The Nizkor Project: Remembering the Holocaust (Shoah)

Shofar FTP Archive File: holocaust/germany/economy/schacht.002

Newsgroups: alt.revisionism
Subject: Holocaust Almanac: Schacht & Reichsbank insolvency
Summary: Although nazi propaganda often asserts that Adolf Hitler
         was some sort of financial miracle worker, the reality seems
         at distinct odds with that view. According to Schacht, the
         Reichsbank was insolvent following the Anschluss-Sudeten
Followup-To: alt.revisionism
Organization: The Nizkor Project, Vancouver Island, CANADA
Lines: 101

Archive/File: holocaust/germany/nuremberg schacht.002
Last-Modified: 1994/03/02

   "On January 7, 1939, Schacht told Hitler he was sitting atop an
   inflationary volcano that was about to explode the economy. During
   the first five years of the Nazi regime the amount of currency in
   circulation had increased from 3.6 to 5.3 billon marks. Although
   consumer goods production fell far short of keeping pace, rigid
   price controls, sometimes enforced by the SA, and covert
   manipulation that sacrificed quality for quantity kept the rise in
   prices under control. But the money required to finance the
   Anschluss, the Sudeten acquisition, and the preparation for war
   resulted in a _near doubling of money in circulation_, from 5.3
   billion to 10.2 billion marks, in ten months.

   'Beginning in March,' and through the period of the Austrian and
   Sudetenland invasion and the actions connected therewith, the 'wage
   and price structure totally fell apart,' Schacht stated. 'The
   overemployment of the economy was accompanied by scarcity of
   materials and labor and by lowering of quality. At the same time
   the relative production of consumer goods for daily needs lagged.
   The excess in orders and the pressure for quick production have
   caused the failure of all planning by the authorities [and] force
   the manufacturers to corner material and labor which has caused _an
   excessive price and wage racket_ because of the shortage of
   materials and labor. Especially in the field of _daily
   requirements_ for the home and clothing, the lack of supply and
   above all the decline of quality is most evident. Children's
   clothes, workers' clothes, and so forth, which formerly lasted for
   years now last for only months, but cost the same or even more than
   the previous good merchandise. _The unlimied growth of the
   government_ expendatures nullifies every attempt for an orderly
   budget and brings the _government's finances to the verge of
   bankruptcy_ despite a tremendous increase in taxes. Due to
   _Treasury deficits_ running into billions, the Minister of Finance
   during the last months was continually placed in the position to
   declare insolvency or to cover the deficit in the Reich finances
   through inflationary means of using the printing press. Gold or
   foreign exchange reserves of the Reichsbank are extinct. _The
   unfavorable balance of imports over exports is increasing rapidly_.
   _The reserves, created through the annexation of Austria and the
   requisitioning of foreign securities and domestic gold coins are
   exhausted_.' (NCA, 3358 PS, The Jewish Question as a Factor in
   German Foreign Policy in 1938, Jan. 25, 1939)

   To Hitler the answer seemed simple: issue new currency backed by
   the real estate, securities, and valuables obtained from the Jews
   through the billion-mark fine -- the real purpose of the
   confiscation. [Conot refers to the Kristallnacht fines, which
   established the legal principle that the Jews must pay the cost of
   the destruction of their property by the Nazis. knm] Schacht,
   however, replied: 'Covering the expended money with real estate,
   securities, and so forth cannot retain the currency value. An
   increase in the production of goods is not possible by the increase
   of scraps of paper money -- one can only increase prices and wages,
   but not production.'

   Schact and the directors of the Reichsbank were of the opinion that
   'it is now time to put a stop to it.' The budget must be brought
   into balance. The treasury, which had run out of funds to pay
   current obligations and government employees, must stop printing
   money ad infinitum. The Reichsbank's independence to control the
   money supply must be restored. (Ibid; Schact, p. 369)

   'This is rebellion!' Hitler sputtered, and on January 20, summoned
   Schacht to unburden himself of his grievances. Remarking, 'You
   don't fit in to the National Socialist scheme of things,' he
   dismissed Schacht and two other Reichsbank directors. Ticking off
   the charges one by one, he transfixed the impassive banker: 'You
   have criticized and condemned the events of November 9!'

   'Had I known that you approved of these events, I should have said
   nothing,' Schacht replied imperturbably.

   For once, Hitler was speechless. 'I am too upset to continue this
   conversation, he burst out, and indicated Schacht should take his
   leave. (Schacht, 359)

   Hitler had reached the end of Germany's economic tether. By drawing
   men from agriculture into industry and the armed forces, he was
   aggravating the shortfall in food production. One bad harvest had
   already necessitated a doubling of grain imports, and another
   (which was to come in 1940) portended disaster. Having led Germany
   from depression into bankruptcy, he was left with his final option:
   to retreat or go to war. And he would never retreat." (Conot,

                             Work Cited
   Conot, Robert E.  Justice at Nuremberg.  New York: Harper & Row,

   Schacht: Conot's notes are unclear as to the Schacht cited, although the
   bibliography lists two works, which I include here:

   Schacht, Hjalmar. Account Settled. London: Weidenfeld & Nicolson,
   ----------------. Confessions of the Old Wizard. Boston: Houghton
   Mifflin Co., 1956


   IMT. International Military Tribunal, Trial of the Major War Criminals;
   the published transcipts of the trial. 

   NCA. Nazi Conspiracy and Aggession, the 10-volume compendium of the
   prosecution's agruments.

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