Nazi Conspiracy & Aggression B. Economic and Financial Preparations for Aggressive War.
One of the most significant preparations for aggressive war
is found in the Secret Reich Defense Law of 21 May 1935
(2261-PS). The law went into effect upon its passage. It
stated at its outset that it was to be made public
instanter, but at the end of it Adolf Hitler signed the
decree ordering that it be kept secret. General Thomas, who
was in charge of War Armament Economy and for some time a
high ranking member of the German High Command, refers to
this law as the cornerstone of war preparations. He points
out that, although the law was not made public until the
outbreak of war, it was put into immediate execution as a
program for preparations. These statements are made at page
25 of General Thomas' work, "A History of the German War and
Armament Economy, 1923-1944." (2353-PS)
This secret law remained in effect until 4 September 1939,
at which time it was replaced by another secret defense law
(2194-PS) revising the system of defense organization and
directing more detailed preparations for the approaching
status of 'mobilization which was clearly an euphemism for
war.
The covering letter, under which this second Reich Defense
Law, was sent to the Ministry for Economy and Labor for
Saxony in Dresden, on 6 December 1939, was classified Top
Secret and read as follows:
"Transportation Section, attention of Construction
Chief Counsellor Hirches, or representative in the
office of the Reich Protector in Bohemia and Moravia,
received Prague, 5 September 1939, No. 274.
"Inclosed please find a copy of the Reich Defense Law
of 4 September 1938 and a copy each of the decrees of
the Reich Minister of Transportation, dated 7 October
1938, RL
[Page 416]
10.2212/38, top secret, and of 17 July 1939, RL/LV 1.2173/39, top secret. For your information and observance, by order, signed Kretzchmar. 3 inclosures completed to Dresden, 4 September 1939, signed Schneider 3 inclosures. Receipt for the letter of 4 September 1939, with 3 inclosures, signed 5 September 1939, and returned to construction Counsellor Kretzchmar." (2194-PS)
Thus the second secret Reich Defense Law was transmitted
under top secret cover.
The general plan for the breach of the Treaty of Versailles
and for the ensuing aggressions was carried out in four
ways: (1) secret rearmament from 1933 to March 1935; (2) the
training of military personnel (that includes secret or
camouflage training); (3) production of munitions of war;
(4) the building of an air force.
The facts of rearmament and of secrecy are self-evident from
the events that followed. The significant phase of this
activity lies in the fact that it was necessary in order to
break the barriers of the Treaty of Versailles and of the
Locarno Pact, and to make ready for aggressive wars which
were to follow.
Those activities by their nature and extent, could only have
been for aggressive purposes. The highest importance which
the German government attached to the secrecy of the program
is emphasized by the disguised methods of financing utilized
both before and after the announcement of conscription, and
the rebuilding of the army, on 16 March 1935.
The point is illustrated by an unsigned memorandum by
Schacht dated 3 May 1935, entitled, "The Financing of the
Armament program, "Finanzierung der Ruestung." (1168-PS) It
is not signed by Schacht, but in an interrogation on 16
October 1946, he identified it as being his memorandum. The
memorandum reads as follows:
"Memorandum from Schacht to Hitler [identified by
Schacht as Exhibit A, interrogation 16 October 1945,
page 40] 3 May 1935.
"Financing of Armament. The following explanations are
based upon the thought, that the accomplishment of the
armament program with speed and in quantity is the
problem of German politics, that everything else
therefore should be subordinated to this purpose as
long as the main purpose is not imperiled by neglecting
all other questions. Even after 16 March 1935, the
difficulty remains that one cannot undertake the open
propagandistic treatment of the German people for
support of armament without endangering our po-
[Page 417]
sition internationally (without loss to our foreign
trade). -The already nearly impossible financing of the
armament program is rendered hereby exceptionally
difficult. "Another supposition must be also
emphasized. The printing press can be used only for the
financing of armament to such a degree, as permitted by
maintaining of the money value. Every inflation
increases the prices of foreign raw materials and
increases the domestic prices, is therefore like a
snail biting its own tail. The circumstance that our
armament had to be camouflaged completely till 16 March
1935, and even since this date the camouflage had to be
continued to a larger extent, making it necessary to
use the printing press (bank note press) already at the
beginning of the whole armament program, while it would
have been natural, to start it (the printing press) at
the final point of financing. In the portefeuille of
the Reichsbank are segregated notes for this purpose,
that is, armament, of 3,775 millions and 866 millions,
altogether 4,641 millions, out of which the armament
notes amount to Reichsmarks 2,374 millions, that is, of
30 April 1935. The Reichsbank has invested the amount
of marks under its jurisdiction, but belonging to
foreigners in blank note of armament. Our armaments are
also financed partly with the credits of our political
opponents. Furthermore, 500 million Reichsmarks were
used for financing of armament, which originated out of
[Reichsanleihe], the federal loans, placed with savings
banks. In the regular budget, the following amounts
were provided. For the budget period 1933-34,
Reichsmarks 750 millions; for the budget period 1934-
35, Reichsmarks 1,100 millions; and for the budget
period 1935-36, Reichsmarks 2,500 millions.
"The amount of deficits of the budget since 1928
increases after the budget 1935-36 to 5 to 6 millions
Reichsmarks. This total deficit is already financed at
the present time by short term credits of the money
market. It therefore reduces in -advance the
possibilities of utilization of the public market for
the armament. The Minister of Finance
[Reichsfinanzminister], correctly points out at the
defense of the budget: As a permanent yearly deficit is
an impossibility, as we cannot figure with security
with increased tax revenues in amount balancing the
deficit and any other previous debits, as on the other
hand a balanced budget is the only secure basis for the
impending great task of military policy. For all these
reasons we have to put in motion a fundamental and
conscious budget policy which solves the problem of
arma-
[Page 418]
ment financing by organic and planned reduction of
other expenditures not only from the point of receipt,
but also from the point of expenditure, that is, by
saving.
"How urgent this question is, can be deduced from the
following, that a large amount of task has been started
by the state and party and which is now in process, all
of which are not covered by the budget, but from
contributions and credits, which have to be raised by
industry. in addition to the regular taxes.
"The existing of various budgets side by side, which
serve more or less public tasks, is the greatest
impediment for gaining a clear view over the
possibilities of financing the armaments. A whole
number of ministries and various branches of the party
have their own budgets, and for this reason have
possibilities of incomes and expenses, though based on
the sovereignty of finance of the state, but not
subject to the control of the Minister of Finance and
therefore also not subject to the control of the
cabinet. Just as in the sphere of politics the much too
far-reaching delegation of legislative powers to
individuals brought about various states within the
states, exactly in the same way the condition of
various branches of state and party, working side by
side and against each other, has a devastating effect
on the possibility of financing. If on this territory
concentration and unified control is not introduced
very soon, the solution of the already impossible task
of armament financing is endangered.
"We have the following tasks:
"(1) A deputy is entrusted with finding all sources and
revenues, which have its origin in contributions to the
federal government, to the state and party and in
profits of public and party enterprises.
"(2) Furthermore experts, entrusted by the Fuehrer,
have to examine how these amounts were used and which
of these amounts can in the future be withdrawn from
their previous purpose.
"(3) The same experts have to examine the investments
of all public and party organizations, to which extent
this property can be used for the purpose of armament
financing.
"(4) The federal Ministry of Finance is to be entrusted
to examine the possibilities of increased revenues by
way of new taxes or increasing of existing taxes.
"The up-to-date financing of armaments by the
Reichsbank
[Page 419]
under existing political conditions was a necessity and
the political success proved the correctness of this
action. The other possibilities of armament financing
have to be started now under any circumstances. For
this purpose all absolutely non-essential expenditures
for other purposes must not take place and the total
financial strength of Germany, limited as it is, has to
be concentrated for the one purpose of armament
financing. Whether the problem of financing, as
outlined in this program, succeeds, remains to be seen,
but without such concentration, it will fail with
absolute certainty." (1168-PS)
The
original plaintext version
of this file is available via
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Volume
I Chapter IX
Preparation for Aggression
1933-1936
(Part 3 of 14)