Nazi Conspiracy & Aggression 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.
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Volume
I Chapter VIII
The Economic Aspects of the Conspiracy
(Part 3 of 5)