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                                                  [Page 349]

                        Chapter VIII
It is well known that the Nazi conspirators rearmed Germany
on a vast scale. The purpose of that rearmament is revealed
in the secret records of the plans and deliberations of the
inner councils of the Nazis. These records show that the
reorganization of the German government, the financial
wizardry of Hjalmar Schacht, and the total mobilization of
the German economy largely under Hjalmar Schacht, Hermann
Goering, and Walter Funk, were directed at a single goal:
aggressive war.


The significance of the economic measures adopted and
applied by the conspirators can be properly appraised only
if they are placed in the larger social and political
context of Nazi Germany. These economic measures were
adopted while the conspirators were directing their vast
propaganda apparatus to the glorification of war. They were
adopted while the conspirators were perverting physical
training into training for war. They were adopted while
these conspirators were threatening to use force and were
planning to use force to achieve their material and
political objects. In short, these measures constitute in
the field of economics and government administration the
same preparation for aggressive war which dominated every
aspect of the Nazi state.

In 1939 and 1940, after the Nazi aggression upon Poland,
Holland, Belgium, and France, it became clear to the world
that the Nazi conspirators had created probably the greatest
instrument of aggression in history. That machine was built
up almost in its entirety in a period of less than one
decade. In May of 1939 Major General George Thomas, former
Chief of the Military-Economic Staff in the Reich War
Ministry, reported that the German Army had grown from seven
Infantry divisions in 1933 to thirty-nine Infantry
divisions, among them four fully motorized and three
mountain divisions; eighteen Corps Headquarters; five Panzer
divisions; twenty-two machine gun battalions. Moreover,
General Thomas stated that the German Navy had greatly
expanded by the launching, among other vessels, of two
battleships of thirty-five thousand tons, four heavy
cruisers of ten thousand tons, and other warships; further,
that the Luftwaffe had grown to a point where it had a
strength of two hundred sixty thousand men, twenty-one
squadrons, consisting of two hundred forty echelons, and
thirty-three Anti-Aircraft Batteries. (EC-28)

                                                  [Page 350]

General Thomas further reported, in a lecture delivered on
24 May 1939 in the Nazi Foreign Office, that out of the few
factories permitted by the Versailles Treaty there had
arisen *********

     "The mightiest armament industry now existing in the
     world. It has attained the performances which in part
     equal the German wartime performances and in part even
     surpasses them. Germany's crude steel production is
     today the largest in the world after the Americans. The
     aluminum production exceeds that of America and of the
     other countries of the world very considerably. The
     output of our rifle machine gun, and artillery
     factories is at present larger than that of any other
     state." (EC-28)

These results about which General Thomas spoke in his book
entitled Basic Facts for a History of German War and
Armaments Economy were achieved only by making preparation
for war the dominating objective of German economy. As
General Thomas stated on page 479 of his book:
     "History will know only a few examples of cases where a
     country has directed, even in peace time, all its
     economic forces deliberately and systematically towards
     the requirements of war, as Germany was compelled to do
     in the period between the two World Wars." (2353-PS)

The task of mobilizing the German economy for aggressive war
began promptly after the Nazi conspirators' seizure of
power. It was entrusted principally to Schacht, Goering, and

Schacht was appointed President of the Reichsbank in March
1933, and Minister of Economics in August 1934. The world
did not know, however, that the responsibility for the
execution of this program was entrusted to the office of the
Four Year Plan under Goering (EC-408). Nor did the world
know that Schacht was designated Plenipotentiary for the War
Economy on 21 May 1935, with complete control over the
German civilian economy for war production in the Reich
Defense Council, established by a top secret Hitler decree.

A letter dated 24 June 1935, at Berlin, and signed by von
Blomberg, reads in part:
     " ******The Fuehrer and Reich Chancellor has nominated
     the President of the directorate of the Reichsbank, Dr.
     Schacht, to be Plenipotentiary-General for War Economy.
     "*********I point out the necessity of strictest secrecy
     once more *********." (2261-PS)

Through Schacht's financial genius monetary measures were
devised to restore German industry to full production; and

                                                  [Page 351]
the control of imports and exports, which he devised under
his new plan of 1934, German production was channeled in
accordance with the requirements of the German war machine.

In 1936, with an eye to the experience in the First World
War, the Nazi conspirators embarked on an ambitious plan to
make Germany completely self-sufficient in strategic war
materials such as rubber, gasoline, and steel, in a period
of four years, so that Germany would be fully prepared for
aggressive war. The responsibility for the execution of this
program was entrusted to the office of the Four Year Plan
under Goering. A "memorandum on the Four Year Plan and
Preparation of the War Economy," dated 30 December 1936, and
marked "Secret Command Matter", sets out that the Fuehrer
and Reich Chancellor has conferred powers in regard to
mobilization preparations in the economic field that need
further definition. The third paragraph refers specifically
to Minister-President, Generaloberst Goering as Commissioner
of the Four Year Plan, by authority of the Fuehrer and Reich
Chancellor granted 18 October 1936. The existence of this
program involved the reorganization and control of the whole
German economy for war. (EC-408)

The military objectives of the German economy were clearly
stated by General Thomas in a lecture on 28 February 1939,
delivered at the Staff Instructor's course. He stated:

     "The National Socialist State, soon after taking over
     the power, has reorganized the German economy in all
     sections -and directed it towards a military viewpoint,
     which had been requested by the Army for years. Due to
     the reorganization, agriculture, commerce and
     professions became those powerful instruments the
     Fuehrer needs for his extensive plans, and we can say
     today that Hitler's mobile politics, as well as the
     powerful efforts of the Army and economy, would not
     have been possible without the necessary reorganization
     by the National Socialist Government. We can now say
     that the economic organization as a whole corresponds
     with the needs, although slight adjustments will have
     to be made yet. Those reorganizations made a new system
     of economics possible which was necessary in view of
     our internal and foreign political situation as well as
     our financial problems. The directed economy, as we
     have it today, concerning agriculture, commerce and
     industry, is not only the expression of the present
     State principles, but at the same time also the economy
     of the country's defense." (EC-27)

This program was not undertaken in a vacuum; it was
deliberately designed and executed to provide the necessary

                                                  [Page 352]
 of the Nazi conspirators' plans for aggressive war. In
September 1934 Schacht admitted to the American Ambassador
in Berlin that the Hitler Party was absolutely committed to
war, and that the people too were ready and willing. (EC-
461). At the same time Schacht promulgated his new plan for
the control of imports and exports in the interest of
rearmament. A year later he was appointed Plenipotentiary
for War Economy by top secret decree (2261-PS)

On 4 September 1936 Goering announced, at a Cabinet meeting
attended by von Blomberg, Schacht, and others, that Hitler
had issued instructions to the Reich War Minister on the
basis that "the show-down with Russia is inevitable," and
added that "all measures have to be taken just as if we were
actually in the stage of imminent danger of war." (EC-416)

In the same month the office of the Four Year Plan was
created with the mission of making Germany self-sufficient
for war in four years. Goering regarded it as his task,
within four years, to put the entire economy in a state of
readiness for war. (EC-08)


Although the Nazi government officials provided the
leadership in preparing Germany for war, they received also
the enthusiastic and invaluable cooperation of the German

On the invitation of Goering, approximately 25 of the
leading industrialists of Germany, together with Schacht,
attended a meeting in Berlin on 20 February 1933. This was
shortly before the German election of 5 March 1933. At this
meeting Hitler announced the conspirators' aim to seize
totalitarian control over Germany, to destroy the
parliamentary system, to crush all opposition by force, and
to restore the power of the Wehrmacht. Among those present
at that meeting were Gustav Krupp, head of the munitions
firm, Alfried Krupp, A.G.; four leading officials of the I.
G. Farben Works, one of the world's largest chemical
concerns; Albert Vogler, head of United Steel Works of
Germany; and other leading industrialists. This meeting is
described in the following affidavit of George von

     "I, George von Schnitzler, a member of the Vorstand of
     I. G. Farben, make the following deposition under oath:
     "At the end of February 1933, four members of the
     Vorstand of I. G. Farben, including Dr. Bosch, the head
     of the Vorstand, and myself were asked by the office of
     the President of the Reichstag to attend a meeting in
     his house, the
                                                  [Page 353]
      purpose of which was not given. I do not remember the
     two other colleagues of mine who were also invited. I
     believe the invitation reached me during one of my
     business trips to Berlin. I went to the meeting which
     was attended by about 20 persons, who I believe were
     mostly leading industrialists from the Ruhr.
     "Among those present I remember: "Dr. Schacht, who at
     that time was not yet head of the Reichsbank again and
     not yet Minister of Economics.
     "Krupp von Bohlen, who in the beginning of 1933
     presided over the Reichsverband der Deutschen
     Industrie, which-later on was changed into the semi-
     official organization 'Reichsgruppe Industrie.'
     "Dr. Albert Vogler, the leading man of the Vereinigte
     "Von Lowenfeld from an industrial work in Essen.
     "Dr. Stein, head of the Geworkschaft Auguste Victoria,
     a mine which belongs to the I. G. Dr. Stein was an
     active member of the Deutsche Volkspartei.
     "I remember that Dr. Schacht acted as a kind of host.
     "While I had expected the appearance of Goering, Hitler
     entered the room, shook hands with everybody and took a
     seat at the top of the table. In a long speech he
     talked mainly about the danger of communism over which
     he pretended that he just had won a decisive victory.
     "He then talked about the Bundnis -- alliance -- into
     which his party and the Deutsch Nationale Volkspartei
     had entered. This latter party, in the meantime, had
     been reorganized by Herr von Papen. At the end he came
     to the point which seemed to me the purpose of the
     meeting. Hitler stressed the importance that the two
     aforementioned parties should gain the majority in the
     coming Reichstag election. Krupp von Bohlen thanked
     Hitler for his speech. After Hitler had left the room,
     Dr. Schacht proposed to the meeting the raising of an
     election fund of, as far as I remember, RM 3,000,000.
     The fund should be distributed between the two 'allies'
     according to their relative strength at the time being.
     Dr. Stein suggested that the Deutsche Volksparte should
     be included *********." (EC-439)
In a speech delivered to the industrialists in Berlin on 20
February 1933, Hitler stated:
     "Private enterprise cannot be maintained in the age of
     democracy; it is conceivable only if the people have a
     sound idea of authority and personality. *********I
                                                  [Page 354]
      even while in the hospital that one had to search for
     new ideas conducive to reconstruction. I found them in
     Nationalism, in the value of strength and power of
     individual personality. *********If one rejects pacifism,
     one must put a new idea in its place immediately.
     Everything must be pushed aside, must be replaced by
     something better. *********We must not forget that all the
     benefits of culture must be introduced more or less
     with an iron fist, just as once upon a time the farmers
     were forced to plant potatoes.
     "With the very same courage with which we go to work to
     make up for what had been sinned during the last 14
     years, we have withstood all attempts to move us off
     the right way."
     "*********We must first gain complete power if we want to
     crush the other side completely. While still gaining
     power, one should not start the struggle against the
     opponent. Only when one knows that one has reached the
     pinnacle of power, that there is no further possible
     development, shall one strike. *********
     "*********Now we stand before the last election.
     Regardless of the outcome there will be no retreat,
     even if the coming election does not bring about a
     decision. *********
     "The question of restoration of the Wehrmacht will not
     be decided at Geneva but in Germany, when we have
     gained internal strength through internal peace." (D-
In reply to these statements Goering, who was present at
that same meeting, declared:
     "That the sacrifice asked for surely would be much
     easier for industry to bear if it realized that the
     election of March 5th will surely be the last one for
     the next ten years, probably even for the next hundred
     years." (D-203)

In a memorandum dated 22 February 1933, found in the
personal files of Gustav Krupp von Bohlen und Halbach, Krupp
briefly described this same meeting, and recalled that he
had expressed to Hitler the gratitude of the 25
industrialists present. (D-204)

In April 1933, after Hitler had entrenched himself in power,
Gustav Krupp, as Chairman of the Reich Association of German
Industry, which was the largest association of German
industrialists, submitted to Hitler the plan of that
association for the reorganization of German industry. In
connection therewith Krupp undertook to bring the
association into line with the aims of the conspirators, and
to make it an effective instrument

                                                  [Page 355]
 for the execution of their policies. In a letter of
transmittal (D-157), Krupp stated that the plan of
reorganization which he submitted on behalf of the
association of industrialists, was characterized by the
desire to coordinate economic measures and political
necessity, adopting the Fuehrer conception of the new German
state. In the plan of reorganization itself, Krupp stated:

     "The turn of political events is in line with the
     wishes which I myself and the board of directors have
     cherished for a long time. In reorganizing the Reich
     Association of German Industry, I shall be guided by
     the idea of bringing the new organization into
     agreement with the political aims of the Reich
     Government." (D-157)

The ideas of Krupp were subsequently adopted.

Under the decree introducing the leadership principle into
industry, each group of industry was required to have a
leader who was to serve without compensation. The leaders
were to be appointed and could be removed at the discretion
of the Minister of Economics. The charter of each group was
to be created by the leader, who was obligated to lead his
group in accordance with the principles of the National
Socialist State (Reichsgesetzblatt, 1934, Part I, 1194, Sec.
11, 12, 16). The introduction of the leadership principle
into the organizations of business centralized authority and
guaranteed the efficient execution of orders, which the
government issued to business, in the effort to promote a
war economy.

The overwhelming support given by the German industrialists
to the Nazi war program is described in a speech prepared by
Gustav Krupp in January 1944, for delivery at the University
of Berlin:

     "War material is life-saving for one's own people, and
     whoever works and performs in those spheres can be
     proud of it. Here, enterprise as a whole, finds its
     highest justification of existence. This justification,
     I may inject this here, crystallized especially during
     the time of interregnum between 1919 and 1933, when
     Germany was lying down disarmed. *********
     "It is the one great merit of the entire German war
     economy that it did not remain idle during those bad
     years, even though its activity could not be brought to
     light for obvious reasons. Through years of secret
     work, scientific and basic groundwork was laid in order
     to be ready again to work
                                                   Page 356]
      for the German armed forces at the appointed hour
     without loss of time or experience.
     "Only through the secret activity of German enterprise
     together with the experience gained meanwhile through
     production of peacetime goods, was it possible, after
     1933, to fall into step with the new tasks arrived at,
     restoring Germanys military power. Only through all
     that could the entirely new and various problems,
     brought up be the Fuehrer's Four-Year Plan for German
     enterprise, be mastered. It was necessary to supply raw
     materials, to explore and experiment, to invest capital
     in order to make German economy independent and strong-
     in short, to make it war-worthy.


     "I think I may state here that the German enterprises
     followed the new ways enthusiastically, that they made
     the great intentions of the Fuehrer their own by fair
     competition and conscious gratitude, and became his
     faithful followers. How else could the tasks between
     1933 and 1939, and especially after 1939, have been

It must be emphasized that the secret rearmament program was
launched immediately upon the seizure of power by the Nazi
conspirators. On 4 April 1933 the Reich Cabinet passed a
resolution establishing a Reich Defense Counsel. The
function of this council was secretly to mobilize for war.
At the second meeting of the working committee of the
Councillors for Reich Defense, the predecessor of the Reich
Defense Council, which was held on 22 May 1933, the chairman
was Keitel. Keitel stated that the Reich Defense Council
would immediately undertake to prepare for war emergency. He
stressed the urgency of the task of organizing a war
economy, and announced that the council stood ready to brush
aside all obstacles. Fully aware of the fact that their
action was in flagrant violation of the Treaty of
Versailles, Keitel emphasized the extreme importance of
absolute secrecy.:

     "No document ought to be lost, since otherwise it may
     fall into the hands of the enemies intelligence
     service. Orally transmitted, matters are not provable:
     they can be denied by us in Geneva." (EC-177)
                                                  [Page 357]

The singleness of purpose with which the Nazi conspirators
geared the German economy to the forging of a war machine is
further shown by the secret minutes of the second meeting of
the working committee of the Reich Defense Council, held on
7 February 1934. At this meeting at which Capt. Schmundt,
Col. Guerian, Maj. Gen. von Reichenau, Maj. Warlimont, and
Jodl then a Lt. Col. were present, Lieutenant-General Beck
pointed out

     "The actual state of preparation is the purpose of this
     session. (EC-404 )

Detailed measures of financing a future war were discussed
and it was pointed out that the financial aspects of the war
economy would be regulated by the Reich Finance Ministry and
the Reichsbank, which was headed by Schacht. (EC-404)

Under his secret appointment as Plenipotentiary-General of
the War Economy, Schacht had the express function of placing
all economic forces of the nation in the services of the
Nazi war machine. The secret defense law of 21 May 1935 in
effect gave Schacht charge of the
entire war economy. In case of war h was to be virtual
economic dictator of Germany. His task was to place all
economic forces into service for the conduct of war and to
secure economically the life of the German people. The
Ministers of Economics, Food, Agriculture, Labor, and
Forestry, as well as all Reich agencies directly under the
Fuehrer, were subordinated to him. He was to be responsible
for the financing well as for the conduct of the war; and he
was further authorized to issue ordinances within his sphere
of responsibility, even if these deviated from existing
laws. (2261-PS)

The rearmament of Germany proceeded at a rapid pace. By
summer of 1935 the Nazi conspirators were emboldened to make
plans for the reoccupation of the Rhineland, and at the
tenth meeting of the working committee of the council the
question of measures to be taken in connection with the
proposed reoccupation of the Rhineland was discussed.

At that meeting, on 26 June 1935, it was said that the
Rhineland required special treatment because of the
assurances given by Hitler to the French that no military
action was being undertaken in the demilitarized zone. Among
the matters requiring special treatment was the preparation
of economic mobilization, a task specifically entrusted to
Schacht as secret Plenipotentiary for the economy. In this
connection it was stated:

     "*********Since political entanglements abroad must be
     present under all circumstances, only these pre-
                                                  [Page 358]
     paratory measures that are urgently necessary may be
     carried out. The existence of such preparations, or the
     intention of them must be kept in strictest secrecy in
     the zone itself as well as in the rest of the Reich."

Preparations of various types were thereupon discussed.

The rapid success of German rearmament is attributable to
the work of Schacht. In the fall of 1934, the Nazi
conspirator announced the "New Plan", which aimed at the
control of imports and exports in order to obtain the raw
materials needed for armaments and the foreign currency
required to sustain the armament program. The "New Plan" was
the creation of Schacht. Under the plan, Schacht controlled
imports by extending the system of supervisory boards for
import control, which was previously limited to the main
groups of raw materials, to all goods imported into Germany.
The requirement of licenses for imports enabled the Nazi
conspirators to restrict imports to those commodities which
served their war aims.

Subsequently, in February 1935, the Devisen Law was passed
(Reichsgesetzblatt 1935, I, 105). Under it, all transactions
involving foreign exchange were subject to the approval of
Devisen, stellen (Foreign Exchange Control Offices). By thus
controlling the disposition of foreign exchange, the
conspirators were able to manipulate foreign trade so as to
serve their ends.

Every aspect of the German economy was geared to war under
the guidance of the Nazi conspirators, particularly Schacht.
In a study of the economic mobilization for war as of 30
September 1934, it was stated that steps had already been
taken to build up stock piles, to construct new facilities
for the production of scarce goods, to redeploy industry to
secure areas, and to control fiscal and trade policies. The
task of stock piling, it was announced, had been hampered by
the requirement of secrecy and camouflage. Reserves of
automobile fuels and stocks of coal were accumulated, and
the production of synthetic oil was accelerated. Civilian
supply was purposely organized so that most plants would be
working for the German Armed Forces. Studies were made of
the possibility of barter trade with supposedly neutral
countries in case of war. (EC-128)

Financing of the armament program presented a difficult
problem for the conspirators. In 1934 and 1935, the German
economy could by no possibility have raised funds for the
Nazis' extensive rearmament program through taxes and public
loans. From the outset, the armament program involved "the
engagement of the last reserves." Moreover, apart from the
problem of raising

                                                  [Page 359]
 the huge sums required to sustain this program, the Nazi
conspirators were exceedingly anxious, in the early stages,
to conceal the extent of their armament activities.

After considering various techniques of financing the
armament program, Schacht proposed the use of "mefo" bills.
One of the primary advantages of this method was the fact
that through its use figures indicating the extent of
rearmament, which would have become public through the use
of other methods, could be kept secret. "Mefo" bills were
used exclusively for armament financing. Transactions in
"mefo" bills worked as follows: "Mefo" bills were drawn by
armament contractors and accepted by a limited liability
company. The spelling of the word "mefo" is taken
from the name of this company, Metallurgische
Forschungsgesellschaft, m.b.h. (MEFO). This company had a
nominal capital of one million Reichsmarks and was merely a
dummy organization. The bills were received by all German
banks for possible rediscounting with the Reichsbank. The
bills were guaranteed by the Reich. Their secrecy was
assured by the fact that they appeared neither in the
published statements of the Reichsbank nor in the budget

The "mefo" bill system continued to be used until 1 April
1938. Up to that date 12 billion Reichsmarks of "mefo" bills
for the financing of rearmament had been issued. Since it
was no longer deemed necessary to conceal the vast progress
of German re. armament, "mefo" financing was discontinued at
that time. (EC-436)

Further sources of funds upon which Schacht drew to finance
the secret armament program were the funds of political
opponents of the Nazi regime, and Marks of foreigners on
deposit in the Reichsbank. As Schacht boasted in a
memorandum to Hitler dated 3 May 1935:

     "Our armaments are also financed partly with the
     credits of our political opponents." (1168-PS)

The outstanding "mefo" bills represented at all times a
threat to the stability of the currency because they could
be tendered to he Reichsbank for discount, in which case the
currency circulation would automatically have to be
increased. Thus, there was an ever-present threat of
inflation. Schacht nevertheless continued on his course,
because he stood with unswerving loyalty to -he Fuehrer,
because he fully recognized the basic idea of National
Socialism, and because he felt that at the end, the
disturbances, compared to the great task, could be
considered irrelevant.

High-ranking military officers paid tribute to Schacht's con-

                                                  [Page 360]
trivances on behalf of the Nazi war machine. An article
written for the "Military Weekly Gazette" in January 1937

     "The German Defense Force commemorates Dr. Schacht
     today as one of the men who have done imperishable
     things for it and its development in accordance with
     directions from the Fuehrer and Reich Chancellor. The
     defense force owes it to Schachts skill and great
     ability that in defiance of all currency difficulties
     it, according to plan, has been able to grow up to its
     present strength from an army of 100,000 men."

After the reoccupation of the Rhineland, the Nazi
conspirators redoubled their efforts to prepare Germany for
a major war. The Four Year Plan was proclaimed by Hitler in
his address at the Nurnberg Party Convention on 9 September
1936. It was given a statutory foundation by the decree
concerning the execution of the Four Year Plan dated 18
October 1936 (Reichsgesetzblatt, I, 887.). By this decree
Goering was put in charge of the plan. He was authorized to
enact any legal and administrative measures deemed necessary
by him for the accomplishment of his task, and to issue
orders and instructions to all government agencies,
including the highest Reich authorities. The purpose of the
plan was to enable Nazi Germany to attain complete self-
sufficiency in essential raw materials, notably motor fuel,
rubber, textile fiber, and non-ferrous metals, and to
intensify preparations for war. The development of synthetic
products was greatly accelerated despite their high costs.

Apart from the self-sufficiency program, however, the Nazi
conspirators required foreign exchange to finance propaganda
and espionage activities abroad. Thus, in a speech on 1
November 1937 before the Wehrmachtakademie, General Thomas

     "If you consider that one will need during the war
     considerable means in order to organize the necessary
     propaganda, in order to pay for the espionage service,
     and for similar purposes, then one should be clear that
     our internal Mark would be of no use therefore, and
     that Foreign Exchange will be needed." (EC-14)

This need for foreign exchange was reduced in part by virtue
of the espionage and propaganda services rendered free of
charge to the Nazi state by leading German industrial
concerns. A memorandum dated at Essen on 12 October 1935,
which was found in the files of the Krupp company, contains
the subheading: "Concerns:-distribution official propaganda
literature abroad with help of our foreign connections." I
goes on to say that on the morning of October 11 the
district representative of the Ribben-

                                                  [Page 361]
trop Private Foreign Office, Dienststelle Ribbentrop, made
an appointment by telephone with Mr. Lachman to arrive at an
appointed time. The memorandum continues:

     "In answer to my question, with whom I was dealing and
     which official bureau he represented, he informed me
     that he was not himself the district representative of
     Ribbentrops Private Foreign Office, but that a Mr.
     Landrat Bollman was such and that he himself had come
     at Mr. Bollmans order." (D-206)

After discussing the confusion in the field of foreign
propaganda, the memorandum states that Ribbentrops Foreign
Office is creating a private organization for foreign
propaganda, and that for this purpose the support of the
Krupp firm and especially an index of addresses are needed.
This request received the following response:

     "I informed Mr. Lachman that our firm has put itself
     years ago at the disposal of the official bureaus for
     purposes of foreign propaganda, and that we had
     supported all requests addressed to us to the utmost."

These activities are demonstrated by another document found
in the files of the Krupp company. A memorandum prefaced by
Herr Sonnenberg, on 14 October 1937, reports a meeting at
Essen on 12 October 1937. The governments request for
assistance in foreign intelligence activities met this

     "On our part we undertook to supply information to the
     Combined Services Ministry (R) as required." (D-167)

Meanwhile the conspirators program of self-sufficiency was
proceeding with great speed. The production of steel, for
example, as shown in official German publication, rose as

1933 - 74,000 tons
1934 - 105,000 tons
1935 - 145,000 tons
1936 - 186,000 tons
1937 - 217,000 tons
1938 - 477,000 tons

The production of gasoline increased at an even greater
tempo: from 387,000 tons in 1934 to 1,494,000 tons in 1938
(Statistical Yearbook of the German Reich, 1939-1942).

The Nazi conspirators pressed the completion of the armament
program with a sense of urgency betraying their awareness of
the imminence of war. At a meeting on 4 September 1936
Goering pointed out that "all measures have been taken just

                                                 [[Page 362]
if we were actually in the state of imminent danger of war."
He pointed out that:
     "*********if war should break out tomorrow we would be
     forced to take measures from which we might possibly
     still shy away at the present moment. They are
     therefore to be taken." (EC-416)

The extreme urgency was manifested by Goering's remark that

     "*********existent reserves will have to be touched for
     the purpose of carrying us over this difficulty until
     the goal ordered by the Fuehrer has been reached; in
     case of war they are not a reliable backing in any
     case." (EC-416)

Schacht was advised by a top secret letter dated 31 August
1936 that Hitler ordered all formations of the air force to
be ready by 1 April 1937. (1301-PS)

After their successes in Austria and the Sudetenland, the
Nazi conspirators redoubled their efforts to equip
themselves for the war of aggression which they planned to
launch. In a conference on 14 October 1938, shortly before
the Nazis made their first demands on Poland, Goering

     "*********Everybody knows from the press what the world
     situation looks like, and therefore the Fuehrer has
     issued an order to him to carry out a gigantic program
     compared to which previous achievements are
     insignificant. There are difficulties in the way which
     he will overcome with the utmost energy and
     ruthlessness." (1301-PS)

The supply of foreign currency had sunken because of
preparations for the invasion of Czechoslovakia.
Replenishment was considered necessary. At the same
conference, on 14 October 1938, Goering declared:

     "These gains made through the export are to be used for
     an increased armament. The armament should not be
     curtailed by export activities." (1301-PS)

Goering had received the order from the Fuehrer to increase
armaments to an abnormal extent, the air force having first
priority, and interpreted it as follows:

     "Within the shortest time, the air force should be
     increased five fold; also the navy should create war
     weapons more rapidly, and the army should produce large
     amounts of war weapons at a faster rate, particularly
     heavy artillery and heavy tanks. Along with this a
     larger production of armaments must go, especially
     fuel, rubber, powders and explosives must be moved to
     the foreground. This should be coupled with an
     accelerated expansion of highways, canals, and
     particularly of the railroads." (1301-PS)
                                                  [Page 363]

In the course of these preparations for war, a clash of
wills ensued between Goering and Schacht, as a result of
which Schacht resigned his position as head of the Ministry
of Economics and Plenipotentiary for the War Economy in
November 1937. He was removed from the presidency of the
Reichsbank in January 1939. Regardless of the details of
this controversy, Schacht's departure in no way implied any
disagreement with the major war aims of the Nazis. Schacht
took particular pride in his vast attainments in the
financial and-economic fields in aid of the Nazi war
machine. In a letter to General Thomas Schacht wrote:

     "I think back with much satisfaction to the work in the
     Ministry of Economics which afforded me the opportunity
     to assist in the rearmament of the German people in the
     most critical period, not only in the financial but
     also in the economic sphere. I have always considered a
     rearmament of the German people as condition sine quo
     non of the establishment of a new German nation." (EC-

In a letter written to General Von Blomberg, on 8 July 1937,
Schacht wrote:

"The direction of the war economy by the plenipotentiary
would in that event never take place entirely independent
from the rest of the war mechanism but would be aimed at
accomplishment of the political war purpose with the
assistance of all economic forces. I am entirely willing,
therefore, to participate in this way in the preparation of
the forthcoming order giving effect to the Defense Act." (EC-

In the spring of 1937, Schacht participated with
representatives of the three branches of the armed forces in
"war games in war economy" at Godesberg. A report of these
exercises, entitled War economy tasks in Godesberg
undertaken by General Staff between the 25th of May and the
2nd of June," records the speech welcoming Dr. Schacht:

     "Before I start with the discussion of the war game in
     war economy, I have to express how grateful we all are
     that you, President Dr. Schacht, have gone to the
     trouble personally to participate in our final
     discussion today despite all your other activities.
     This proves to us your deep interest in war economy
     tasks shown at all times and your presence is renewed
     proof that you are willing to facilitate for us
     soldiers the difficult war-economic preparations and to
     strengthen the harmonious cooperation with your
     "I want to point out, however, that all matters and all
                                                  [Page 364]
      information received has to be kept in strictest
     secrecy *********" (EC-17)
The annexation of Austria was apparently a goal which
Schacht had long sought, for in a speech to the employees of
the former Austrian National Bank he declared:

     "*********Austria has certainly a great mission, namely, to
     be the bearer of German culture, to insure respect and
     regard for the German name, especially in the direction
     of the southeast. Such a mission can only be performed
     within the Great German Reich and based on the power of
     a nation of 75 millions, which, regardless of the wish
     of the opponents, forms the heart and the soul of
     "We have read a lot in the foreign press during the
     last few days that this aim, the union of both
     countries, is to a certain degree justified, but that
     the methods of effecting this union was terrible. This
     method which certainly did not suit one or the other
     power was nothing but the consequence of countless
     perfidies and brutal acts and violence which foreign
     countries have practiced against us *********"
     "*********I am known for sometimes expressing thoughts which
     give offense and there I would not like to depart from
     this consideration. I know that there are even in this
     country a few people -- I believe they are not too
     numerous -- who find fault with the events of the last few
     days, but nobody, I believe) doubts the goal, and it
     should be said to all grumblers that you can't satisfy
     everybody. One person says he would have done it maybe
     one way, but the remarkable thing is that they did not
     do it, and that it was only done by our Adolf Hitler;
     and if there is still something left to be improved,
     then those grumblers should try to bring about these
     improvements from the German Reich, and within the
     German community, but not to disturb us from without."

A memorandum of 7 January 1939, written by Schacht and other
directors of the Reichsbank to Hitler, urged a balancing of
the budget in view of the threatening danger of inflation.
The memorandum continued:

     "*********From the beginning the Reichsbank has been aware of
     the fact that a successful foreign policy can be
     attained only by the reconstruction of the German armed
     forces. It [the Reichsbank] therefore assumed to a very
     great extent the responsibility to finance the
                                                  [Page 365]
      in spite of the inherent dangers to the currency. The
     justification thereof was the necessity, which pushed
     all other considerations into the background, to carry
     through the armament at once, out of nothing, and
     furthermore under camouflage, which made a respect-
     commanding foreign policy possible." (EC-369)

The Reichsbank directors, as experts on money, believed that
a point had been reached where greater production of
armaments was no longer possible. That was merely a judgment
on the situation and not a moral stand, for there was no
opposition to Hitler's policy of aggression. Doubts were
merely entertained as to whether that policy could be
financed. Hitler's letter to Schacht on the occasion of
Schacht's departure from the Reichsbank paid high tribute to
Schacht's great efforts in furthering the program of the
Nazi conspirators. The armed forces by now had enabled
Hitler to take Austria and the Sudetenland. Hitler, in his
letter to Schacht declared:

     "Your name, above all, will always be connected with
     the first epoch of national rearmament." (EC-397)

Even though dismissed from the presidency of the Reichsbank,
Schacht was retained as a minister without portfolio and
special confidential adviser to Hitler. Funk stepped into
Schacht's position as president of the Reichsbank
(Voelkisher Beobachter of 21 January 1939). Funk was
uninhibited by fears of inaction, and like Goering, under
whom he had served in the Four Year Plan, he recognized no
obstacles to the plan to attack Poland. In a letter written
on 25 August 1939, only a few days before the attack on
Poland, Funk reported to Hitler that the Reichsbank was
prepared to withstand any disturbances of the international
currency and credit system occasioned by a large-scale war.
He said that he had secretly transferred all available funds
of the Reichsbank abroad into gold, and that Germany stood
ready to meet the financial and economic tasks which lay
ahead. (699-PS)

It seems clear that the Nazi conspirators directed the whole
of the German economy toward preparation for aggressive war.
To paraphrase the words of Goering, the conspirators gave
the German people "guns instead of butter." They also gave
history its most striking example of a nation gearing itself
in time of peace to the single purpose of aggressive war.
Their economic preparations formulated and applied with the
energy of Goering the financial wizardry of Schacht, and the
willing complicity of Funk, among others, were the
indispensable prerequisites for their subsequent campaign of


Charter of the International Military Tribunal,
Article 6, especially 6(a). Vol. I Pg. 5

International Military Tribunal, Indictment
Number 1, Section IV(E). Vol. I Pg. 21

[Note: A single asterisk (***) before a document indicates
that the document was received in evidence at the Nurnberg
trial. A double asterisk (******)-before a document number
indicates that the document was referred to during the trial
but was not formally received in evidence, for the reason
given in parentheses following the description of the
document. The USA series number, given in parentheses
following the description of the document, is the official
exhibit number assigned by the court.]

***699-PS: Letter from Funk to Hitler,
25 August 1939, reporting on economic affairs. (GB 49)  Vol.
III pg. 509

***1168-PS; Unsigned Schacht memorandum
to Hitler, 3 May 1935, concerning the financing of the
armament program. (USA 37) Vol. III pg. 827

***1301-PS; File relating to financing
of armament including minutes of conference with Goering at
the Air Ministry, 14 October 1938, concerning acceleration
of rearmament. (USA 123) Vol. III pg. 868

                                                  [Page 367]
***2261-PS; Directive from Blomberg to
Supreme Commanders of Army, Navy and Air Forces, 24 June
1935; accompanied by copy of Reich Defense Law of 21 May
1935 and copy of Decision of Reich Cabinet of 12 May 1935 on
the Council for defense of the Reich. (USA 24) Vol. IV  Pg.

***2353-PS; Extracts from General
Thomas' Basic Facts for History of German War and Armament
Economy. (USA 35) Vol. IV  Pg.1071

***3787-PS; Report of the Second
Meeting of the Reich Defense Council, 25 June 1939. (USA
782) Vol. VI  Pg.718

***3901-PS; Letter written November
1932 by Schacht, Krupp and others to the Reich President.
(USA 851) Vol. VI  Pg.796

***D-157; Letter from Krupp to Hitler,
25 April 1933, with enclosure. (USA 765) Vol. VI  Pg. 1063

***D-167; Memoranda by Sonnenberg and
Dr. Conn concerning exchange of intelligence involving Krupp
works. (USA 766) Vol. VI  Pg. 1069

***D-203; Speech of Hitler to leading
members of industry before the election of March 1933. (USA
767) Vol. VI  Pg. 1080

***D-204; Statement of Krupp concerning
political organisation of state and economy, 22 February
1933 (USA 768) Vol. VI  Pg. 1085

***D-206; Memorandum, 12 October 1939,
on distribution of propaganda abroad through foreign
connections of Krupp firm. (USA 769) Vol. VI  Pg. 1085

                                                  [Page 368]

***D-317; Krupp speech, "Thoughts about
the Industrial Enterpriser", January 1944. (USA 770) Vol.
VII  Pg. 21

***EC-14; Speech before the Wehrmacht
War College, 1 November 1937, by Major-General Thomas. (USA
758) Vol. VII  Pg.246

***EC-27; Address of Major-General
Thomas before the Staff Instructors' Course, on 28 February
1939 in Saarow-Pieskow. (USA 759) Vol. VII  Pg.250

***EC-28; Lecture of Major-General
Thomas delivered, 24 May 1939, at the Foreign Office. (USA
760). Vol. VII  Pg.250

***EC-128; Report on state of
preparation for war economic mobilization a of 30 September
1934. (USA 623) Vol. VII  Pg.306

***EC-174; Summary "war economy" trip
to Godesberg undertaken by General Staff between 25 May 1937
and 2 June 1937. (USA 761) Vol. VII  Pg.326

***EC-177; Minutes of second session of
Working Committee of the Reich Defense held on 26 April
1933. (USA 390) Vol. VII  Pg.328

***EC-252; Letter from Schacht to
Blomberg, 8 July 1937. (USA 762) Vol. VII  Pg. 346

***EC-257; Personal letter from Schacht
to Thomas, 29 December 1937. (USA 763) Vol. VII  Pg.347

***EC-286; Correspondence between
Schacht and Goering, March-April 1937, concerning price
control. (USA 833). Vol. VII  Pg.380

***EC-293; Letter from Schacht to Reich
and Prussian Economics Minister, 24 December 1935,
concerning army demands for raw material. (USA 834) Vol. VII
Pg. 391

                                                  [Page 369]
***EC-297-A; Address in Vienna of the
Reichsbank President, Dr. Schacht, 21 March 1938. (USA 632)
Vol. VII  Pg.394

***EC-369; Correspondence between
Schacht and Hitler, January 1939. (USA 631) Vol. VII  Pg.426

***EC-383; Letter 16 January 1937 with
enclosure -- article about Schacht appearing in the Military
weekly Gazette. (USA 640) Vol. VII  Pg.436

***EC-397; Letter from Hitler to
Schacht, 19 January 1939. (USA 650) Vol. VII  Pg. 438

***EC-404; Minutes of conference of
Sixth Session of Working Committee of Reichs Defense
Council, held on 23 January 1934 and 24 January 1934. (USA
764) Vol. VII  Pg.443

***EC-405; Minutes of Tenth Meeting of
Working Committee of Reichs Defense Council, 26 June 1935.
(GB 160) Vol. VII  Pg.450

***EC-408: Memorandum report about the
Four Year Plan and preparation of the war economy, 30
December 1936. (USA 579) Vol. VII  Pg. 465

***EC-416; Minutes of Cabinet Meeting,
4 September 1936. (USA 635) Vol. VII  Pg.471

***EC-436; Affidavit of Puhl,
2 November 1945. (USA 620) Vol. VII  Pg.494

***EC-439; Affidavit of Schnitzler, 10
November 1945. (USA 618) Vol. VII  Pg.501

***EC-461; Extracts from Ambassador
Dodd's Diary, 133-38. (USA 58) Vol. VII  Pg.515

Affidavit J; Affidavit of Erhard Milch, 23 January 1946. Vol. VIII Pg.653

Chart No. 9; The Organization of German Business. Vol. VII  Pg.778

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