Fourth Day:
Friday, 23rd November, 1945
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]
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:
[Page 136]
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]
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:
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 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:
[Page 138]
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:
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]
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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(Part 5 of 7)
[MR. THOMAS DODD continues]
"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."
"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."
"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.
"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.
In the year of 1933 ---- 74,000 tons
The production of gasoline increased at an even greater
tempo: from 370,000 tons in 1934 to 1,494,000 tons in 1938.
........................1934 ---- 108,000 tons
........................1935 ---- 145,000 tons
........................1936 ---- 186,000 tons
........................1937 ---- 217,000 tons
and in the year 1938 -- 477,000 tons