertained by having his confidential ear filled with their partisan pleadings, which they try out on him first. He thinks that the Colwyn Committee will not be unwise enough to give any real decision on the matter, but will merely record their opinion that the abolition of the separate Air Force would probably result in certain savings but that, as the subject is one of great controversy and is the subject of much feeling in the Fighting Services, and as probably much more depends on it than the matter of economy, they are not prepared to make any recommendation.
Hankey thinks that the matter will eventually come to a Royal Commission. The War Office are rather hiding behind the skirts of the Admiralty in the attack. Sir Hugh Trenchard  is relieved that the tension is over and that the attack has begun. He is liable to bite pieces out of any Admiral he meets these days.
For the first time for a considerable period, certain members of the Cabinet asked that their dissent might be put on record in connection with the Cabinet decision for the placing on a 'care and maintenance' basis of Pembroke and Rosyth Dockyards. The dissenting members were Balfour , Austen Chamberlain  and two minor lights.
I have always hitherto been a little sorry for the technical heads of the Fighting Services by reason of their being subservient to civilians and politicians. I am rather getting over this feeling, owing to the narrowness of view of the Fighting Services as such.
They, possibly rightly, take the view that they are responsible to H.M.G. for the full out roaring-lion efficiency of as formidable and intransigent a fighting service as possible, irrespective of the political position of the world, which they say is no concern of theirs. They are all suspicious of the League and rather contemptuous of it. Their opinions on such matters as disarmament, political treaties or even the broad subject of Imperial defence have to be read with the reserve that comes from the knowledge that they are looking at the matter through their own narrow window, and are discounting the political and, in fact, all considerations other than their own.
I am, Yours sincerely, R. G. CASEY