Archive/File: imt/nca/nca-01/nca-01-08-economic-mobilization Last-Modified: 1996/06/06 [Page 349] Chapter VIII ECONOMIC ASPECTS OF THE CONSPIRACY 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. I. ECONOMIC MOBILIZATION FOR 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 Funk. 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 through [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 instrument [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) 2. COLLABORATION OF THE INDUSTRIALISTS IN REARMAMENT Although the Nazi government officials provided the leadership in preparing Germany for war, they received also the enthusiastic and invaluable cooperation of the German industrialists. 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 Schnitzler: "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 Stahlwerke. "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 recognized [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- 203) 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 overcome?" 3. THE USE OF ECONOMIC MEASURES TO FACILITATE REARMAMENT 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 that: "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." (EC-405) 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 figures. 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 stated: "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 stated: "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." (D-206) 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 response: "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 follows: 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 as [[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 stated: "*********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- 257) 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- 252) 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 offices." ********************* "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 Europe." ********************* "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." (EC-297-A) 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 rearmament [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 aggression. LEGAL REFERENCES AND LIST OF DOCUMENTS RELATING TO ECONOMIC ASPECTS OF THE CONSPIRACY 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. 934 ***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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