The Nizkor Project: Remembering the Holocaust (Shoah)

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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

                                                  [Page 135]

Reich Finance Ministry and the Reichsbank, which was headed

by the defendant Schacht.

On May 31st, 1935, as stated earlier -

THE PRESIDENT: Are you passing from EC-404?

MR. DODD: I am, your Honour.

THE PRESIDENT: Very well, go on.

MR. DODD: As was stated earlier in this morning's

discussion, the defendant Schacht was secretly appointed

Plenipotentiary-General of the War Economy, and he had the

express function of placing all economic forces of the

nation in the services of the Nazi war machine.

By the secret defence law Of 21st May, 1935, under which

Schacht received this secret appointment, he was in effect,

given charge of the entire war economy. In case of war, he

was to be virtual economic dictator of Germany. His task was

to place all economic forces into the service for the

conduct of the war and to secure economically the life of

the German people. The Ministers of Economy, of Food,

Agriculture, Labour, Forestry, as well as all Reich agencies

directly under the Fuehrer, were subordinated to him. He was

to be responsible for the financing as well as for the

conduct of the war; and he was even authorised to issue

ordinances within his sphere of responsibility, even if

these deviated from the existing laws.

The rearmament of Germany proceeded at an amazingly rapid

pace. By the summer of 1935, the Nazi conspirators were

emboldened to make plans for the reoccupation of the

Rhineland, and at the tenth meeting of this same Working

Committee of the Council, the question of measures to be

taken in connection with the proposed reoccupation of the

Rhineland were discussed.

I refer to the document EC-40S:

At that meeting, held on the 26th day of 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 de-militarised

zone. Among the matters requiring special treatment was the

preparation of economic mobilisation, a task specifically

entrusted to the defendant Schacht, as secret

Plenipotentiary for the War Economy.

THE PRESIDENT: Are you reading from this document?

MR. DODD: I am quoting in part from it, your Honour, and it

is upon pages 4 and 5 of this document that I base my

statements. I dislike annoying the Court with constant

references to these documents, but I thought it would be the

best way to proceed.

THE PRESIDENT: If you tell us exactly where it is in the

document we can find it there.

MR. DODD: It is on page 4, if your Honour pleases.

THE PRESIDENT: Yes, go on.

MR. DODD: On page 4, the middle of the page, the fifth

paragraph, the first sentence, "the de-militarised zone

requires special treatment."


MR. DODD: And on page 5, " J," under "The Preparations,"

"preparation of economic mobilisation." On page 4, the last

paragraph just before the setting-out of the " A," "B," "C,"

and "D," it said -

THE PRESIDENT: I think you ought to read on page 4, the last

paragraph 1 -"since political entanglements."

MR. DODD: That was the one I had proceeded to read.

THE PRESIDENT: I thought you had gone on to page 5.

MR. DODD: "Since political entanglements abroad must be

avoided at present under all conditions, only those

preparatory 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."

                                                  [Page 136]

Preparations are then set out, and they include, as I have

indicated a few minutes ago, as the last one in the list,

the preparations for economic mobilisation.

There are many others, of course, for preliminary restoring

of measures, and for the financial preparation for

evacuation measured, and so forth. We shall pass now from

that document to the rapid success of the German re-

armament, primarily attributable to the work of the

defendant Schacht. In the Fall of 1934, the Nazi

conspirators announced the so-called "New Plan," aiming at

the control of imports and exports in order to obtain the

raw materials, which were needed for armaments and the

foreign currency which was required to sustain the armament

programme. The new plan was the creation of the defendant

Schacht, and under the plan, the defendant Schacht

controlled imports by extending the system of Supervisory

Boards for import control, which was previously limited to

the main groups of raw materials, and all goods imported

into Germany, whether those raw materials were semi-

manufactured goods or finished products. The requirement of

licences for imports enabled the Nazi conspirators to

restrict imports to those commodities which served their war


Subsequently, in February, 1935, the "Devisen" Law was

passed which can be found by referring to the

Reichsgesetzblatt 1935, 1, 105. Under it, all transactions

involving foreign exchange were subject to the approval of

Devisenstellen (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 needs and desires.

Thus every aspect of German economy was being geared to war

under the guidance of the Nazi conspirators, particularly of

the defendant Schacht. In a study of the economic

mobilisation for war as of 30th 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 re-deploy industry, to secure areas and to

control fiscal and trade policies. References were made to

the fact that the task of stock piling 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 organised 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.

The matter of financing the armament programme presented a

difficult problem for the conspirators. In 1934 and 1935 the

German economy could by no possibility have raised funds for

their extensive rearmament programme through taxes and

public loans. From the outset, the armament programme

involved "the engagement of the last reserves."

Apart from the problem of raising the huge sums required to

sustain this programme, the Nazi conspirators were

exceedingly anxious, in the early stages to conceal the

extent of their feverish armament activities.

After considering various techniques of financing the

armament programme, the defendant Schacht proposed the use

of "mefo" bills. One of the primary advantages of this

method was the fact that figures indicating the extent of

rearmament, that would have become public through the use of

other methods, could be kept secret through the use of mefo

bills. These mefo bills were used exclusively for armament


Transactions in mefo bills worked as follows:

Mefo bills were drawn by armament contractors and accepted

by a limited liability company, the Metallurgische

Forscbungsgesellschaft m.b.H., whose initials spell the word

"mefo" from which the transaction takes its name. This

company had a nominal capital of one million Reichsmarks and

was therefore merely a dummy Organisation. The bills were

received by all German banks for possible rediscounting with

the Reichsbank, and the bills were guaranteed

                                                  [Page 137]

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 figures.

The mefo bill system continued to be used until 1st April,

1938. To that date, twelve 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 rearmament, mefo financing was discontinued at

that time.

A further source of funds which defendant Schacht drew upon

to finance the secret armament programme was the funds of

political opponents of the Nazi regime, and marks of

foreigners on deposit in the Reichsbank. As Schacht stated,

"Our armaments are also financed partly with the credits of

our political opponents."

That statement was made in the memorandum from the defendant

Schacht to Hitler, dated 3rd May, 1935, and is in document

1168-PS, and the specific sentence I found in the second

paragraph is:

   "The outstanding mefo bills at all times represented a

   threat to the stability of the currency because they

   could be tendered to the Reichsbank for discount, in

   which case the currency circulation would automatically

   have to be increased."

Thus, there was an ever-present threat of inflation. But

Schacht continued on his course, because "he stands with

unswerving loyalty to the Fuehrer, because he fully

recognises the basic idea of National Socialism and because

at the end, the disturbances, as compared to the great task,

can be considered irrelevant."

High ranking military officers paid tribute to the defendant

Schacht's contrivances on behalf of the Nazi war machine. In

an article written for the "Military Weekly Gazette" in

January, 1937, it is said:

   "The German Defence Force commemorates Dr. Schacht to-

   day 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 Defence Force

   owes it to Schacht's skill and great ability that, in

   defiance of all currency difficulties, it has, according

   to plan, 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 Nuremberg Party Convention on 9th

September, 1936, and it was given a statutory foundation by

the decree concerning the execution of the Four-Year Plan

dated 18th October, 1936, which I found in Reichsgesetzblatt

1936, 1, 887. By this decree the defendant Goering was put

in charge of the plan. He was authorised 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 fibre, 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 programme, however, the Nazi

conspirators required foreign exchange to finance propaganda

and espionage activities abroad. Thus, in a speech on 1st

November, 1937, before the Wehrmachtakademie, General Thomas


   "If you consider that one will need during the war

   considerable means in order to organise the necessary

   propaganda, to pay for the espionage services and

   similar purposes, then it will be clear that our

   internal Mark can therefore be of no use, and that

   foreign exchange will be needed."

This particular need for foreign exchange was reduced in

part by the virtue of the espionage and propaganda services

rendered free of charge to the Nazi State by some leading

German industrial concerns.

                                                  [Page 138]

I hold in my hand document D-206, dated at Essen 12th

October, 1935. It was found in the files of the Krupp

Company by representatives of United States and the British

Isles.  I shall not read all of it unless your Honour

requires it, but I will start at the beginning by way of

establishing its purpose and the information contained

therein. It is entitled "Memorandum". There is the

subheading: "Concerns-distribution official propaganda

literature abroad with help of our foreign connections". It

goes on and says that on the morning of 11th October the

district representative of Ribbentrop's Private Foreign

Office, Dienststelle Ribbentrop, made an appointment by

telephone for a Mr. Lachman to arrive at an appointed time.

" In answer to my question as to with whom I was dealing,

and which official bureau he represented, he informed me

that he was not himself the district representative of

Ribbentrop's Private Foreign Office, but that a Mr. Landrat

Bollman was such, and that he himself had come at Mr.

Bollman's orders."

The next paragraph states that "there exists a very great

mix-up in the field of foreign propaganda, and Ribbentrop's

Foreign Office wants to create a tighter organisation for

foreign propaganda. For this purpose the support of our firm

and above all an index of addresses were needed." The next

sentence, in the third paragraph, I would like to read. "I

informed Mr. Lachman that our firm had put itself years ago

at the disposal of official bureaux for purposes of foreign

propaganda, and that we had supported all requests addressed

to us to the utmost."

I now hold in my hand document P-167. This is also a copy of

a document found in the files of the Krupp Company by

representatives of the Americans and of the British Isles.

It is dated 12th October-14th October, 1937, and states it

is a memorandum of Herr Sonnenberg of the meeting at Essen

on 12th October, 1937.  It indicates that only in the "Maze"

representing the Intelligence with the combined service of

the ministry is the department coming under the Defence

Office, as for the Intelligence in the foreign department,

but not including matters published in newspapers. The

intelligence received by Koch was from agents, and threading

through other channels to be passed on by the services of

the Intelligence.

Finally, the third paragraph states: On our part we

undertook to supply cases to combine the service of ministry

as required.

I have concluded reading from that document, and I pass on

now to discuss the conspirators' programme, carried out, as

I have said so many times here to-day, with amazing-really

amazing speed; the production of steel, for example, as

shown in the official German publications, rose    as


In the year of  1933 --  74,000 tons

                1934 -- 108,000 tons

                1935 -- 145,000 tons

                1936 -- 186,000 tons

                1937 -- 217,000 tons

and in the year 1938 -- 477,000 tons

The production of gasoline increased at an even greater

tempo: from 370,000 tons in 1934 to 1,494,000 tons in 1938.

The Nazi conspirators pressed the completion of the armament

programme with a sense of urgency which clearly betrayed

their awareness of the imminence of war. At a 4th September,

1938, meeting, Goering pointed out that "all measures have

to be taken just as 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 shy away at the present moment. They

are therefore to be taken." 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

                                                  [Page 139]

Fuehrer has been reached; in case of war, he added, they are

not a reliable backing in any case."

By a letter marked "top secret" and "an important secret,

top secret," on 21st August, 1936, the defendant Schacht was

informed of Hitler's order that all formations of the Air

Force be ready by 1st April, 1937. This served to accentuate

the urgent sense of immediacy that had pervaded the Nazi

economy from the outside, thus laying the groundwork for

further aggressive action.

Reading from other sections in Hitler Nazi-

THE PRESIDENT: I am going to interrupt you. In so far as I

understand, you have not referred us to any document since

document 167.

MR. DODD: No, your Honour, the figures there on the

production of steel, and of oil, are from the statistical

year book of the German Reich, 1939 and 1940, and the

statistical year book of the German Reich 1941 and 1942

inclusive. That is, with respect to the steel figures; and

the figures which I quoted with respect to the production of

gasoline are from the statistical year book of the German

Reich, 1941 and 1942. The statements of the defendant

Goering are based upon the document marked EC-416, in

document book.

I quoted a remark about the-

THE PRESIDENT: That is the document you already referred to?

MR. DODD: Yes, it has been referred to heretofore, I

believe. Some of these documents contain references to more

than one part of the presentation, and I have to refer to

them at different times in the presentation I make.

THE PRESIDENT: All right. Go on, if you want to refer to it.

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