Archive/File: imt/tgmwc/tgmwc-01/tgmwc-01-04.05 Last-Modified: 1999/08/28 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." THE PRESIDENT: Yes. 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 aims. 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 financing. 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 stated: "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 follows: 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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