Conjuring Hitler How Britain and
America Made the Third Reich
By Guido Giacomo Preparata
5
America Made the Third Reich
By Guido Giacomo Preparata
5
The Reich on the Marble Cliffs
Fire, Legerdemain and Mummery All the Way
to Barbarossa, 1933–41
Who is inspired and instructed by God, can only do good. Everything
that the Englishman does is thereby fundamentally righteous. And even
then, if he once does something that is abject according to conventional
morality, he so does it as to annihilate the opponent of God, who is in
any case unrighteous, and for that all means are sacrosanct.
Reinhold Hoops, England’s Self-Deception 1
I regard Halifax as a hypocrite of the worst type and a liar…Churchill is
the very type of a corrupt journalist. There is not a worse prostitute in
politics. He himself has written that it’s unimaginable what can be done
in war with the help of lies. He’s an utterly amoral, repulsive creature…
Stalin is half-beast, half-giant.
Adolf Hitler, Adolf Hitler’s Secret Conversations 2
We were entering the Lemur-peopled woods where human justice and
man-made laws are unknown; in them there was no fame to be won.
Ernst Jünger, On the Marble Cliffs 3
MEPHISTOPHELES:
To the pressure of our repeated onslaught
Our enemies are forced to yield
And, fighting unsteadily,
They are pushing toward the right
And so confusing the left side
Of their main force in the fight.
The firm head of our phalanx
Is moving toward the right and, like a flash,
They dash into the weak spot. –
Now splashing like storm-tossed
Waves, equal forces are wildly
Raging in the twofold conflict;
A more glorious thing has never been thought up,
This battle has been won for us!
Goethe, Faust Part Two, Act Four (10640–10653)4
Nazi Coup d’état
And so in January 1933 Hitler was made Chancellor – which is not to say
that he and his associates had truly seized power, yet. In fact they had taken
the deal from the barons – Papen, and his patrons – with strings attached.
The aristocrats thought that Hitler had been finally ‘framed in.’ ‘Within
two months,’ Papen smugly told a conservative critic, ‘we will have pushed
Hitler so far into a corner that he’ll squeak.’5 Including Hitler, there were
just three Nazis in the new Cabinet, and at first it seemed indeed that they
merely represented the added touch of populist legitimacy to what was by
and large a Fascist, elitist remix of the Second Reich. But the Fuhrer had his
foot in the door. So now his preoccupation was how to drive the patricians
out, let all the other Nazis in, and make himself absolute master of the
house. A bankrupt house, that is. All in all there was nothing exceptional
in the means he employed to achieve the objective; he resorted to the
customary, bloody intrigues of Levantine kingdoms: deceit, backstabbing,
physical liquidation and terror. Means so customary, in fact, that one could
have almost predicted the Fuhrer's moves from 1933 to 1934 by consulting
the second part of Goethe’s Faust (1831), which tells the story of a monarch
who, with the help of the Devil (Mephisto), restores order to his broken down
empire. Acting on Mephisto’s counsel, the elite subdues the masses
by terrorizing them with one, great sudden fire, and revives the languishing
economy by printing special money-bills mortgaged on the imperial right
to the land. This late inflationary blaze finds its necessary resolution in a
great military campaign against the neighboring ‘enemy.’
In broad outlines, the experience of the Third Reich was not much
different. Shortly before the March elections of 1933, from within, the
Hitlerites and the pro-Nazi elements of the establishment launched a coup
d’état, which was masked by a spectacular act of sabotage: the Reichstag fire.
Using this internally manufactured act of terror, the Nazis passed a series of
bills limiting civil liberties, and so managed to scare the population as to
score, with the additional quota of the traditional conservatives, a narrow
electoral majority. Thereafter, on the strength of this emergency legislation,
they annihilated the Leftist opposition in a few months. That meant also
purging the revolutionaries from within their own ranks, which was done
in June 1934 when the question of the succession to the presidency came
to the fore: shortly before the death of Hindenburg, Hitler bartered the
elimination of the SA hotheads and the surrender of the Brown shirts to
the army in exchange for the fealty of the generals.
Then, from 1933 to 1938, the Nazis tackled the gripping economic
depression and turned it into an exceptional season of unprecedented growth, which was for the most part characterized by military expenditure.
The Nazi Recovery was made possible by the expert coordination of Schacht
and his team of specialists operating from the Reichsbank and the Ministry
of Economics. To lighten and speed up Germany’s industrial revival, the
economic stewards of the Third Reich implemented a few modifi cations
in the make-up of the fi nancial apparatus that allowed the preparation for
war and the overall performance of the system to proceed untrammeled by
cyclical complications. By 1939, Germany had thus completed her second
Five-Year Plan, Dawes being the fi rst, and found herself ready to attack.
Now one wonders what the other powers were doing while Hitler was
rearming. And the answer is that they – Britain, the USSR, and the United
States – did all they could to facilitate his task. They provided the Nazis
with resources, military know-how, patents, money, and weapons – in
very large quantities. Why? To set the Nazis up, lead them on, and finally
destroy them, and take Germany into the bargain at war’s end. Throughout
the 1930's, the United States acted as a mere supplier to the Nazis in the
shadow of Britain, who produced the entire show. This show had to end
with Britain’s participation in a worldwide conflict as the leader of the
coalition of Allied forces against Nazi Germany. But the Hitlerites had to
be duped into going to war against Russia with the guarantee that Britain,
and thus America, would remain neutral: Hitler would not want to repeat
the errors of World War I. Therefore Britain had to ‘double’ herself, so to
speak, into a pro-Nazi and anti-Nazi faction – both of which, of course, were
components of one and the same fakery. The complex and rather grotesque
whole of Britain’s foreign policy in the 1930's was indeed the result of these
ghastly theatrical diversions with which the Hitlerites were made to believe
that at any time the colorful Nazi-phile camp would overthrow the hawks
of the War Party, led by Winston Churchill, and sign a separate peace with
the Third Reich. The secret goal of this unbelievable mummery was to drive
Hitler away from the Mediterranean in 1941, and into the Soviet marshes,
which the British would in fact allow him to ‘cleanse’ for three years, until
the time would arrive to hem the Nazis in and finally crush them.
None of this would have been possible without the unreserved
collaboration of Soviet Russia. The Soviets worked in unison with the anti German
directives of Britain as if they were her most faithful ally: they,
like Britain, appeased the Fuhrer, and contributed abundantly to the Nazi
war machine, shipping carloads of provisions to Germany throughout the
entire length of the Nazi rearmament. Furthermore, Russia would take in
the brunt of Germany’s comprehensive powers of devastation, and absorb
it with 20 million dead. After the carnage the Nazis were so exhausted that they fell rather easily when the Allies finally boxed them in, in June 1944. In
recompense for such an unspeakable sacrifice, the Anglo-Americans threw
half of Europe to their Slav accomplices – their old, grateful beneficiaries
of 1917.
The Weimar Republic, Nazism’s incubator, was destroyed in five stages:6 (1) under the Catholic Brüning, the ‘Hunger Chancellor’ (27 March 1930–30 May 1932), the parliamentary regime was suspended and rule by presidential decree instituted; (2) under von Papen, the petty Catholic aristocrat intriguing on behalf of the absentees, and initially launched as General von Schleicher’s figurehead (31 May 1932–17 November 1932), an authoritarian restoration of the old imperial order (‘the Cabinet of barons’) was briefly attempted, which was marked by the suppression of Leftist opposition and the timid implementation of public works programs; (3) under von Schleicher, the ‘Red General’ (2 December 1932–28 January 1933), the boldest maneuver took place against the secret built-in provisions of the Treaty of Versailles: a transverse sally led by parts of the army against the agrarians and finance, relying upon the populist support of Socialist trade unions and the Nazi Left wing; (4) under Hitler, a first phase was spent drafting patriotic acts against terrorism (30 January 1933–5 March 1933); (5) under the Nazi Gleichschaltung (the ‘normalization,’ 6 March 1933–2 August 1934), Hitler regimented the whole of Germany in the spirit of his party.
Now that the Nazi creature was formed, it did what had long been expected of it: it broke free of its stifling hothouse and, in time, pushed towards Russia.
On 1 February 1933, 48 hours after taking over, Hitler dissolved the Reichstag. President Hindenburg had needed a little persuasion before granting his new Chancellor the permission to do so – ‘Why?,’ he asked Hitler, ‘I thought you had gathered a working majority…’ Hitler’s reply was prompt: ‘This is time to deal with the Communists and Socialists once and for all.’7
New elections were announced for March 5. Yet another electoral round swept the Fatherland. On January 31, Goebbels wrote in his diary: ‘The broad outlines of the conflict to be waged against the Red terror have been established in the course of a meeting with Hitler. For the moment we shall abstain from taking countermeasures. Not until the opportune moment when the Communists launch a revolution shall we strike.’8
Hitler’s electoral calendar, drawn up by Goebbels, was published on February 10: therein no meeting was scheduled for February 25, 26, or 27.9 On February 26, Berlin’s fashionable fortuneteller, a fraudster by the name of Hanussen who had entertained scores of SA leaders in his theatrical venue – a high-class lupanar on the Lietzenburger Strasse – ‘predicted’ in a publicized seance, that the Communists were about to torch an important governmental building to set off a massive rebellion.10
On the night of February 27, 1933, the Reichstag’s cupola went up in flames, blazing like a giant piece of charcoal, beckoning the late stragglers of Berlin. The Fuhrer was summoned at once to the site. Upon reaching the smoldering remains of what used to be the Parliament, he exclaimed: ‘This is a beacon from heaven...No one can now prevent us from crushing the Communists with a mailed fist.’11 Even Goring arrived, overexcited – the emotion of both leaders appeared genuine. According to the official version, the Reichstag fire was an ‘act of terrorism,’ a Communist crime. Yet attempts at sedition were witnessed nowhere round the country. All was silent. Lists of arrests, which had been prepared long before, led to the incarceration of several thousand Communist and Socialist activists – the Gestapo came into being, and the camps received their first inmates. On February 28, the K.P.D (German Communist Party) was outlawed. Meanwhile, the electoral push was intensified by the squawking of slogans, torch-lit processions, marches and drills.
On March 5, on election day, despite the prodding of the terrorist antics and loads of cash from I. G. Farben,12 the Nazis were still not capable of reaping a majority: they accumulated 43.9 percent of the ballot, which only with an 8 percent nudge from the moribund Nationalists, allowed them to form a qualified quorum in the House.
In its war against terror, the government issued two ordinances, on February 28 and March 7, respectively, ‘for the defense of the people and the state,’ which restrained the freedom of the press, individual liberties, and the right of assembly. On March 12, the swastika-crested flag of the party was promoted to National Ensign.
Having the Reichstag burned to the ground, the congress convened in the Kroll Opera House on March 23. No Communists in the House; with the ‘suspension’ of 30 additional Socialists, the number of representatives had been reduced by 109: the remaining deputies were asked to pass an Enabling Act which would have given the government the right for four years to legislate by decree, without constitutional restrictions. The corollary of such a bill was to reduce the political machine of the country to a one party decision panel.
The vote: 441 ayes, 94 (Socialist) noes – Hitler was granted full powers. By March 31, the Nazi Gleichschaltung was in full swing: a centralized bureaucracy replaced the federal constituency established by Bismarck – all strings were now pulled from Berlin, via the subordinate control of an array of delegates (Statthalter) loyal to the Fuhrer.
On April 7, 1933, the bullet-riddled body of the ‘clairvoyant’ Hanussen was found in the wooded outskirts of Berlin.
In May, the Hitlerites proceeded to dismantle conclusively the party system of Weimar: the S.P.D leadership was incarcerated wholesale; with one blow an organization commanding 4 million workers, and endowed with a capital of 184 million Reichsmarks, was crumbled into dust. Nowhere was there the slightest reaction. Let alone resistance. The Nationalist veterans’ paramilitary formations, like the Stahlhelm (the Steel Helmet) were next. Then came the turn of the Catholics: the deal for them was self-dissolution in exchange for a concordat between the Holy See and the Nazi Reich. By the terms of such a pact, the Vatican would have recognized the Nazi state, agreed that the bishops pledge their allegiance to it, and forbidden priests to engage in politics – all this in exchange for a Nazi promise to respect the Church’s right to catechesis and its property. The Secretary of State of the Vatican, Eugenio Pacelli, had been swaying the 23 million German Catholics in this direction at least since 1931. Heinrich Brüning, the former unlucky Chancellor, who was now in charge of the Catholic Zentrum, pressured from Rome, agreed bitter in his heart on July 4 to dissolve this pillar of German political history – the party that had also been Erzberger’s. And to add insult to masochistic injury, the Nazis rejected those members of the Center party that willingly applied to flow into their ranks. The concordat was signed on July 8 and ratified on September 10, 1933.
The concordat broke down almost at once. Within ten days of its signing, Hitler’s SA attacked the parades of the Catholic Youth League; the beatings did not cease, they were worsened by the more systematic persecution of active Catholic dissenters, who were interned in the camps and/or bludgeoned to death. Pacelli did not hide from his foreign visitors his disgust at these happenings,13 but he thought he had no choice, no weapon at this stage other than appeasing the Nazis – things could have always been worse, he sighed: in Germany there could have been Bolshevism, which spared no priest. Veblen had foretold this much: the forthcoming reactionary regime of the Reich would be championed by the Elder Statesmen of the West as the bulwark against the (imaginary) Red menace.
In the span of six months, Hitler and his blackguards had smashed the incubator into pieces – there now remained to consolidate the National Socialist Revolution by sealing a twofold pact with the front legs of the quartet: industry/finance and the army.
Meanwhile, September 21, 1933 was the date set for the beginning of
the trial of the Reichstag’s putative arsonists: a young Dutchman, former
Communist sympathizer, by the name of Marinus van der Lubbe, and a
handful of Communist leaders, three of whom were Bulgarian Bolshevik
agents, all of them suitably trapped in a judicial proceeding that promised to
turn into a spellbinding spectacle. The accusations were poorly constructed –
too hastily; the case was suspect, the judge was embarrassed, the prosecutors
confused. The Communists defended themselves easily, and were forthwith
acquitted. There remained van der Lubbe, the inescapable useful idiot of yet
another terrorist sham: he alone, so claimed the accusation’s new theorem,
set 11,000 cubic meters of property on fire. During the proceedings, van
der Lubbe laughed as he lied – a laugh that was ‘strange,’ they reported.14
He driveled; he made no sense. The police had found him meandering
in the hall of the Reichstag, haggard, canopied by the long curtains on
fire. Commentators at the trial were of one mind: what they observed
was ‘a human wreck,’ an ‘unfortunate, doped up…moron.’15 The world
had seen this before: as the next step, the suicidal ‘moron’ would beg
the government’s henchmen to finish him off. His plea to the judges: ‘I
demand that I be punished by imprisonment or death.’16 The trial ended
in December; van der Lubbe was executed on January 10, 1934. Not even
at Nuremberg, in 1946, when they could have made the most of it, would
the Allied inquisitors be able to shed light on the incident and identify the
culprits. So was bestowed on history yet another unsolved act of terror with
the usual ingredients: a sacrificial ‘moron’ without motive, a conspiracy of
silence, and a catastrophic sequitur on the high plane of events.
With or without evidence, however, in terror ‘is fecit cui prodest’ always: ‘the one who did it is the one benefiting from it’ – that is, the Nazis themselves. Indeed, not even the evidence was lacking: everyone knew that a group of SA did it, possibly with the connivance of Goring and Goebbels,17 – a few SA leaders themselves crowed about it in public.18 In the end it appeared that van der Lubbe was a drifter ‘recruited’ by Hanussen, the glamorous psychic dispatched in April, as a favor to some SA bigwigs, clients of his.19 The drifter, whose homosexuality had been exploited by a gang of a dozen Brown shirts,20 was lured by them into the Reichstag, while they, after igniting the fire in several other spots, had ‘left through the secret corridor linking the Reichstag to the Residence of Goring, the Reichstag President.’21 This ‘prank’ was, in brief, a gift from the SA to their Fuhrer.
And Hitler, indeed, was in dire want of a roaring endorsement from the people; he addressed them on November 12, 1933: ‘Men of Germany! Women of Germany! Do you approve the policy of the government? Are you prepared to declare that it expresses your opinion and your own will, and solemnly to make it your own?’ This time the plebiscite was in the Fuhrer's favor by over 90 percent of the vote.
But by the spring of 1934, the Nazi tenure was still not petrified: there remained the thorn of Rohm’s SA. These troops, now 3 million strong – ten times the size of the official Reichswehr – were demanding the ‘Second Revolution.’ What this meant from the economic standpoint was unclear: possibly the early socialization schemes of the Nazi party, or a re-edition of Schleicher’s programs – in short, naive plans that dream of abolishing a most powerful network of interests, those of German business and finance, which Versailles had left, deliberately, untouched. This was the world of the aristocrats and the business moguls – the hated Bonzen – who stood ‘for law and order, respectability, and philistine values.’22 And Rohm was no economist, he was the eternal front-line lansquenet; he wanted to absorb the army and not be absorbed by it, to do away with the officer caste and transform Germany into a giant farmstead-economy ruled by a clan of proud Nazi herdsmen (his SA). Hitler tried to reason with him, in vain. To his gang, Röhm vented:
Adolf is rotten. He’s betraying all of us. He only goes around with
reactionaries. His old comrades aren’t good enough for him. So he brings
in these East Prussian generals…Adolf knows perfectly what I want…Not a
second pot of the Kaiser’s army…Are we a revolution or aren’t we?…23
There began to circulate talk of sedition – plots either to remove Hitler or kill him. Sometimes, the name of the unyielding ‘Red General,’ von Schleicher, was dropped in this connection, but the conspiracy, if any, was yet fluid. The ground under his feet, Hitler still sensed, was not as firm as he wished it to be. Especially as the Junkers, from their stalls, were showing signs of growing impatience with the factious confusion reigning among the Nazis. In Cologne, chez von Schröder, on 4 January 1933, it was national cohesiveness upon which Hitler had been sold – the Fuhrer had better keep his end of the bargain with his financial backers.
Looking ahead, in May, it became clear that Hindenburg had not much time left to live. Hitler could not afford to leave the post of Reich president vacant. Meeting with the Defense Minister General von Blomberg aboard the cruiser Deutschland he traded the Presidency for the liquidation of the SA.24
In June, when the old Field Marshal fell ill, Hitler decided to act. The SA were given a month’s furlough, and most of their rebellious chieftains retired, unsuspecting, to the lake resort of Wiessee. On June 30 the purge began. Squads of SS executioners were dispatched to this vacationing retreat to round up Röhm and his clique and shuttle them off to the Stadelheim prison in Munich. One by one, including Röhm, who rejected the offer to die by his own hand, they were shot down by Hitler’s praetorian commandos. Loose ends were tied and old scores were settled in the killing. Nine of the ten surviving SA arsonists of the Reichstag disappeared.25 General von Schleicher, his wife, and Schleicher’s assistant General von Bredow, both generals being also adversaries profoundly acquainted with the Reichswehr/Red Army connection, were cut down by volleys of machine-gun fire; Gregor Strasser, the looming wedge of the National Socialist movement, who had retired to private life, was taken to a jail, shot in the neck and left to bleed to death. Funded by a mysterious network, his brother Otto, who had defected from the N.S.D.A.P in 1930, would lead, as head of the so-called Black Front, an ineffective propaganda war against Hitler from Czechoslovakia, and then France, before vanishing into Canada at the outbreak of the war.26 Other Catholic exponents were murdered as well – yet one more warning to Rome. Finally, having not forgotten the double-cross of the 1923 Beerhall putsch, von Kahr, the Bavarian commissioner who dropped Hitler and the putschists to the Weimar police, ‘was taken away by SS men and later found hacked to death near Dachau.’27 In Munich the blasts of gunfire were heard throughout the entire day; then at dusk, silence. The exact figure of victims is not known. Presumably, the purge erased between 300 and 1,200 individuals.28 The President was alerted; Hitler, strained by tension and exhaustion, reassured the Old Man that a terrible revolt had been headed off. The generals were satisfied.
At the end of July, Hindenburg was on his deathbed; he asked his watchful doctor Sauerbruch, the celebrious surgeon: ‘Has Freund Heinz come into the house yet?’ ‘No,’ replied the doctor, ‘He is not in the house yet, but he is prowling in the garden.’29 On August 2, Freund Heinz (that is, death) stole in the house and took the Old Man – he had lived 88 years. For Germany the Field Marshal had done his best, as had Germany during the war, but likewise his best had not been good enough. The following day, on the legal basis of a document drawn up at the Chancellery, with the tacit approval of the army, Hitler announced to the people that he would thenceforth fuse into his hands the titles of Chancellor and President, and assume in their stead the sonorous appellation of Reichsführer. On August 19, 1934, he demanded yet another referendum to be acclaimed as ‘the leader,’ unique and unchallenged, and thereby to sanction the ultimate effacement of the Weimar Republic. It was ‘yes’ by 90 percent.
The pretended Hitlerite revolution was the outcome not of any deep will of the masses but a sort of violent dynamism from which the ruling Right wing expected to profit by canalizing it…It was von Papen who, thanks to his ascendancy over Hindenburg, organized the coup d’état. This coup d’état was simply a ‘Kombination,’ a scheme prepared through fifteen years of diabolical intrigues and spectacular mass demonstrations. It owed its success to terrorism…30
‘There are two great unknowns in the history and politics of the Third Reich:
the army and the finances.’31 Associated with the latter was none other
than the ‘old wizard’ himself, Hjalmar Schacht, the financial druid plugged
by Dulles and the Anglo-American cabal in early 1922, and Reichsbank
president from 1923 to 1930. François-Poncet, the French ambassador to
the Third Reich, remembered him thus:
Schacht was a cynic, a frantic blusterer, a person possessed of unbridled ambitions. A tall, dry, spare devil of a man, his features might have been hacked out by a bill hook, and his long wrinkled neck was like the neck of a bird of prey.32
It must have been harrowing, for such an ambitious creature as he, to sit still away from the levers of power for three interminable and comatose years, 1930–33. Considering his professional origins, sponsors, and character, it was hardly surprising to find him on the Nazi bandwagon at the onset of the Depression. Of the opportunists that swarmed to Nazism after the momentous election of September 1930 – the Septemberlinge, as Goebbels contemptuously tagged them – Schacht was the most prestigious by far.33
At the time, Schacht told himself that he had to commit; he just could not keep calm at the thought of Germany falling prey, should Hitler have stormed the Chancellery, to all sorts of unsavory monetary cranks, who teemed the back rows of the Nazi apparatus – they had to have professionals there at the top.34 He had to come back and ‘do the trick,’ as his by now most intimate friend Montagu Norman, had been taunting him to do,publicly, since 1931. In due time he would have. For the time being, he advised Hitler to be in his speeches as vague and noncommittal as possible in matters relating to the economy.
Notwithstanding the bleak premonitions of the Papen government, Germany experienced in the summer of 1932 a modest economic revival. The truth was that part of the financial network, which was supportive of Papen, put a little faith in him and his barons and loosened the strings of the purse. In fact, lukewarm attempts on the part of the Grid to release some cash in the system had been afoot for over a year.
In the summer of 1931, at the trough of the slump, funds were no longer flowing from abroad. The ailing banks, who had granted credit to businesses for the most part now semi-defunct, rushed to the central institute in hope of selling it their ‘frozen notes’ (the I.O.U's of the bankrupt concerns) for a ‘sufficient’ amount of cash. The Reichsbank, whose discount rate in August was already a steep 10 percent, felt overwhelmed by the request and the tawdry quality of this paper. To pass muster, a bill required three signatures: the drawer’s (creditor), the drawee’s (debtor), and a guarantor’s. Sections of the banking community suggested that the third underwriting come from a specially designed institute, the Akzeptbank, whose capital was promptly subscribed by the corporate leaders of the Grid. When all was done, the price for the rescue added up to 10 percent, plus 2 percent as a commission fee for the middle-role of the Akzeptbank: a net bite of 12 percent in the general tide of insolvency–outrageously expensive.35
By mid-1932, the Reichsbank had accumulated a sizable chunk of such ‘frozen paper’ in its portfolio and made good profits on it. But these advances of cash at such a high cost still amounted to no more than drops in the ocean: joblessness was not relieved in the least. Simply put, the German Grid had no faith whatsoever in the republic.
It was true that the state was bankrupt, but not entirely true that Germany had no money, or no capital. In 1931, the foreigners, indeed, had withdrawn much, as had the expatriate Germans, but the bulk of the foreign exchange sucked in during the great American feast of the 1920's was hoarded underground, and, most important, so was the mass of the nation’s aggregate wealth. Such wealth, mostly in the form of securities, represented that sumptuous infrastructure and industrial apparatus – the second largest in the world – erected with the Dawes loans, and which presently lay dormant.
The silent shufflings of these banking consortia between 1930 and 1933 were part of a broader engagement on the part of Germany’s financial interests into ‘impairing’ forms of investment: that is to say that the banks did not employ their funds to create new wealth of productive capital, but…simply confined themselves to buying capital goods (fixed property, securities, etc.) already in existence. The savings funds reentered the general circulation of industry and trade not by the act of investment, but by the expenditures of the impoverishing borrowers and sellers, who expended the money to meet their living expenses or their losses in business.36
In other words, the banking system and the great industrial conglomerates were making use of their cash literally to buy up the rest of the country by purchasing ‘property’ (deeds, stocks, mortgages and the like) at slashed prices from insolvent producers and consumers. The modicum of activity registered in 1931 under the auspices of the Reichsbank, the Akzeptbank and their affiliates constituted precisely this redistribution of wealth from the economy to the Grid; redistribution that accentuated, of course, the already skewed concentration of power in the hands of the latter. Between the slump and recovery stood unemployment; meanwhile, the absentees took advantage of the overall cheapness, attracting to their orbit additional titles of ownership. This was also how the central bank came to own, by the end of 1931, conspicuous stakes in several of the great Berlin banks.37
In 1932, ‘the money,’ in the form of cash, stocks, and bonds, was indeed sunk underground in the accounts of Germany’s banking network. A succession of ministers pleaded with the bankers, entreated them, while searching for a clever argument that might bring the absentee gentlemen to turn on the money tap. Brüning tried when the match was already lost. Under Papen, because of his connections, the financial interests instead made some room for a trial at reform.
The chief device introduced in the summer of 1932 was the ‘tax certificate’ (Steuergutschein): a variation on a general financing template, which was one of many refined instruments of Germany’s national political economy,38 and which Schacht, as we shall see, would transform for the Nazis into a standardized and swift mechanism.39
The idea behind tax certificates was to grant businesses a rebate on their forthcoming tax payments. The authorities would consider the most recent figures of tax yields and multiply these by a percentage (the rebate); the product would then be converted in a number of certificates to be distributed among the entrepreneurs, who in turn could use them to remit future tax dues.40
The paper bore interest of 4 percent: the intent was to send the recipients of these certificates to knock on the gates of the monetary markets and pressure the banks to discount the paper at their counters – the 4 percent was, again, the lure for the ‘investors.’ This roundabout device was nothing less than the government’s demand on behalf of struggling producers for a cash loan from the powerful investors: the firm would obtain the cash, minus the discount, hopefully thrive thereafter, and the Reich would pay interest on the certificates to the banks with the taxes it expected to levy from a boosted economy. In sum, the scheme comprised a short-term loan from the banks to the Reich, and a favorable (and interest-free) medium term loan from the Reich to businesses. In the event, the lag would have to be bridged by further long-term borrowing on the part of the government, which, in the light of the anticipated economic improvement, should not have been a problem.41
What did the businesses actually do with these certificates? Most spent the cash either to pay their debts or to employ the rebate to cut their prices, thus making things far worse in an environment where falling prices were the crux of the paralysis. The chief objective of the Papen plan was to encourage the use of the certificates as security for credit advances to be devoted to plant expansion and production; and particularly as touched the unemployed masses, the proposal was drafted with an eye only to boosting private consumption.
The whole came far short of the mark: only a very modest contingent of workers was reabsorbed. And when, by mid autumn, the baronial Cabinet of von Papen appeared to be vacillating, the banking Grid recoiled in a heartbeat. ‘The market was not prepared to take up the paper as fast as it was offered.’42 Unemployment, which had decreased until then, started in November to rise once again. And continued to climb under Schleicher, who was dreaded by the financial and aristocratic elites, even though he endorsed the fiscal policy of his predecessor.*
* At this time, an important think-tank in Berlin (the Institut für Konjunkturforschung) spread the myth that the recession had been overcome in the spring of 1932, and since the end of World War II, the Liberal establishment has repossessed this exaggeration with a view to employing it against the contention that there had been willful action behind the subsequent Nazi boom; no such thing was to be entertained: the boom had thus to be ascribed only to the ‘impersonal,’ ‘unpredictable’ swings of the business cycle. We shall briefly show that this was not true. In fact, the alternate vicissitudes of German unemployment in the biennium of 1932–33 may be easily correlated with the political orientation of the said elites: the brief respite registered in the Spring of 1932 was due exclusively to the favor accorded by the German clubs to Papen, whereas the recessionary relapse experienced in late 1932 was but the clubs’ manifest sign of hostility towards the Schleicher government.
Intriguingly, in the dreary days of November 1932, as he cast about for a successor to Papen, the Red General came to consider Schacht himself as a potential candidate for the Chancellery. Not for a moment was the banker enticed by the prospect of becoming the puppet of Schleicher. The general seemed to have forgotten that the banker belonged to a wholly different and much more powerful fraternity than his own. Besides, Schacht had already thrown in his lot with Hitler. Nevertheless, morbidly curious, the banker presented himself to the interview to sniff, ‘size up’ this bothersome, plotting general. Even in his post-war memoirs, in which he spent superhuman energy to depict himself as a paragon of nobility, was Schacht incapable of concealing his clannish, implacable hatred for Schleicher – possibly the only Weimar politician who came close to aborting the Nazi incubation. Schacht reminisced:
Although I immediately decided to refuse I was interested to discover his political views of the situation. His statements were so colorless that I had time to look around the room. It was every bit as devoid of character as the man’s speech – without any personal touch, any sign of individual taste…He pinned his last hope on a split of the National/Socialist Party. When he expressed this hope in my presence I broke in: ‘I think, General, that you underrate the iron discipline of the Party so assiduously maintained by Hitler.’ On that occasion Schleicher smiled in a superior fashion. Not long afterwards he ceased altogether to smile.43
Doubtless, Schacht must not have mourned the Red General the day following the Purge, 30 June 1934. By then, Schacht was solidly enthroned as Hitler’s new Reichsbank governor. He also enjoyed the undivided support of the Army and of the organized metallurgy industry, who championed his candidacy for leading an economic dictatorship focused on rearmament. The dream, sketched in the memo that he had forwarded to Dulles more than a decade ago, was about to come true: supreme monetary command over an oligopolized structure. However, Schacht had an adversary in the person of Kurt Schmitt, the Minister of Economics, who favored the development of a domestic consumers’ market – Schmitt, moreover, had had the favor of Rohm.44
A few days after the Purge, in early July, Minister Schmitt, an asset of the insurance lobby, addressed an assembly of German exporters. No sooner had he opened his allocation, ‘What, then, is to be done?’ than he fainted dead away, and was hauled off to convalesce in seclusion. Four weeks later, Schacht was summoned by Hitler, who immediately probed him: ‘I must find someone else for the post and would like to ask you, Herr Schacht, whether you would be prepared, in addition to your office of President of the Reichsbank to take our Ministry of Economic Affairs?’ How could he say ‘no’? ‘There remained the one and only possibility,’ Schacht would recall in his autobiography – the possibility of ‘working from within outwards.’45 In Nuremberg he would confess: ‘I’d even join the devil, for a big, strong Germany.’46
On July 30, 1934, Schacht officially succeeded Schmitt as Economic Minister; President Hindenburg undersigned the appointment and died three days later.47 Germany had its new Mephistophelean steward: Schacht was Reichsbank president and newly appointed Economic Minister, vested with the super added honorific of Generalbevollmächtigte für die Kriegswirtschaft (General Plenipotentiary for the War Economy). They now said of him that he was the ‘Economic Dictator of Germany.’
July 1934 was but a replay of March 1933. On the 17th of that month, Schacht had been officially recalled at the central bank – to steer the ship he had forsaken three years before. This had been the exchange between Hitler and Schacht:
[Hitler:] ‘Herr Schacht, I am sure we are agreed that at the moment there can be only one urgent duty for the new national Government, and that is to do away with unemployment. For this it will be necessary to find a very large sum of money. Do you see any possibility of raising such a sum – other than through the Reichsbank?’
[Schacht:] I agree with you entirely, Chancellor, that it is essential to wipe out the unemployment figures. But no matter what money can be extorted from other sources, it would still be quite insufficient for the job. You won’t be able to avoid recourse to the Reichsbank…
[Hitler:] ‘You must be able to say to what extent the Reichsbank can and must – help.’
[Schacht:] ‘I am honestly not in a position, Chancellor, to mention any particular sum. My opinion is this: Whatever happens, we must put an end to unemployment and therefore the Reichsbank must furnish whatever will be necessary to take the last unemployed off the streets.’
[Hitler:] ‘Would you be prepared to take command of the Reichsbank again?’ 48
Behind Schacht, also known as ‘the American,’49 stood important segments of German absentee ownership and Anglo-Saxon finance. As Hitler recalled, the first allotment earmarked for rearmament purveyed by the Reichsbank to the Hitlerites was of 8 billion marks; of that sum, Schacht and the Reichsbank deducted 500 million marks as interest. Not even the Nazis were spared the payment of interest: – 6.25 percent. And they paid, without protest. They would honor the obligation by availing themselves of the power to tax. The price was high, Hitler fumed, but he kept quiet.
Unlike Rohm, his SA, the Strassers and their Left wing, the Hitlerites had a solid grasp of economic realities. After sacrificing the SA to the army, Hitler now had to play a careful game with the Grid, to which he already owed much, and which he did not underestimate, hence his adulatory conduct while conversing with Schacht. This was his second compromise with the powers that be: like his old comrade Rohm, Hitler hated the bankers (‘that other gang…bunch of crooks,’ and Schacht, a ‘swindler!’)50 no less than he hated the Prussian generals, but he had to accomplish his mission in the East, whatever the cost.
Schacht knew what Hitler wanted from him; now was the time to ‘do the trick.’ First of all he was expected to ignite that Initialzuendung, or ‘initial spark,’ with which Papen had attempted to shock the German economy in the throes of 1932. The jump-start, all experts agreed, should have come from government expenditure, but, for the rest of the common mortals, the ‘big problem remained as it had always been, where to find the money,’ 51 or, in other words, how to ‘make capital appear when seemingly it did not exist.’52
As mentioned before, the unemployment condition inherited by the Third Reich was nothing short of catastrophic: 9 million jobless out of a labor force of 20 million – two out of every five Germans employed in 1929 were without work in the winter of 1932–33.53
Since 1930, as workers were being laid off and the national income was plummeting, the Grid had made a fortune out of the misery of the Fatherland by buying stacks of securities ‘cheap.’ This process of financial concentration was achieved in 1933, the year of Hitler. Then, as if materializing out of thin air, a host of ‘semi-public’ financial institutes appeared that began to issue bills by broadsides of several billion Reichsmarks every year. Bills, which the central bank proceeded to discount, just as it had done in 1931; yet this time neither unsteadily nor with avariciousness, but on a vast scale and at a most generous rate. Thus began the Nazi economic miracle – the so-called process of ‘work creation.’
In June 1933, the economists of the Third Reich attacked the crisis on the labor front. The operation came to be defined as one of Vorfi nanzierung: pre-financing.
The financial contrivance the credit institutes employed to stimulate economic activity was a special kind of paper.
After the great inflation, the 1924 statute of the Reichsbank did not allow unrestricted purchases of government paper. The only instrument against which the central institute was permitted to advance cash was the commercial bill, for only this last, at least on a purely formal level, carried the guarantee that tangible wares were indeed being produced.54 In 1933, by dint of this clause, statutory prohibitions were outflanked* and the legal outfit was at last cleared to accommodate imposing injections of monetary means.
* They would be abrogated the following year in the ambit of the consolidation movement, which is discussed below.
The financing procedure was orchestrated as follows: first of all, the Reich borrowed from the Reichsbank – this was the opening of the Grid propitiated by Schacht. Then the government, via specialized credit agencies, re-loaned such credits to provinces, municipalities, communes, and other local public bodies.
The works were carried out by private entrepreneurs under contracts with the municipalities. The main instrument of financing consisted of so-called ‘work-creation bills’ (Arbeitsbeschaffungswechsel), which were extended to the contractors by the commissioning cities and accepted (discounted) by the banking establishment: at the bank, the bill was immediately transformed into check money (and cash), which was devoted to hiring the jobless and commence the works. If the discounting credit institute was itself in need of cash, it might present these bills for re-discount at the mother institute, the Reichsbank (see Figure 5.1).
Of course, the paper bore interest: 4 per cent like the tax certificates – thus these bills were conceived as a perfectly liquid short-term investment medium. Nominally the bills matured in three months, but as a rule they were subject to 20 automatic renewals, which carried the actual maturity of the paper to five years. At maturity the Reich honored the bills with the tax revenues generated by the Vorfi nanzierung: this obligation represented a long-term liability to the Reich for the amounts originally loaned on short term by the private banking Interests.55 Stripped of its roundabout features, the procedure of the bills came down to the financing of public spending by central bank credit, with the Reichsbank acting as the credit-generating agent for the Reich. At the beginning of this sudden work-creation campaign, the burden of ‘financing’ was borne entirely by Schacht’s institute.56
Simply put, there was money in 1931 which had vanished underground and failed to re-emerge for the length of three long years. Then the Nazis came, and when the banking Grid sent its financial ambassador, Hjalmar Schacht, to the central bank, it thus gave the signal to pour, once again, the monetary base that had vanished back into the main avenues of the network. So the big Berlin banks of the Grid returned the money by lending it to the Reich, the Reich lent it to the cities, the cities gave these bills to the people, the people brought them their commercial banks, which changed them into checks, and the system came alive.*
* Technically speaking, the large Berlin banks behind the Reichsbank reinjected the high-powered money in the system, and the commercial banks, on behalf of all the other, lesser absentees, endorsed the bills and magnified the issue through the deposits multiplier: the 4 percent interest on the bills acted as a magnet (of all other hidden deposits) trawled by the Reichsbank in the phase of pre-financing
The initial monetary injections were allocated for infrastructure. And the bills took on the name of the type of project that they were meant to finance: ‘work creation bills,’ ‘special highway bills,’ ‘land reclamation bills,’ and so on. Entrepreneurs cashed in, had their paper discounted, and paid the workmen. Banks turned to the Reichsbank, which started to print paper money; with it banks repaid the debts they couldn’t honor during the slump, and fueled the recovery. Men found work again, they did not spend much; what they managed to lay aside was automatically reinvested by the savings banks within the self-same circuit of state expenditure.
Hitler was triumphant; he was seen digging, repeatedly, before delirious crowds: digging the ‘first spadefuls’ (erste Spatenstiche) of the several legs of the Autobahnen network that were being laid across the country, the first of which joined Heidelberg and Frankfurt on September 23, 1933.57
In August 1933 something decisive came to pass: Schacht encountered the lords of German steel – among them the giants Krupp and Siemens. Together they founded the Metallforschungsgesellschaft, or Mefo (Research Corporation of the steel industry) – a fictitious corporation with a meager capital endowment (250,000 marks), against which, from 1934 to 1938, 12 billion Reichsmarks worth of bills were issued for the first war commissions, with the same procedure previously outlined. The Mefo bill was the true spark that triggered the process of rearmament. Although until the outbreak of hostilities only 20 percent of the total rearmament expenditure would be financed in this manner, the Mefo allotment would cover 50 percent of total expenditure on military orders during the initial years. ‘The absolute secrecy of this arrangement was preserved until after the war.’58
The Mefo bill was peculiar paper: it rested upon virtual treasures – upon titles of ownership which, during the twilight of Weimar, were amassed in the sparse hands of the absentee owners, the new indisputable masters of Germany. The Mefo bill was the fruit of a compact between the economic overlords and a tenebrous knighthood, between the highest German dynasties and the Nazis, who, with the monopoly of violence and the promise of war, fulfilled respectively two fundamental economic prerequisites: they ensured taxation, and warranted the yield promised by the Nazi bill – that 4 percent stamped upon the paper. Namely, the price of gold, of money, which, in a world contorted by vehement protectionism, would hopefully be repaid with the surplus forthcoming from the rapine of war. Hitler confirmed three years into the war:
The payments of debts…presents no problem. In the first place the territories which we have conquered by force of arms represent an increase in national wealth which far exceeds the costs of war; in the second place, the integration of twenty million foreigners at cheap rates into the German industrial system represents a saving which, again, is greatly in excess of the debts contracted by the State.59
The obvious legerdemain: there wasn’t a gram of gold to back the Nazi bills, just a different set of relationships, which varied by definition with the political humor of the times. Behind the Mefo bill there were but a paltry equity base, a non-existent corporation, the goodwill of German steel lords, the proverbial discipline and industriousness of the Teuton, and the complicity of bankers and high world finance, which, through their own network, managed to convey, as will be detailed hereafter, the raw materials needed to equip with breathtaking rapidity a redoubtable army.
Upon these formidable monetary premises, the economists of the Third Reich redesigned the structure of the capitalist machine. Two were the main difficulties to overcome: (1) to free the economy from disproportionate financial overhead charges; and (2) to find an outlet for the enormous productive potential of modern industrial systems in such a way that remuneration, profit, and interest would not be wholly eroded.
It was up to the Reichsbank to make the opening move if the first objective was to be attained. By rediscounting the bills forwarded to it by credit institutes, the bank of issue ministered the decisive shot of liquidity to the system. Part of this monetary mass went to settle the debts incurred by slump-stricken businesses (banks and firms),60 part was employed to reanimate the economy. This time Germany had German money, no borrowed cover in gold, pounds, or dollars. In fact, gold reserves officially amounted to 1 percent of note circulation in 1936;61 in the eyes of the people the seal of the Reich sufficed, the paper was unquestionably taken – it was money all right.
The advent of Nazism coincided with a veritable jubilee: the record shows the virtual annulment of all private debt. Like magic, money became less expensive. At the beginning of 1933, the prime rate of interest was over 8 percent;62 by 1935, through an intricate reshuffle of a gamut of other variously named bills dealt across Germany’s banking network, Schacht compressed it to 2.81 percent.63 Germany was liquid again.
Then entered the Nazi economic ministries; all their attention was focused upon the industrial sector: first of all, they ordained in July 1933 ‘compulsory cartels,’ that is, a strong concentration of all main concerns; there followed the capital concession: the so-called Preisfinanzierung (financing by prices).
The Reich placed the order for goods and construction and agreed to a price that, in addition to entrepreneurial profit, included an accelerated depreciation allowance (that is, a stipulation under the pretense that equipment wore out faster than usual), which was tantamount to the total remission of interest charges, and to the concession of a bonus, which firms would devote to the expansion of plants (self-financing scheme). In 1937 the ratio of interest charges to sales for business bottomed out at 0.40 percent.64
Commercial banks were relegated to the mere discounting function: they still held the privileged right to exact interest against the bills tendered by the Reich, yet they had to forego the far more important prerogative to dictate the nature and direction of all investments, as well as the copious rents obtainable therefrom.65 These rents, instead, were appropriated by the Reich, which in turn ceded them to businesses with the Preisfinanzierung.
Throughout the cycle (die Konjunktur), the level of the workers’ wages was pegged at the depression rates of 1932–33, some 21 percent below the prosperity level of 1929.66 Prices, instead, were capped by decree in November 1936. By thus repressing consumption, the production of weaponry was intensified, and the original loans were transformed from short- to long-term engagements: consolidation was initiated.
Germans were now told that the money they had laid in was being immobilized – maturity dates of Reich securities were gradually postponed (28 years for the initial Reich bond auction of 1935, at 4 percent). War would settle all accounts payable. Meanwhile, the economy pushed on: between 1933 and 1936, German GNP increased by an average annual rate of 9.5 percent, and annual productivity for industry and crafts rose by 17.2 percent. The average annual growth of public consumption during these four years was 18.7 percent, while private consumption increased only by 3.6 percent annually.67
In 1935 military expenditure amounted to approximately half of the entire governmental outlay. From then on this share was bound to rise inexorably.
Nazi bills were initially paid off with tax proceeds, but in the course of the consolidation, financial authorities ended up paying only interest on the lengthened loans, putting off the reimbursement of the principal until the end of war. By thus postponing ‘the evil day,’ observed the specialists of the Bank of England in 1939,68 the Nazis appeared to have flattened the ups and downs of the cycle for ‘ten or perhaps twenty years’: it looked as though the whole endeavor was pervaded with the lightness of a zero-interest loan.
Hitler had blind faith in his divisions. So did his financial backers, seemingly. In four years, Hitler conscripted these armies, by 1938 erasing 9 million unemployed,69 redistributing wealth with highly progressive taxation,70 improving somewhat the quality of life until 1939, and repressing even the least inflationary hiccup.
Finally, the abundance of modern industrial systems, which translated into an overall diminution of the price level, and which failed to comply with the logic of profit. What to do with it? War. Schacht helped Hitler by luring back to the surface those pecuniary hoards that had been concealed for three long years in order to finance the war at 3–4 percent. ‘[Schacht:] I had to find a way of extracting this fallow capital from the safe deposits and pockets where it…lay, without expecting it to remain absent for long or lose its value.’71
Throughout the Nazi boom the money owners had collected interest; they would have to wait for the end of the conflict in the East – such was the understanding – to get their own capital back. They had allowed Hitler to spend over 100 billion marks for the mission.72 This was no economic recovery but a feverish sweat before the last Herculean labor.
On the international front the affair was no less involved.
Of the 34 vital materials without which a nation cannot live, Germany had only two in ample quantities – potash and coal.73 For the rest it would have to rely on its chemists and international friends.
Schacht and his associates at the ministry of economies set out on a world tour to conclude general compensation or clearing agreements with whole countries. These agreements were predicated on the creation of a common account into which German importers paid their bills in marks; these same marks could then be drawn by German exporters for their sales to their trading partners. The exchange rates were not allowed to float freely and were often fixed afresh for each major transaction. This system, which ousted all previous methods, became the framework of nearly 65 percent of Germany’s foreign trade.74 Playing (1) on an overvalued clearing rate of the mark and (2) on buying far more from the others than selling to them,75 Schacht involved over 25 countries into these bilateral waistcoats: Latin America, the Balkans, Greece, Turkey and Eastern Europe – Romania, Bulgaria, Hungary, from which the Germans secured oil-yielding fruits, oilseed, fibers, soy beans, bauxite, oil, against iron and weaponry,76 mostly for the benefit of the cannon-maker Krupp.77
But what of the industrialized West; Anglo-America, for instance?
Britain, of course, now that Nazism had ripened, was particularly scrupulous in grooming it as best as she could. In July 1934, right when Schacht was crowned Economic Dictator, she concluded with Germany the Anglo-German Transfer Agreement, considered one of the ‘pillars of British policy towards the Third Reich.’78 Under its norms, the Third Reich was allowed to accumulate a sizable trade surplus vis-à-vis Britain; the surplus translated into free sterling, which the Nazis could employ to purchase whatever commodities they might need for rearmament on the empire’s world markets; rubber and copper being chief among these.79
By the end of the decade, Nazi Germany was Britain’s principal trading client. In 1937, for example, she provided a market for more British goods than any other two continents combined and for four times the amount taken by the United States.80
Then there was the unending headache of the Dawes loans and of all that money still owed to the City of London, which Germany had captured and was not willing to relinquish. Under the legitimate cloak of the so called Standstill Agreements, that is, the deal on credits whose principal was frozen in Germany and upon which the debtor was only obliged to pay interest, Britain, despite some top bankers in London who rebuffed the claim as a ‘misapprehension,’81 not only renewed the original 1931 debt standing but also added fresh credit to the original amount at least by a multiple equal to the number of renewals throughout the entire Nazi takeoff (1933–39).82
On December 4, 1934, Norman advanced the Nazis a loan of approximately $4 million in order to ‘facilitate the mobilization of German commercial credits’: that is, new money to pay old debts – or better said, a gift. 83 Not yet satisfied, and in direct opposition to that segment of the British interests which keenly insisted on being refunded by Germany, Norman fought nail and tooth against the setting-up of a clearing union between Britain and Germany: in fact, a clearing would have automatically diverted ‘free sterling’ into debt repayment, and Schacht would therefore have lost his cherished allowance in pounds for international purchases of raw goods and materials.84
There were several voices in the City that spoke of further money, outside the Standstill Agreements, being loaned by Britain to German private concerns, such as I. G. Farben. The Bank of England itself instructed its employees not to discuss openly such a matter, which was ‘confidential.’85 The archives of the Bank are indeed mute on this count; these other amicable ‘extensions’ might very well have been significant.
Of the foreign money she owed in 1932, Germany would repay her creditors less than 10 percent by 1939.86 Notwithstanding, international business kept on treating Hitler’s Germany with pattes de velours – especially the arms-makers. In 1935, an Anglo-German Society was founded ‘in which Unilever, Dunlop Rubber, the British Steel Export Association, and British Petroleum’ all participated.87 The prestigious British manufacturer of heavy guns, armor plate and warships, Vickers-Armstrong – curiously one of the very few concerns salvaged during the Slump by Montagu Norman himself 88 – had been offering, as early as 1932 in the official publication of the German army, the Militär-Wochen-Blatt, tanks and armored cars.89 At the annual meeting of his company in 1934, Sir Herbert Lawrence, the Chairman of Vickers, was asked to give assurance that the corporation was not being used for the secret rearmament of Germany. This was his reply: ‘I cannot give you assurance in definite terms, but I can tell you that nothing is done without the complete sanction and approval of our own government.’90
William Dodd, a history professor, served as American ambassador to Berlin from 1933 to 1938. ‘Der gute Dodd,’ Hitler would pityingly say of him, ‘he can hardly speak German, and made no sense at all.’91 Dodd might not have spoken good German, but he wrote good enough English to relate the following to his President, Roosevelt, on October 19, 1936:
At the present moment more than a hundred American corporations have subsidiaries here or have cooperative understandings. The DuPont's have three allies: (1) Chief: I. G. Farben Co. (2) Standard Oil has made $500 million a year helping the Germans make Ersatz gas for war purposes; but Standard Oil cannot take any of its earnings out of the country except in goods. They do little of this, report their earnings at home, but do not explain the facts. (3) The International Harvester Company president told me their business here rose 33 per cent a year (arms manufacture, I believe), but they could take nothing out. Even our airplanes people have secret arrangements with Krupp…Why did the Standard Oil Company of New York send $1 million over here in December, 1933, to aid the Germans in making gasoline from soft coal for war emergencies? Why do the International Harvester people continue to manufacture in Germany when their company gets nothing out of the country?92
Roosevelt was evasive, but encouraged Dodd to continue his reports. Not satisfied with the official explications (that Germany should have been allowed to rearm in order to regain world status), the candid ambassador had been recording in his diary several suspect transactions since his arrival in Germany: on September 19, 1934, high-class aircraft manufacturers made in the USA were delivered to Germany against $1 million in gold – Dodd confronted Schacht about the sale; the latter tried at first to deny it, but seeing that Dodd was about to brandish a hard copy of the deal, gave in and confirmed. On October 19 of the same year, it was the turn of the British: Vickers had just sold the Nazis a cargo of war materiel, and despite the haggling over the Standstill and the alleged insolvency of Germany, stories of which filled the newspapers daily, the Germans paid for the weapons in cash; with the evidence, Dodd then rushed to the British ambassador, Sir Eric Phipps, who pretended to be surprised.93
These were only anecdotal fragments of a deep and intricate intercourse consummated by the Allies with the Nazi regime. The Allies, as is well known, had traded heavily with Hitler; they had traded ‘with the enemy.’ And it appears, in fact, ‘that the effective influence of foreign capital, an influence which exerts itself far more with investments than with credits, grew under the Nazi regime.’94 ‘At the time of Pearl Harbor, American investment in Nazi Germany amounted to an estimated total of $475 million. Standard Oil of New Jersey had $120 million invested there; General Motors had $35 million; ITT had $30 million, and Ford had $17.5 million.’95
Frank Knox, the US Naval Secretary (1940–44), would admit that in the biennium 1934–35, Hitler received from America hundreds of state-of-the art airplane engines, and a Senate investigation concluded in 1940 that American industrialists had been freely selling a plethora of military patents to Germany with the consent of the government: Pratt & Whitney, Douglas, Bendix Aviation (controlled by GM, which at the time was controlled by Morgan & Co.), to name but a few, handed over to BMW, Siemens, and others a collection of aviation military secrets,96 while Stukas bombers, as mentioned earlier, were built with techniques learned in Detroit.
Western pundits have always taken the easy way out, explaining away these treasonous deals as the proverbial misdeeds of a few fat, rotten apples trucking with despots for the sake of ‘quick bucks’ – the customary litany against ‘corporate greed.’ That might be the case for the few deals paid in gold – of which the Nazis had virtually none – but certainly not for the colossal Allied investment sunk into Germany without any prospect of retrieving the gains, let alone the original capital on a relatively brief notice: hence the perplexity of Dodd. Many of these ‘foreign’ installations would be spared the Allied bombs at the end of the war, and one is left to wonder when, in fact, the respective governments of Britain and the United States began to think of Europe as their own private domain – the new western appendix of the empire – and of Hitler and his regime as an obtrusive nuisance to be propped up at first and then annihilated in a prolonged international conflict.
Governor Schacht must also have wondered. For years, almost deaf to Hitler’s repeatedly avowed goals of the Drang nach Osten (the ‘Push to the East’), Schacht preconized, instead, a return to Germany of her former African colonies. He too seemed to envision a Reich that would tower over Middle Europe – the grossdeutsch Reich inclusive of Austria and Czechoslovakia as a minimum – yet one connected to exotic outposts by means of a decent-sized navy. But Hitler had no interest in colonies.
It has been written that by early 1935 two blocs supporting different world views formed inside the Nazi establishment and fought for supremacy: a pro-Anglo-Saxon banking-industrial grouping assembled around ‘the American’ Schacht versus the party of I. G. Farben/Deutsche Bank, which aimed to decouple Germany from the British-dominated world markets and create a closed Eurasian economic bloc 97 – a self-sufficient fortress stretching from Odessa to Bordeaux.
In August 1936, Hitler drafted a secret memoir which informed the second Four-Year Plan for the rearmament of Nazi Germany. I. G. Farben was indeed the soul of the project, and Goring became its economic supremo. Yet the new Four-Year Plan, which came into force in September, was only a prod to accelerate preparedness for war: home production of foodstuffs, minerals and synthetic ersatz materials,* for which the plan is remembered, were tasks that had been previously coordinated by Schacht – they were merely to be boosted on a much wider scale.98
* Especially substitutes for rubber and gasoline.
According to the rumor that he himself would spread, Schacht, bitterly and overtly critical of Goring’s uneconomic squander of resources and foreign exchange, and fearful of the runaway inflation that might have resulted from turning ever more butter into guns, distanced himself from the Fuhrer and began to lose favor with the Nazi elite.99 This rumor might have led to the other, according to which the antagonism of Farben would eventually cause the banker’s downfall.100
As in 1930, Schacht felt the ground quaking, but this time the position of Britain, as will be seen, was so ambivalent that not even the guileful ‘American’ was quite certain of the posture he should have assumed. That war would come was certain: Schacht himself, with the Mefo bills, had raised the Wehrmacht from the dead – he was no pacifist. But what sort of war? The emergence in Britain of the anti-Nazi War Party led by Churchill was reason enough for him to become apprehensive, and so he receded – a few steps, by arguing in public with Goring. The story of Schacht’s protests against the risk of inflation and the uneconomic use of foreign exchange was a fable. In fact, as Hitler would later recall:
An inflationary crisis could only have arisen after all the unemployed labor had been absorbed, and this did not happen until late 1937 or early 1938. Up till then the only difficulties we had to face were those of foreign exchange. Schacht had told me that we had at our disposal a credit of fifteen hundred million marks abroad, and it was on this basis that I planned my Four Year Plan, which never caused me the slightest anxiety…And that is how things are today [August 1942], and we never find ourselves blocked for money.101
On November 26, 1936, Schacht was relieved of his post of Minister for Economic Affairs and Plenipotentiary for the War Economy, and confined his duties to governing the Reichsbank.
After Kristallnacht, the night of November 9, 1938, during which synagogues all across Germany were desecrated and destroyed, Schacht was offered by Hitler his last opportunity: he was dispatched to propose to influential Jewish captains of Anglo-American finance a plan for the evacuation of Jews from Germany – Montagu Norman would preside. In sum, Schacht’s plan sought to impound the wealth of German Jews as collateral, and on that basis issue an international loan at 5 percent to be subscribed by their wealthy co-religionaries: the funds sequestered would go towards the amortization of the loan. A quarter of the dollar proceeds gathered with the subscriptions would then be devoted to paying the prospective evacuees their passage out of the country.102
‘Not an ideal proposition,’ by Schacht’s own admission,103 but better, he reasoned, than leaving the Jews at the mercy of the party. Undoubtedly his plan was larcenous and extortionate; and as such it was scoffed at by Roosevelt in the United Sates and by Chamberlain and Halifax in Britain: between December 14 and 17, emboldened by these politicians’ chiding, the Jewish bankers fl exed their muscles and sabotaged the conference 104 – no submission to Nazi blackmail, they rebutted.
Schacht had failed, and he was not irreplaceable: on February 21, 1939, he was dismissed from his post of Reichsbanks president. He would retain the honorary title of Minister without Portfolio until January 21, 1943.
to be continued...245...104
notes
Chapter 5
1. Reinhold Hoops, Englands Selbst-täuschung (Berlin: Zentralverlag NSDAP Franz Eher Nachfolger Gmbh, 1940), p. 37.
2. Adolf Hitler, Hitler’s Secret Conversations 1941–1944 (New York: Farrar, Straus & Young, 1953), pp. 166, 259, 534, 507.
3. Ernst Jünger, On the Marble Cliffs (Norfolk, CT: New Directions, 1947), p. 93.
4. Johann Wolfgang von Goethe, Goethe’s Faust Part Two (Prose translation by Max Dietz) (Pennsylvania: Bryn Mawr, 1949), p. 191.
5. Klaus Fischer, Nazi Germany. A New History (New York: Continuum, 1996), p. 268.
6. Carroll Quigley, Tragedy and Hope. A History of the World in Our Time (New York: Macmillan Company, 1966), p. 430.
7. I. Benoist-Méchin, Histoire del’armée allemande (Paris: Éditions Albin Michel, 1966), Vol. 3, p. 87. Preparata 03 chap06 287 10/3/05 12:01:23 pm 288 Conjuring Hitler
8. Jacques Delarue, Gestapo. A History of Horror (New York: Dell, 1964), p. 65.
9. Ibid.
10. John Toland, Adolf Hitler (Garden City, NY: Doubleday & Co., 1976), p. 569.
11. Fischer, Nazi Germany, p. 272.
12. Joseph Borkin, The Crime and Punishment of I. G. Farben (New York: The Free Press, 1978), p. 56.
13. John Cornwell, Hitler’s Pope. The Secret History of Pius XII (New York: Viking, 1999), p. 154.
14. Hans Mommsen, ‘The Reichstag Fire and Its Political Consequences,’ in Hajo Holborn (ed.), Republic to Reich. The Making of the Nazi Revolution. Ten Essays (New York: Vintage, 1972), p. 147.
15. André François-Poncet, The Fateful Years. Memoirs of a French Ambassador in Berlin, 1931–1938 (London: Victor Gollancz, 1949), p. 55.
16. Mommsen, ‘Reichstag Fire,’ p. 150.
17. Delarue, Gestapo, p. 67.
18. Max Gallo, The Night of the Long Knives (New York: Da Capo Press, 1997 [1972]), pp. 41–2.
19. John Weitz, Hitler’s Banker: Hjalmar Horace Greeley Schacht (Boston: Little, Brown & Company, 1997), p. 140.
20. Delarue, Gestapo, pp. 70–71.
21. François-Poncet, Fateful Years, p. 55.
22. Fischer, Nazi Germany, p. 285.
23. Ibid.
24. Gallo, Long Knives, p. 100.
25. Delarue, Gestapo, p. 141.
26. Douglas Reed, The Prisoner of Ottawa, Otto Strasser (London: Jonathan Cape, 1953).
27. Ian Kershaw, Hitler: 1889–1936: Hubris (New York: W. W. Norton & Co., 1998), p. 515.
28. François-Poncet, Fateful Years, p. 133.
29. Ibid., p. 153.
30. Edmond Vermeil, Germany’s Three Reichs. Their History and Culture (London: Andrew Dakers Limited, 1945), p. 291.
31. Paul Maquenne, L’hérésie économique allemande (Paris: Guerre 39, Union Latine, 1940), p.115.
32. François-Poncet, Fateful Years, p. 221.
33. Hans Ulrich Thamer, Il Terzo Reich (Verführung und Gewalt, Deutschland 1933–1945) (Bologna: Il Mulino, 1993 [1986]), p. 222.
34. Hjalmar Schacht, My First Seventy-six Years: The Autobiography of Hjalmar Schacht (London: Allen Wingate, 1955), p. 295.
35. Karl Erich Born, Die Deutsche Bankenkrise 1931, Finanzen und Politik (München: R. Piper & Co. Verlag, 1967), p. 118.
36. N. J. Johannsen, A Neglected Point in Connection with Crises (New York: Augustus M. Kelley Publishers, 1971 [1908]), pp. 35, 80; emphasis added.
37. Born, Deutsche Bankenkrise, pp. 174ff.
38. Karl Schiller, Arbeitsbeschaffung und Finanzordnung in Deutschland (Berlin: Junker und Dünnhaupt Verlag, 1936), pp. 35–67.
39. Jan Marczewski, Politique monétaire et fi nancière du IIIe Reich (Paris: Librairie du Recueil Sirey, 1941), p. 58.
40. Kenyon Poole, German Financial Policies 1932–1939 (Cambridge, MA: Harvard University Press, 1939), p. 37.
41. Marczewski, Politique monétaire, pp. 32–3.
42. Poole, German Financial Policies, p. 47. 43. Schacht, Autobiography, p. 297. Preparata 03 chap06 288 10/3/05 12:01:23 pm Notes 289 44. Gallo, Long Knives, p. 158. 45. Schacht, Autobiography, p. 320.
46. Weitz, Hitler’s Banker, p. 157.
47. Norbert Mühlen, Schacht: Hitler’s Magician. The Life and Loans of of Dr. Hjalmar Schacht (New York: Alliance Book Corporation, 1939), p. 157.
48. Schacht, Autobiography, p. 302.
49. Peter Padfi eld, Himmler, Reichsführer-SS (London: Macmillan, 1990), p. 115.
50. Hitler, Secret Conversations, p. 350.
51. Edward Norman Peterson, Hjalmar Schacht: For and Against Hitler (Boston: Christopher Publishing House, 1954), p. 149; emphasis added. 52. Poole, German Financial Policies, p. 29.
53. R. J. Overy, War and Economy in the Third Reich (Oxford: Clarendon Press, 1994), p. 38.
54. Otto Nathan, Nazi War Finance and Banking (NBER Paper No. 20, 1944), p. 43.
55. Samuel Lurie, Private Investment in a Controlled Economy (New York: Columbia University Press, 1947), p. 15.
56. Ibid., pp. 58–9.
57. Thamer, Terzo Reich, p. 414.
58. Avraham Barkai, Nazi Economics. Ideology, Theory and Policy (New Haven: Yale University Press, 1990), p. 165.
59. Hitler, Secret Conversations, p. 372.
60. Poole, German Financial Policies, p. 111.
61. Lurie, Private Investment, p. 36, and Barkai, Nazi Economics, p. 255.
62. Marczewski, Politique monétaire, p. 88.
63. Poole, German Financial Policies, pp. 118–20.
64. Lurie, Private Investment, p. 158.
65. Ibid., p. 59. 66. Ibid., pp. 57–8, 154.
67. Barkai, Nazi Economics, p. 158.
68. Bank of England, OV 34/9, from two memoranda, respectively, by G. H. S. Pinsent, 6 December 1938 (p. 79), and C. F. Cobbold, 24 August 1939 (p. 231).
69. Overy, War and Economy, p. 42.
70. David Schoenbaum, Hitler’s Social Revolution. Class and Status in Nazi Germany, 1933–1939 (New York: W. W. Norton & Company, Inc., 1980 [1966]), pp. 145–8.
71. Schacht, Autobiography, p. 317.
72. Fischer, Nazi Germany, p. 377.
73. Stephen Roberts, The House That Hitler Built (New York: Harper & Brothers Publishers, 1938), p. 172.
74. H. W. Arndt, The Economic Lessons of the Nineteen Thirties (London: Oxford University Press, 1944), pp. 187–8.
75. Bruno Bettelheim, L’économie allemande sous le nazisme: un aspect de la décadence du capitalisme (Paris: Librairie Marcel Rivière et Cie., 1946), p. 180.
76. Mühlen, Schacht, pp. 120–35.
77. Weitz, Hitler’s Banker, p. 206.
78. Neil Forbes, Doing Business With the Nazis. Britain’s Economic and Financial Relations With Germany, 1931–1939 (London: Frank Cass, 2000), p. 97.
79. Ibid., p. 107.
80. Cleona Lewis, Nazi Europe and World Trade (Washington DC: Brookings Institution, 1941), p. 16.
81. Forbes, Doing Business, p. 181.
82. Bank of England, OV 34/201, p. 10, a memorandum dated October 14, 1934, speaks of ‘Standstill bills’ being drawn ‘under credit lines granted before July 1931’ (emphasis added), which can only be understood as a provision for initiating a Preparata 03 chap06 289 10/3/05 12:01:24 pm 290 Conjuring Hitler new cycle of fresh lending to German importers by these specifi c short-term bills, which were renewed as soon as they were paid off.
83. John Gunther, Inside Europe (New York: Harper & Brothers, 1938), p. 99.
84. Forbes, Doing Business, pp. 113, 116.
85. Ibid., pp. 173, 174.
86. Mühlen, Schacht, p. 35.
87. Martin Gilbert, The Roots of Appeasement (New York: New American Library, 1966), p. 155.
88. Henry Clay, Lord Norman (London: Macmillan & Co., 1957), pp. 318–22.
89. Dorothy Woodman, Hitler Rearms. An Exposure of Germany’s War Plans (London: John Lane; Bodley Head Limited, 1934), p. 201.
90. John Hargrave, Montagu Norman (New York: Greystone Press, 1942), p. 218.
91. Ernst Hanfstaengl, Hitler: The Missing Years (New York: Arcade Publishing, 1994 [1957]), p. 204.
92. Anthony Sutton, Wall Street and the Rise of Hitler (Sudbury: Suffolk: Bloomfi eld Books, 1976), pp. 15–16.
93. William Dodd, Ambassador Dodd’s Diary, 1933–1938 (New York: Harcourt, Brace and Company, 1941), pp. 166, 170, 176.
94. Bettelheim, L’économie allemande, p. 78.
95. Charles Higham, Trading With the Enemy: An Exposé of the Nazi-American Money Plot, 1933–1949 (New York: Delacorte Press, 1983), p. xvi.
96. Andrej Gromyko, L’espansione internazionale del capitale, storia e attualità (Roma: Editori Riuniti, 1985 [1982]), p. 151.
97. Padfi eld, Himmler, p. 206.
98. Schacht, Autobiography, p. 370.
99. Ibid. pp. 366ff.
100. Padfi eld, Himmler, p. 208.
101. Hitler, Secret Conversations, pp. 514–15.
102. Weitz, Hitler’s Banker, p. 240.
103. Schacht, Autobiography, pp. 383–4.
104. Ron Chernow, The Warburgs. The Twentieth-Century Odyssey of a Remarkable Jewish Family (New York: Random House, 1993), pp. 480–5.
* * *
The Weimar Republic, Nazism’s incubator, was destroyed in five stages:6 (1) under the Catholic Brüning, the ‘Hunger Chancellor’ (27 March 1930–30 May 1932), the parliamentary regime was suspended and rule by presidential decree instituted; (2) under von Papen, the petty Catholic aristocrat intriguing on behalf of the absentees, and initially launched as General von Schleicher’s figurehead (31 May 1932–17 November 1932), an authoritarian restoration of the old imperial order (‘the Cabinet of barons’) was briefly attempted, which was marked by the suppression of Leftist opposition and the timid implementation of public works programs; (3) under von Schleicher, the ‘Red General’ (2 December 1932–28 January 1933), the boldest maneuver took place against the secret built-in provisions of the Treaty of Versailles: a transverse sally led by parts of the army against the agrarians and finance, relying upon the populist support of Socialist trade unions and the Nazi Left wing; (4) under Hitler, a first phase was spent drafting patriotic acts against terrorism (30 January 1933–5 March 1933); (5) under the Nazi Gleichschaltung (the ‘normalization,’ 6 March 1933–2 August 1934), Hitler regimented the whole of Germany in the spirit of his party.
Now that the Nazi creature was formed, it did what had long been expected of it: it broke free of its stifling hothouse and, in time, pushed towards Russia.
On 1 February 1933, 48 hours after taking over, Hitler dissolved the Reichstag. President Hindenburg had needed a little persuasion before granting his new Chancellor the permission to do so – ‘Why?,’ he asked Hitler, ‘I thought you had gathered a working majority…’ Hitler’s reply was prompt: ‘This is time to deal with the Communists and Socialists once and for all.’7
New elections were announced for March 5. Yet another electoral round swept the Fatherland. On January 31, Goebbels wrote in his diary: ‘The broad outlines of the conflict to be waged against the Red terror have been established in the course of a meeting with Hitler. For the moment we shall abstain from taking countermeasures. Not until the opportune moment when the Communists launch a revolution shall we strike.’8
Hitler’s electoral calendar, drawn up by Goebbels, was published on February 10: therein no meeting was scheduled for February 25, 26, or 27.9 On February 26, Berlin’s fashionable fortuneteller, a fraudster by the name of Hanussen who had entertained scores of SA leaders in his theatrical venue – a high-class lupanar on the Lietzenburger Strasse – ‘predicted’ in a publicized seance, that the Communists were about to torch an important governmental building to set off a massive rebellion.10
On the night of February 27, 1933, the Reichstag’s cupola went up in flames, blazing like a giant piece of charcoal, beckoning the late stragglers of Berlin. The Fuhrer was summoned at once to the site. Upon reaching the smoldering remains of what used to be the Parliament, he exclaimed: ‘This is a beacon from heaven...No one can now prevent us from crushing the Communists with a mailed fist.’11 Even Goring arrived, overexcited – the emotion of both leaders appeared genuine. According to the official version, the Reichstag fire was an ‘act of terrorism,’ a Communist crime. Yet attempts at sedition were witnessed nowhere round the country. All was silent. Lists of arrests, which had been prepared long before, led to the incarceration of several thousand Communist and Socialist activists – the Gestapo came into being, and the camps received their first inmates. On February 28, the K.P.D (German Communist Party) was outlawed. Meanwhile, the electoral push was intensified by the squawking of slogans, torch-lit processions, marches and drills.
On March 5, on election day, despite the prodding of the terrorist antics and loads of cash from I. G. Farben,12 the Nazis were still not capable of reaping a majority: they accumulated 43.9 percent of the ballot, which only with an 8 percent nudge from the moribund Nationalists, allowed them to form a qualified quorum in the House.
In its war against terror, the government issued two ordinances, on February 28 and March 7, respectively, ‘for the defense of the people and the state,’ which restrained the freedom of the press, individual liberties, and the right of assembly. On March 12, the swastika-crested flag of the party was promoted to National Ensign.
Having the Reichstag burned to the ground, the congress convened in the Kroll Opera House on March 23. No Communists in the House; with the ‘suspension’ of 30 additional Socialists, the number of representatives had been reduced by 109: the remaining deputies were asked to pass an Enabling Act which would have given the government the right for four years to legislate by decree, without constitutional restrictions. The corollary of such a bill was to reduce the political machine of the country to a one party decision panel.
The vote: 441 ayes, 94 (Socialist) noes – Hitler was granted full powers. By March 31, the Nazi Gleichschaltung was in full swing: a centralized bureaucracy replaced the federal constituency established by Bismarck – all strings were now pulled from Berlin, via the subordinate control of an array of delegates (Statthalter) loyal to the Fuhrer.
On April 7, 1933, the bullet-riddled body of the ‘clairvoyant’ Hanussen was found in the wooded outskirts of Berlin.
In May, the Hitlerites proceeded to dismantle conclusively the party system of Weimar: the S.P.D leadership was incarcerated wholesale; with one blow an organization commanding 4 million workers, and endowed with a capital of 184 million Reichsmarks, was crumbled into dust. Nowhere was there the slightest reaction. Let alone resistance. The Nationalist veterans’ paramilitary formations, like the Stahlhelm (the Steel Helmet) were next. Then came the turn of the Catholics: the deal for them was self-dissolution in exchange for a concordat between the Holy See and the Nazi Reich. By the terms of such a pact, the Vatican would have recognized the Nazi state, agreed that the bishops pledge their allegiance to it, and forbidden priests to engage in politics – all this in exchange for a Nazi promise to respect the Church’s right to catechesis and its property. The Secretary of State of the Vatican, Eugenio Pacelli, had been swaying the 23 million German Catholics in this direction at least since 1931. Heinrich Brüning, the former unlucky Chancellor, who was now in charge of the Catholic Zentrum, pressured from Rome, agreed bitter in his heart on July 4 to dissolve this pillar of German political history – the party that had also been Erzberger’s. And to add insult to masochistic injury, the Nazis rejected those members of the Center party that willingly applied to flow into their ranks. The concordat was signed on July 8 and ratified on September 10, 1933.
The concordat broke down almost at once. Within ten days of its signing, Hitler’s SA attacked the parades of the Catholic Youth League; the beatings did not cease, they were worsened by the more systematic persecution of active Catholic dissenters, who were interned in the camps and/or bludgeoned to death. Pacelli did not hide from his foreign visitors his disgust at these happenings,13 but he thought he had no choice, no weapon at this stage other than appeasing the Nazis – things could have always been worse, he sighed: in Germany there could have been Bolshevism, which spared no priest. Veblen had foretold this much: the forthcoming reactionary regime of the Reich would be championed by the Elder Statesmen of the West as the bulwark against the (imaginary) Red menace.
In the span of six months, Hitler and his blackguards had smashed the incubator into pieces – there now remained to consolidate the National Socialist Revolution by sealing a twofold pact with the front legs of the quartet: industry/finance and the army.
With or without evidence, however, in terror ‘is fecit cui prodest’ always: ‘the one who did it is the one benefiting from it’ – that is, the Nazis themselves. Indeed, not even the evidence was lacking: everyone knew that a group of SA did it, possibly with the connivance of Goring and Goebbels,17 – a few SA leaders themselves crowed about it in public.18 In the end it appeared that van der Lubbe was a drifter ‘recruited’ by Hanussen, the glamorous psychic dispatched in April, as a favor to some SA bigwigs, clients of his.19 The drifter, whose homosexuality had been exploited by a gang of a dozen Brown shirts,20 was lured by them into the Reichstag, while they, after igniting the fire in several other spots, had ‘left through the secret corridor linking the Reichstag to the Residence of Goring, the Reichstag President.’21 This ‘prank’ was, in brief, a gift from the SA to their Fuhrer.
And Hitler, indeed, was in dire want of a roaring endorsement from the people; he addressed them on November 12, 1933: ‘Men of Germany! Women of Germany! Do you approve the policy of the government? Are you prepared to declare that it expresses your opinion and your own will, and solemnly to make it your own?’ This time the plebiscite was in the Fuhrer's favor by over 90 percent of the vote.
But by the spring of 1934, the Nazi tenure was still not petrified: there remained the thorn of Rohm’s SA. These troops, now 3 million strong – ten times the size of the official Reichswehr – were demanding the ‘Second Revolution.’ What this meant from the economic standpoint was unclear: possibly the early socialization schemes of the Nazi party, or a re-edition of Schleicher’s programs – in short, naive plans that dream of abolishing a most powerful network of interests, those of German business and finance, which Versailles had left, deliberately, untouched. This was the world of the aristocrats and the business moguls – the hated Bonzen – who stood ‘for law and order, respectability, and philistine values.’22 And Rohm was no economist, he was the eternal front-line lansquenet; he wanted to absorb the army and not be absorbed by it, to do away with the officer caste and transform Germany into a giant farmstead-economy ruled by a clan of proud Nazi herdsmen (his SA). Hitler tried to reason with him, in vain. To his gang, Röhm vented:
There began to circulate talk of sedition – plots either to remove Hitler or kill him. Sometimes, the name of the unyielding ‘Red General,’ von Schleicher, was dropped in this connection, but the conspiracy, if any, was yet fluid. The ground under his feet, Hitler still sensed, was not as firm as he wished it to be. Especially as the Junkers, from their stalls, were showing signs of growing impatience with the factious confusion reigning among the Nazis. In Cologne, chez von Schröder, on 4 January 1933, it was national cohesiveness upon which Hitler had been sold – the Fuhrer had better keep his end of the bargain with his financial backers.
Looking ahead, in May, it became clear that Hindenburg had not much time left to live. Hitler could not afford to leave the post of Reich president vacant. Meeting with the Defense Minister General von Blomberg aboard the cruiser Deutschland he traded the Presidency for the liquidation of the SA.24
In June, when the old Field Marshal fell ill, Hitler decided to act. The SA were given a month’s furlough, and most of their rebellious chieftains retired, unsuspecting, to the lake resort of Wiessee. On June 30 the purge began. Squads of SS executioners were dispatched to this vacationing retreat to round up Röhm and his clique and shuttle them off to the Stadelheim prison in Munich. One by one, including Röhm, who rejected the offer to die by his own hand, they were shot down by Hitler’s praetorian commandos. Loose ends were tied and old scores were settled in the killing. Nine of the ten surviving SA arsonists of the Reichstag disappeared.25 General von Schleicher, his wife, and Schleicher’s assistant General von Bredow, both generals being also adversaries profoundly acquainted with the Reichswehr/Red Army connection, were cut down by volleys of machine-gun fire; Gregor Strasser, the looming wedge of the National Socialist movement, who had retired to private life, was taken to a jail, shot in the neck and left to bleed to death. Funded by a mysterious network, his brother Otto, who had defected from the N.S.D.A.P in 1930, would lead, as head of the so-called Black Front, an ineffective propaganda war against Hitler from Czechoslovakia, and then France, before vanishing into Canada at the outbreak of the war.26 Other Catholic exponents were murdered as well – yet one more warning to Rome. Finally, having not forgotten the double-cross of the 1923 Beerhall putsch, von Kahr, the Bavarian commissioner who dropped Hitler and the putschists to the Weimar police, ‘was taken away by SS men and later found hacked to death near Dachau.’27 In Munich the blasts of gunfire were heard throughout the entire day; then at dusk, silence. The exact figure of victims is not known. Presumably, the purge erased between 300 and 1,200 individuals.28 The President was alerted; Hitler, strained by tension and exhaustion, reassured the Old Man that a terrible revolt had been headed off. The generals were satisfied.
At the end of July, Hindenburg was on his deathbed; he asked his watchful doctor Sauerbruch, the celebrious surgeon: ‘Has Freund Heinz come into the house yet?’ ‘No,’ replied the doctor, ‘He is not in the house yet, but he is prowling in the garden.’29 On August 2, Freund Heinz (that is, death) stole in the house and took the Old Man – he had lived 88 years. For Germany the Field Marshal had done his best, as had Germany during the war, but likewise his best had not been good enough. The following day, on the legal basis of a document drawn up at the Chancellery, with the tacit approval of the army, Hitler announced to the people that he would thenceforth fuse into his hands the titles of Chancellor and President, and assume in their stead the sonorous appellation of Reichsführer. On August 19, 1934, he demanded yet another referendum to be acclaimed as ‘the leader,’ unique and unchallenged, and thereby to sanction the ultimate effacement of the Weimar Republic. It was ‘yes’ by 90 percent.
The pretended Hitlerite revolution was the outcome not of any deep will of the masses but a sort of violent dynamism from which the ruling Right wing expected to profit by canalizing it…It was von Papen who, thanks to his ascendancy over Hindenburg, organized the coup d’état. This coup d’état was simply a ‘Kombination,’ a scheme prepared through fifteen years of diabolical intrigues and spectacular mass demonstrations. It owed its success to terrorism…30
Money magic, Work creation,
and Foreign aid
Schacht was a cynic, a frantic blusterer, a person possessed of unbridled ambitions. A tall, dry, spare devil of a man, his features might have been hacked out by a bill hook, and his long wrinkled neck was like the neck of a bird of prey.32
It must have been harrowing, for such an ambitious creature as he, to sit still away from the levers of power for three interminable and comatose years, 1930–33. Considering his professional origins, sponsors, and character, it was hardly surprising to find him on the Nazi bandwagon at the onset of the Depression. Of the opportunists that swarmed to Nazism after the momentous election of September 1930 – the Septemberlinge, as Goebbels contemptuously tagged them – Schacht was the most prestigious by far.33
At the time, Schacht told himself that he had to commit; he just could not keep calm at the thought of Germany falling prey, should Hitler have stormed the Chancellery, to all sorts of unsavory monetary cranks, who teemed the back rows of the Nazi apparatus – they had to have professionals there at the top.34 He had to come back and ‘do the trick,’ as his by now most intimate friend Montagu Norman, had been taunting him to do,publicly, since 1931. In due time he would have. For the time being, he advised Hitler to be in his speeches as vague and noncommittal as possible in matters relating to the economy.
Notwithstanding the bleak premonitions of the Papen government, Germany experienced in the summer of 1932 a modest economic revival. The truth was that part of the financial network, which was supportive of Papen, put a little faith in him and his barons and loosened the strings of the purse. In fact, lukewarm attempts on the part of the Grid to release some cash in the system had been afoot for over a year.
In the summer of 1931, at the trough of the slump, funds were no longer flowing from abroad. The ailing banks, who had granted credit to businesses for the most part now semi-defunct, rushed to the central institute in hope of selling it their ‘frozen notes’ (the I.O.U's of the bankrupt concerns) for a ‘sufficient’ amount of cash. The Reichsbank, whose discount rate in August was already a steep 10 percent, felt overwhelmed by the request and the tawdry quality of this paper. To pass muster, a bill required three signatures: the drawer’s (creditor), the drawee’s (debtor), and a guarantor’s. Sections of the banking community suggested that the third underwriting come from a specially designed institute, the Akzeptbank, whose capital was promptly subscribed by the corporate leaders of the Grid. When all was done, the price for the rescue added up to 10 percent, plus 2 percent as a commission fee for the middle-role of the Akzeptbank: a net bite of 12 percent in the general tide of insolvency–outrageously expensive.35
By mid-1932, the Reichsbank had accumulated a sizable chunk of such ‘frozen paper’ in its portfolio and made good profits on it. But these advances of cash at such a high cost still amounted to no more than drops in the ocean: joblessness was not relieved in the least. Simply put, the German Grid had no faith whatsoever in the republic.
It was true that the state was bankrupt, but not entirely true that Germany had no money, or no capital. In 1931, the foreigners, indeed, had withdrawn much, as had the expatriate Germans, but the bulk of the foreign exchange sucked in during the great American feast of the 1920's was hoarded underground, and, most important, so was the mass of the nation’s aggregate wealth. Such wealth, mostly in the form of securities, represented that sumptuous infrastructure and industrial apparatus – the second largest in the world – erected with the Dawes loans, and which presently lay dormant.
The silent shufflings of these banking consortia between 1930 and 1933 were part of a broader engagement on the part of Germany’s financial interests into ‘impairing’ forms of investment: that is to say that the banks did not employ their funds to create new wealth of productive capital, but…simply confined themselves to buying capital goods (fixed property, securities, etc.) already in existence. The savings funds reentered the general circulation of industry and trade not by the act of investment, but by the expenditures of the impoverishing borrowers and sellers, who expended the money to meet their living expenses or their losses in business.36
In other words, the banking system and the great industrial conglomerates were making use of their cash literally to buy up the rest of the country by purchasing ‘property’ (deeds, stocks, mortgages and the like) at slashed prices from insolvent producers and consumers. The modicum of activity registered in 1931 under the auspices of the Reichsbank, the Akzeptbank and their affiliates constituted precisely this redistribution of wealth from the economy to the Grid; redistribution that accentuated, of course, the already skewed concentration of power in the hands of the latter. Between the slump and recovery stood unemployment; meanwhile, the absentees took advantage of the overall cheapness, attracting to their orbit additional titles of ownership. This was also how the central bank came to own, by the end of 1931, conspicuous stakes in several of the great Berlin banks.37
In 1932, ‘the money,’ in the form of cash, stocks, and bonds, was indeed sunk underground in the accounts of Germany’s banking network. A succession of ministers pleaded with the bankers, entreated them, while searching for a clever argument that might bring the absentee gentlemen to turn on the money tap. Brüning tried when the match was already lost. Under Papen, because of his connections, the financial interests instead made some room for a trial at reform.
The chief device introduced in the summer of 1932 was the ‘tax certificate’ (Steuergutschein): a variation on a general financing template, which was one of many refined instruments of Germany’s national political economy,38 and which Schacht, as we shall see, would transform for the Nazis into a standardized and swift mechanism.39
The idea behind tax certificates was to grant businesses a rebate on their forthcoming tax payments. The authorities would consider the most recent figures of tax yields and multiply these by a percentage (the rebate); the product would then be converted in a number of certificates to be distributed among the entrepreneurs, who in turn could use them to remit future tax dues.40
The paper bore interest of 4 percent: the intent was to send the recipients of these certificates to knock on the gates of the monetary markets and pressure the banks to discount the paper at their counters – the 4 percent was, again, the lure for the ‘investors.’ This roundabout device was nothing less than the government’s demand on behalf of struggling producers for a cash loan from the powerful investors: the firm would obtain the cash, minus the discount, hopefully thrive thereafter, and the Reich would pay interest on the certificates to the banks with the taxes it expected to levy from a boosted economy. In sum, the scheme comprised a short-term loan from the banks to the Reich, and a favorable (and interest-free) medium term loan from the Reich to businesses. In the event, the lag would have to be bridged by further long-term borrowing on the part of the government, which, in the light of the anticipated economic improvement, should not have been a problem.41
What did the businesses actually do with these certificates? Most spent the cash either to pay their debts or to employ the rebate to cut their prices, thus making things far worse in an environment where falling prices were the crux of the paralysis. The chief objective of the Papen plan was to encourage the use of the certificates as security for credit advances to be devoted to plant expansion and production; and particularly as touched the unemployed masses, the proposal was drafted with an eye only to boosting private consumption.
The whole came far short of the mark: only a very modest contingent of workers was reabsorbed. And when, by mid autumn, the baronial Cabinet of von Papen appeared to be vacillating, the banking Grid recoiled in a heartbeat. ‘The market was not prepared to take up the paper as fast as it was offered.’42 Unemployment, which had decreased until then, started in November to rise once again. And continued to climb under Schleicher, who was dreaded by the financial and aristocratic elites, even though he endorsed the fiscal policy of his predecessor.*
* At this time, an important think-tank in Berlin (the Institut für Konjunkturforschung) spread the myth that the recession had been overcome in the spring of 1932, and since the end of World War II, the Liberal establishment has repossessed this exaggeration with a view to employing it against the contention that there had been willful action behind the subsequent Nazi boom; no such thing was to be entertained: the boom had thus to be ascribed only to the ‘impersonal,’ ‘unpredictable’ swings of the business cycle. We shall briefly show that this was not true. In fact, the alternate vicissitudes of German unemployment in the biennium of 1932–33 may be easily correlated with the political orientation of the said elites: the brief respite registered in the Spring of 1932 was due exclusively to the favor accorded by the German clubs to Papen, whereas the recessionary relapse experienced in late 1932 was but the clubs’ manifest sign of hostility towards the Schleicher government.
Intriguingly, in the dreary days of November 1932, as he cast about for a successor to Papen, the Red General came to consider Schacht himself as a potential candidate for the Chancellery. Not for a moment was the banker enticed by the prospect of becoming the puppet of Schleicher. The general seemed to have forgotten that the banker belonged to a wholly different and much more powerful fraternity than his own. Besides, Schacht had already thrown in his lot with Hitler. Nevertheless, morbidly curious, the banker presented himself to the interview to sniff, ‘size up’ this bothersome, plotting general. Even in his post-war memoirs, in which he spent superhuman energy to depict himself as a paragon of nobility, was Schacht incapable of concealing his clannish, implacable hatred for Schleicher – possibly the only Weimar politician who came close to aborting the Nazi incubation. Schacht reminisced:
Although I immediately decided to refuse I was interested to discover his political views of the situation. His statements were so colorless that I had time to look around the room. It was every bit as devoid of character as the man’s speech – without any personal touch, any sign of individual taste…He pinned his last hope on a split of the National/Socialist Party. When he expressed this hope in my presence I broke in: ‘I think, General, that you underrate the iron discipline of the Party so assiduously maintained by Hitler.’ On that occasion Schleicher smiled in a superior fashion. Not long afterwards he ceased altogether to smile.43
Doubtless, Schacht must not have mourned the Red General the day following the Purge, 30 June 1934. By then, Schacht was solidly enthroned as Hitler’s new Reichsbank governor. He also enjoyed the undivided support of the Army and of the organized metallurgy industry, who championed his candidacy for leading an economic dictatorship focused on rearmament. The dream, sketched in the memo that he had forwarded to Dulles more than a decade ago, was about to come true: supreme monetary command over an oligopolized structure. However, Schacht had an adversary in the person of Kurt Schmitt, the Minister of Economics, who favored the development of a domestic consumers’ market – Schmitt, moreover, had had the favor of Rohm.44
A few days after the Purge, in early July, Minister Schmitt, an asset of the insurance lobby, addressed an assembly of German exporters. No sooner had he opened his allocation, ‘What, then, is to be done?’ than he fainted dead away, and was hauled off to convalesce in seclusion. Four weeks later, Schacht was summoned by Hitler, who immediately probed him: ‘I must find someone else for the post and would like to ask you, Herr Schacht, whether you would be prepared, in addition to your office of President of the Reichsbank to take our Ministry of Economic Affairs?’ How could he say ‘no’? ‘There remained the one and only possibility,’ Schacht would recall in his autobiography – the possibility of ‘working from within outwards.’45 In Nuremberg he would confess: ‘I’d even join the devil, for a big, strong Germany.’46
On July 30, 1934, Schacht officially succeeded Schmitt as Economic Minister; President Hindenburg undersigned the appointment and died three days later.47 Germany had its new Mephistophelean steward: Schacht was Reichsbank president and newly appointed Economic Minister, vested with the super added honorific of Generalbevollmächtigte für die Kriegswirtschaft (General Plenipotentiary for the War Economy). They now said of him that he was the ‘Economic Dictator of Germany.’
July 1934 was but a replay of March 1933. On the 17th of that month, Schacht had been officially recalled at the central bank – to steer the ship he had forsaken three years before. This had been the exchange between Hitler and Schacht:
[Hitler:] ‘Herr Schacht, I am sure we are agreed that at the moment there can be only one urgent duty for the new national Government, and that is to do away with unemployment. For this it will be necessary to find a very large sum of money. Do you see any possibility of raising such a sum – other than through the Reichsbank?’
[Schacht:] I agree with you entirely, Chancellor, that it is essential to wipe out the unemployment figures. But no matter what money can be extorted from other sources, it would still be quite insufficient for the job. You won’t be able to avoid recourse to the Reichsbank…
[Hitler:] ‘You must be able to say to what extent the Reichsbank can and must – help.’
[Schacht:] ‘I am honestly not in a position, Chancellor, to mention any particular sum. My opinion is this: Whatever happens, we must put an end to unemployment and therefore the Reichsbank must furnish whatever will be necessary to take the last unemployed off the streets.’
[Hitler:] ‘Would you be prepared to take command of the Reichsbank again?’ 48
Behind Schacht, also known as ‘the American,’49 stood important segments of German absentee ownership and Anglo-Saxon finance. As Hitler recalled, the first allotment earmarked for rearmament purveyed by the Reichsbank to the Hitlerites was of 8 billion marks; of that sum, Schacht and the Reichsbank deducted 500 million marks as interest. Not even the Nazis were spared the payment of interest: – 6.25 percent. And they paid, without protest. They would honor the obligation by availing themselves of the power to tax. The price was high, Hitler fumed, but he kept quiet.
Unlike Rohm, his SA, the Strassers and their Left wing, the Hitlerites had a solid grasp of economic realities. After sacrificing the SA to the army, Hitler now had to play a careful game with the Grid, to which he already owed much, and which he did not underestimate, hence his adulatory conduct while conversing with Schacht. This was his second compromise with the powers that be: like his old comrade Rohm, Hitler hated the bankers (‘that other gang…bunch of crooks,’ and Schacht, a ‘swindler!’)50 no less than he hated the Prussian generals, but he had to accomplish his mission in the East, whatever the cost.
Schacht knew what Hitler wanted from him; now was the time to ‘do the trick.’ First of all he was expected to ignite that Initialzuendung, or ‘initial spark,’ with which Papen had attempted to shock the German economy in the throes of 1932. The jump-start, all experts agreed, should have come from government expenditure, but, for the rest of the common mortals, the ‘big problem remained as it had always been, where to find the money,’ 51 or, in other words, how to ‘make capital appear when seemingly it did not exist.’52
As mentioned before, the unemployment condition inherited by the Third Reich was nothing short of catastrophic: 9 million jobless out of a labor force of 20 million – two out of every five Germans employed in 1929 were without work in the winter of 1932–33.53
Since 1930, as workers were being laid off and the national income was plummeting, the Grid had made a fortune out of the misery of the Fatherland by buying stacks of securities ‘cheap.’ This process of financial concentration was achieved in 1933, the year of Hitler. Then, as if materializing out of thin air, a host of ‘semi-public’ financial institutes appeared that began to issue bills by broadsides of several billion Reichsmarks every year. Bills, which the central bank proceeded to discount, just as it had done in 1931; yet this time neither unsteadily nor with avariciousness, but on a vast scale and at a most generous rate. Thus began the Nazi economic miracle – the so-called process of ‘work creation.’
In June 1933, the economists of the Third Reich attacked the crisis on the labor front. The operation came to be defined as one of Vorfi nanzierung: pre-financing.
The financial contrivance the credit institutes employed to stimulate economic activity was a special kind of paper.
After the great inflation, the 1924 statute of the Reichsbank did not allow unrestricted purchases of government paper. The only instrument against which the central institute was permitted to advance cash was the commercial bill, for only this last, at least on a purely formal level, carried the guarantee that tangible wares were indeed being produced.54 In 1933, by dint of this clause, statutory prohibitions were outflanked* and the legal outfit was at last cleared to accommodate imposing injections of monetary means.
* They would be abrogated the following year in the ambit of the consolidation movement, which is discussed below.
The financing procedure was orchestrated as follows: first of all, the Reich borrowed from the Reichsbank – this was the opening of the Grid propitiated by Schacht. Then the government, via specialized credit agencies, re-loaned such credits to provinces, municipalities, communes, and other local public bodies.
The works were carried out by private entrepreneurs under contracts with the municipalities. The main instrument of financing consisted of so-called ‘work-creation bills’ (Arbeitsbeschaffungswechsel), which were extended to the contractors by the commissioning cities and accepted (discounted) by the banking establishment: at the bank, the bill was immediately transformed into check money (and cash), which was devoted to hiring the jobless and commence the works. If the discounting credit institute was itself in need of cash, it might present these bills for re-discount at the mother institute, the Reichsbank (see Figure 5.1).
Of course, the paper bore interest: 4 per cent like the tax certificates – thus these bills were conceived as a perfectly liquid short-term investment medium. Nominally the bills matured in three months, but as a rule they were subject to 20 automatic renewals, which carried the actual maturity of the paper to five years. At maturity the Reich honored the bills with the tax revenues generated by the Vorfi nanzierung: this obligation represented a long-term liability to the Reich for the amounts originally loaned on short term by the private banking Interests.55 Stripped of its roundabout features, the procedure of the bills came down to the financing of public spending by central bank credit, with the Reichsbank acting as the credit-generating agent for the Reich. At the beginning of this sudden work-creation campaign, the burden of ‘financing’ was borne entirely by Schacht’s institute.56
Simply put, there was money in 1931 which had vanished underground and failed to re-emerge for the length of three long years. Then the Nazis came, and when the banking Grid sent its financial ambassador, Hjalmar Schacht, to the central bank, it thus gave the signal to pour, once again, the monetary base that had vanished back into the main avenues of the network. So the big Berlin banks of the Grid returned the money by lending it to the Reich, the Reich lent it to the cities, the cities gave these bills to the people, the people brought them their commercial banks, which changed them into checks, and the system came alive.*
* Technically speaking, the large Berlin banks behind the Reichsbank reinjected the high-powered money in the system, and the commercial banks, on behalf of all the other, lesser absentees, endorsed the bills and magnified the issue through the deposits multiplier: the 4 percent interest on the bills acted as a magnet (of all other hidden deposits) trawled by the Reichsbank in the phase of pre-financing
The initial monetary injections were allocated for infrastructure. And the bills took on the name of the type of project that they were meant to finance: ‘work creation bills,’ ‘special highway bills,’ ‘land reclamation bills,’ and so on. Entrepreneurs cashed in, had their paper discounted, and paid the workmen. Banks turned to the Reichsbank, which started to print paper money; with it banks repaid the debts they couldn’t honor during the slump, and fueled the recovery. Men found work again, they did not spend much; what they managed to lay aside was automatically reinvested by the savings banks within the self-same circuit of state expenditure.
Hitler was triumphant; he was seen digging, repeatedly, before delirious crowds: digging the ‘first spadefuls’ (erste Spatenstiche) of the several legs of the Autobahnen network that were being laid across the country, the first of which joined Heidelberg and Frankfurt on September 23, 1933.57
In August 1933 something decisive came to pass: Schacht encountered the lords of German steel – among them the giants Krupp and Siemens. Together they founded the Metallforschungsgesellschaft, or Mefo (Research Corporation of the steel industry) – a fictitious corporation with a meager capital endowment (250,000 marks), against which, from 1934 to 1938, 12 billion Reichsmarks worth of bills were issued for the first war commissions, with the same procedure previously outlined. The Mefo bill was the true spark that triggered the process of rearmament. Although until the outbreak of hostilities only 20 percent of the total rearmament expenditure would be financed in this manner, the Mefo allotment would cover 50 percent of total expenditure on military orders during the initial years. ‘The absolute secrecy of this arrangement was preserved until after the war.’58
The Mefo bill was peculiar paper: it rested upon virtual treasures – upon titles of ownership which, during the twilight of Weimar, were amassed in the sparse hands of the absentee owners, the new indisputable masters of Germany. The Mefo bill was the fruit of a compact between the economic overlords and a tenebrous knighthood, between the highest German dynasties and the Nazis, who, with the monopoly of violence and the promise of war, fulfilled respectively two fundamental economic prerequisites: they ensured taxation, and warranted the yield promised by the Nazi bill – that 4 percent stamped upon the paper. Namely, the price of gold, of money, which, in a world contorted by vehement protectionism, would hopefully be repaid with the surplus forthcoming from the rapine of war. Hitler confirmed three years into the war:
The payments of debts…presents no problem. In the first place the territories which we have conquered by force of arms represent an increase in national wealth which far exceeds the costs of war; in the second place, the integration of twenty million foreigners at cheap rates into the German industrial system represents a saving which, again, is greatly in excess of the debts contracted by the State.59
The obvious legerdemain: there wasn’t a gram of gold to back the Nazi bills, just a different set of relationships, which varied by definition with the political humor of the times. Behind the Mefo bill there were but a paltry equity base, a non-existent corporation, the goodwill of German steel lords, the proverbial discipline and industriousness of the Teuton, and the complicity of bankers and high world finance, which, through their own network, managed to convey, as will be detailed hereafter, the raw materials needed to equip with breathtaking rapidity a redoubtable army.
Upon these formidable monetary premises, the economists of the Third Reich redesigned the structure of the capitalist machine. Two were the main difficulties to overcome: (1) to free the economy from disproportionate financial overhead charges; and (2) to find an outlet for the enormous productive potential of modern industrial systems in such a way that remuneration, profit, and interest would not be wholly eroded.
It was up to the Reichsbank to make the opening move if the first objective was to be attained. By rediscounting the bills forwarded to it by credit institutes, the bank of issue ministered the decisive shot of liquidity to the system. Part of this monetary mass went to settle the debts incurred by slump-stricken businesses (banks and firms),60 part was employed to reanimate the economy. This time Germany had German money, no borrowed cover in gold, pounds, or dollars. In fact, gold reserves officially amounted to 1 percent of note circulation in 1936;61 in the eyes of the people the seal of the Reich sufficed, the paper was unquestionably taken – it was money all right.
The advent of Nazism coincided with a veritable jubilee: the record shows the virtual annulment of all private debt. Like magic, money became less expensive. At the beginning of 1933, the prime rate of interest was over 8 percent;62 by 1935, through an intricate reshuffle of a gamut of other variously named bills dealt across Germany’s banking network, Schacht compressed it to 2.81 percent.63 Germany was liquid again.
Then entered the Nazi economic ministries; all their attention was focused upon the industrial sector: first of all, they ordained in July 1933 ‘compulsory cartels,’ that is, a strong concentration of all main concerns; there followed the capital concession: the so-called Preisfinanzierung (financing by prices).
The Reich placed the order for goods and construction and agreed to a price that, in addition to entrepreneurial profit, included an accelerated depreciation allowance (that is, a stipulation under the pretense that equipment wore out faster than usual), which was tantamount to the total remission of interest charges, and to the concession of a bonus, which firms would devote to the expansion of plants (self-financing scheme). In 1937 the ratio of interest charges to sales for business bottomed out at 0.40 percent.64
Commercial banks were relegated to the mere discounting function: they still held the privileged right to exact interest against the bills tendered by the Reich, yet they had to forego the far more important prerogative to dictate the nature and direction of all investments, as well as the copious rents obtainable therefrom.65 These rents, instead, were appropriated by the Reich, which in turn ceded them to businesses with the Preisfinanzierung.
Throughout the cycle (die Konjunktur), the level of the workers’ wages was pegged at the depression rates of 1932–33, some 21 percent below the prosperity level of 1929.66 Prices, instead, were capped by decree in November 1936. By thus repressing consumption, the production of weaponry was intensified, and the original loans were transformed from short- to long-term engagements: consolidation was initiated.
Germans were now told that the money they had laid in was being immobilized – maturity dates of Reich securities were gradually postponed (28 years for the initial Reich bond auction of 1935, at 4 percent). War would settle all accounts payable. Meanwhile, the economy pushed on: between 1933 and 1936, German GNP increased by an average annual rate of 9.5 percent, and annual productivity for industry and crafts rose by 17.2 percent. The average annual growth of public consumption during these four years was 18.7 percent, while private consumption increased only by 3.6 percent annually.67
In 1935 military expenditure amounted to approximately half of the entire governmental outlay. From then on this share was bound to rise inexorably.
Nazi bills were initially paid off with tax proceeds, but in the course of the consolidation, financial authorities ended up paying only interest on the lengthened loans, putting off the reimbursement of the principal until the end of war. By thus postponing ‘the evil day,’ observed the specialists of the Bank of England in 1939,68 the Nazis appeared to have flattened the ups and downs of the cycle for ‘ten or perhaps twenty years’: it looked as though the whole endeavor was pervaded with the lightness of a zero-interest loan.
Hitler had blind faith in his divisions. So did his financial backers, seemingly. In four years, Hitler conscripted these armies, by 1938 erasing 9 million unemployed,69 redistributing wealth with highly progressive taxation,70 improving somewhat the quality of life until 1939, and repressing even the least inflationary hiccup.
Finally, the abundance of modern industrial systems, which translated into an overall diminution of the price level, and which failed to comply with the logic of profit. What to do with it? War. Schacht helped Hitler by luring back to the surface those pecuniary hoards that had been concealed for three long years in order to finance the war at 3–4 percent. ‘[Schacht:] I had to find a way of extracting this fallow capital from the safe deposits and pockets where it…lay, without expecting it to remain absent for long or lose its value.’71
Throughout the Nazi boom the money owners had collected interest; they would have to wait for the end of the conflict in the East – such was the understanding – to get their own capital back. They had allowed Hitler to spend over 100 billion marks for the mission.72 This was no economic recovery but a feverish sweat before the last Herculean labor.
On the international front the affair was no less involved.
Of the 34 vital materials without which a nation cannot live, Germany had only two in ample quantities – potash and coal.73 For the rest it would have to rely on its chemists and international friends.
Schacht and his associates at the ministry of economies set out on a world tour to conclude general compensation or clearing agreements with whole countries. These agreements were predicated on the creation of a common account into which German importers paid their bills in marks; these same marks could then be drawn by German exporters for their sales to their trading partners. The exchange rates were not allowed to float freely and were often fixed afresh for each major transaction. This system, which ousted all previous methods, became the framework of nearly 65 percent of Germany’s foreign trade.74 Playing (1) on an overvalued clearing rate of the mark and (2) on buying far more from the others than selling to them,75 Schacht involved over 25 countries into these bilateral waistcoats: Latin America, the Balkans, Greece, Turkey and Eastern Europe – Romania, Bulgaria, Hungary, from which the Germans secured oil-yielding fruits, oilseed, fibers, soy beans, bauxite, oil, against iron and weaponry,76 mostly for the benefit of the cannon-maker Krupp.77
But what of the industrialized West; Anglo-America, for instance?
Britain, of course, now that Nazism had ripened, was particularly scrupulous in grooming it as best as she could. In July 1934, right when Schacht was crowned Economic Dictator, she concluded with Germany the Anglo-German Transfer Agreement, considered one of the ‘pillars of British policy towards the Third Reich.’78 Under its norms, the Third Reich was allowed to accumulate a sizable trade surplus vis-à-vis Britain; the surplus translated into free sterling, which the Nazis could employ to purchase whatever commodities they might need for rearmament on the empire’s world markets; rubber and copper being chief among these.79
By the end of the decade, Nazi Germany was Britain’s principal trading client. In 1937, for example, she provided a market for more British goods than any other two continents combined and for four times the amount taken by the United States.80
Then there was the unending headache of the Dawes loans and of all that money still owed to the City of London, which Germany had captured and was not willing to relinquish. Under the legitimate cloak of the so called Standstill Agreements, that is, the deal on credits whose principal was frozen in Germany and upon which the debtor was only obliged to pay interest, Britain, despite some top bankers in London who rebuffed the claim as a ‘misapprehension,’81 not only renewed the original 1931 debt standing but also added fresh credit to the original amount at least by a multiple equal to the number of renewals throughout the entire Nazi takeoff (1933–39).82
On December 4, 1934, Norman advanced the Nazis a loan of approximately $4 million in order to ‘facilitate the mobilization of German commercial credits’: that is, new money to pay old debts – or better said, a gift. 83 Not yet satisfied, and in direct opposition to that segment of the British interests which keenly insisted on being refunded by Germany, Norman fought nail and tooth against the setting-up of a clearing union between Britain and Germany: in fact, a clearing would have automatically diverted ‘free sterling’ into debt repayment, and Schacht would therefore have lost his cherished allowance in pounds for international purchases of raw goods and materials.84
There were several voices in the City that spoke of further money, outside the Standstill Agreements, being loaned by Britain to German private concerns, such as I. G. Farben. The Bank of England itself instructed its employees not to discuss openly such a matter, which was ‘confidential.’85 The archives of the Bank are indeed mute on this count; these other amicable ‘extensions’ might very well have been significant.
Of the foreign money she owed in 1932, Germany would repay her creditors less than 10 percent by 1939.86 Notwithstanding, international business kept on treating Hitler’s Germany with pattes de velours – especially the arms-makers. In 1935, an Anglo-German Society was founded ‘in which Unilever, Dunlop Rubber, the British Steel Export Association, and British Petroleum’ all participated.87 The prestigious British manufacturer of heavy guns, armor plate and warships, Vickers-Armstrong – curiously one of the very few concerns salvaged during the Slump by Montagu Norman himself 88 – had been offering, as early as 1932 in the official publication of the German army, the Militär-Wochen-Blatt, tanks and armored cars.89 At the annual meeting of his company in 1934, Sir Herbert Lawrence, the Chairman of Vickers, was asked to give assurance that the corporation was not being used for the secret rearmament of Germany. This was his reply: ‘I cannot give you assurance in definite terms, but I can tell you that nothing is done without the complete sanction and approval of our own government.’90
William Dodd, a history professor, served as American ambassador to Berlin from 1933 to 1938. ‘Der gute Dodd,’ Hitler would pityingly say of him, ‘he can hardly speak German, and made no sense at all.’91 Dodd might not have spoken good German, but he wrote good enough English to relate the following to his President, Roosevelt, on October 19, 1936:
At the present moment more than a hundred American corporations have subsidiaries here or have cooperative understandings. The DuPont's have three allies: (1) Chief: I. G. Farben Co. (2) Standard Oil has made $500 million a year helping the Germans make Ersatz gas for war purposes; but Standard Oil cannot take any of its earnings out of the country except in goods. They do little of this, report their earnings at home, but do not explain the facts. (3) The International Harvester Company president told me their business here rose 33 per cent a year (arms manufacture, I believe), but they could take nothing out. Even our airplanes people have secret arrangements with Krupp…Why did the Standard Oil Company of New York send $1 million over here in December, 1933, to aid the Germans in making gasoline from soft coal for war emergencies? Why do the International Harvester people continue to manufacture in Germany when their company gets nothing out of the country?92
Roosevelt was evasive, but encouraged Dodd to continue his reports. Not satisfied with the official explications (that Germany should have been allowed to rearm in order to regain world status), the candid ambassador had been recording in his diary several suspect transactions since his arrival in Germany: on September 19, 1934, high-class aircraft manufacturers made in the USA were delivered to Germany against $1 million in gold – Dodd confronted Schacht about the sale; the latter tried at first to deny it, but seeing that Dodd was about to brandish a hard copy of the deal, gave in and confirmed. On October 19 of the same year, it was the turn of the British: Vickers had just sold the Nazis a cargo of war materiel, and despite the haggling over the Standstill and the alleged insolvency of Germany, stories of which filled the newspapers daily, the Germans paid for the weapons in cash; with the evidence, Dodd then rushed to the British ambassador, Sir Eric Phipps, who pretended to be surprised.93
These were only anecdotal fragments of a deep and intricate intercourse consummated by the Allies with the Nazi regime. The Allies, as is well known, had traded heavily with Hitler; they had traded ‘with the enemy.’ And it appears, in fact, ‘that the effective influence of foreign capital, an influence which exerts itself far more with investments than with credits, grew under the Nazi regime.’94 ‘At the time of Pearl Harbor, American investment in Nazi Germany amounted to an estimated total of $475 million. Standard Oil of New Jersey had $120 million invested there; General Motors had $35 million; ITT had $30 million, and Ford had $17.5 million.’95
Frank Knox, the US Naval Secretary (1940–44), would admit that in the biennium 1934–35, Hitler received from America hundreds of state-of-the art airplane engines, and a Senate investigation concluded in 1940 that American industrialists had been freely selling a plethora of military patents to Germany with the consent of the government: Pratt & Whitney, Douglas, Bendix Aviation (controlled by GM, which at the time was controlled by Morgan & Co.), to name but a few, handed over to BMW, Siemens, and others a collection of aviation military secrets,96 while Stukas bombers, as mentioned earlier, were built with techniques learned in Detroit.
Western pundits have always taken the easy way out, explaining away these treasonous deals as the proverbial misdeeds of a few fat, rotten apples trucking with despots for the sake of ‘quick bucks’ – the customary litany against ‘corporate greed.’ That might be the case for the few deals paid in gold – of which the Nazis had virtually none – but certainly not for the colossal Allied investment sunk into Germany without any prospect of retrieving the gains, let alone the original capital on a relatively brief notice: hence the perplexity of Dodd. Many of these ‘foreign’ installations would be spared the Allied bombs at the end of the war, and one is left to wonder when, in fact, the respective governments of Britain and the United States began to think of Europe as their own private domain – the new western appendix of the empire – and of Hitler and his regime as an obtrusive nuisance to be propped up at first and then annihilated in a prolonged international conflict.
Governor Schacht must also have wondered. For years, almost deaf to Hitler’s repeatedly avowed goals of the Drang nach Osten (the ‘Push to the East’), Schacht preconized, instead, a return to Germany of her former African colonies. He too seemed to envision a Reich that would tower over Middle Europe – the grossdeutsch Reich inclusive of Austria and Czechoslovakia as a minimum – yet one connected to exotic outposts by means of a decent-sized navy. But Hitler had no interest in colonies.
It has been written that by early 1935 two blocs supporting different world views formed inside the Nazi establishment and fought for supremacy: a pro-Anglo-Saxon banking-industrial grouping assembled around ‘the American’ Schacht versus the party of I. G. Farben/Deutsche Bank, which aimed to decouple Germany from the British-dominated world markets and create a closed Eurasian economic bloc 97 – a self-sufficient fortress stretching from Odessa to Bordeaux.
In August 1936, Hitler drafted a secret memoir which informed the second Four-Year Plan for the rearmament of Nazi Germany. I. G. Farben was indeed the soul of the project, and Goring became its economic supremo. Yet the new Four-Year Plan, which came into force in September, was only a prod to accelerate preparedness for war: home production of foodstuffs, minerals and synthetic ersatz materials,* for which the plan is remembered, were tasks that had been previously coordinated by Schacht – they were merely to be boosted on a much wider scale.98
* Especially substitutes for rubber and gasoline.
According to the rumor that he himself would spread, Schacht, bitterly and overtly critical of Goring’s uneconomic squander of resources and foreign exchange, and fearful of the runaway inflation that might have resulted from turning ever more butter into guns, distanced himself from the Fuhrer and began to lose favor with the Nazi elite.99 This rumor might have led to the other, according to which the antagonism of Farben would eventually cause the banker’s downfall.100
As in 1930, Schacht felt the ground quaking, but this time the position of Britain, as will be seen, was so ambivalent that not even the guileful ‘American’ was quite certain of the posture he should have assumed. That war would come was certain: Schacht himself, with the Mefo bills, had raised the Wehrmacht from the dead – he was no pacifist. But what sort of war? The emergence in Britain of the anti-Nazi War Party led by Churchill was reason enough for him to become apprehensive, and so he receded – a few steps, by arguing in public with Goring. The story of Schacht’s protests against the risk of inflation and the uneconomic use of foreign exchange was a fable. In fact, as Hitler would later recall:
An inflationary crisis could only have arisen after all the unemployed labor had been absorbed, and this did not happen until late 1937 or early 1938. Up till then the only difficulties we had to face were those of foreign exchange. Schacht had told me that we had at our disposal a credit of fifteen hundred million marks abroad, and it was on this basis that I planned my Four Year Plan, which never caused me the slightest anxiety…And that is how things are today [August 1942], and we never find ourselves blocked for money.101
On November 26, 1936, Schacht was relieved of his post of Minister for Economic Affairs and Plenipotentiary for the War Economy, and confined his duties to governing the Reichsbank.
After Kristallnacht, the night of November 9, 1938, during which synagogues all across Germany were desecrated and destroyed, Schacht was offered by Hitler his last opportunity: he was dispatched to propose to influential Jewish captains of Anglo-American finance a plan for the evacuation of Jews from Germany – Montagu Norman would preside. In sum, Schacht’s plan sought to impound the wealth of German Jews as collateral, and on that basis issue an international loan at 5 percent to be subscribed by their wealthy co-religionaries: the funds sequestered would go towards the amortization of the loan. A quarter of the dollar proceeds gathered with the subscriptions would then be devoted to paying the prospective evacuees their passage out of the country.102
‘Not an ideal proposition,’ by Schacht’s own admission,103 but better, he reasoned, than leaving the Jews at the mercy of the party. Undoubtedly his plan was larcenous and extortionate; and as such it was scoffed at by Roosevelt in the United Sates and by Chamberlain and Halifax in Britain: between December 14 and 17, emboldened by these politicians’ chiding, the Jewish bankers fl exed their muscles and sabotaged the conference 104 – no submission to Nazi blackmail, they rebutted.
Schacht had failed, and he was not irreplaceable: on February 21, 1939, he was dismissed from his post of Reichsbanks president. He would retain the honorary title of Minister without Portfolio until January 21, 1943.
A British masquerade to
entrap the Germans anew
‘Nostra maxima culpa,’ ‘our gravest fault’: so reads the chapter title of one
of many books, all alike, devoted by British historians to that disturbing
season of their history known as ‘appeasement.’105 ‘Culpa’: ‘fault,’ ‘error,’
‘regrettable mistake’ – for having tried to appease a regime, Hitler’s, that
would not and could not be pacified by any amount of goodwill, however
profligate. A mistake at best, a shameful episode at worst – but a misjudgment
in any case. to be continued...245...104
notes
Chapter 5
1. Reinhold Hoops, Englands Selbst-täuschung (Berlin: Zentralverlag NSDAP Franz Eher Nachfolger Gmbh, 1940), p. 37.
2. Adolf Hitler, Hitler’s Secret Conversations 1941–1944 (New York: Farrar, Straus & Young, 1953), pp. 166, 259, 534, 507.
3. Ernst Jünger, On the Marble Cliffs (Norfolk, CT: New Directions, 1947), p. 93.
4. Johann Wolfgang von Goethe, Goethe’s Faust Part Two (Prose translation by Max Dietz) (Pennsylvania: Bryn Mawr, 1949), p. 191.
5. Klaus Fischer, Nazi Germany. A New History (New York: Continuum, 1996), p. 268.
6. Carroll Quigley, Tragedy and Hope. A History of the World in Our Time (New York: Macmillan Company, 1966), p. 430.
7. I. Benoist-Méchin, Histoire del’armée allemande (Paris: Éditions Albin Michel, 1966), Vol. 3, p. 87. Preparata 03 chap06 287 10/3/05 12:01:23 pm 288 Conjuring Hitler
8. Jacques Delarue, Gestapo. A History of Horror (New York: Dell, 1964), p. 65.
9. Ibid.
10. John Toland, Adolf Hitler (Garden City, NY: Doubleday & Co., 1976), p. 569.
11. Fischer, Nazi Germany, p. 272.
12. Joseph Borkin, The Crime and Punishment of I. G. Farben (New York: The Free Press, 1978), p. 56.
13. John Cornwell, Hitler’s Pope. The Secret History of Pius XII (New York: Viking, 1999), p. 154.
14. Hans Mommsen, ‘The Reichstag Fire and Its Political Consequences,’ in Hajo Holborn (ed.), Republic to Reich. The Making of the Nazi Revolution. Ten Essays (New York: Vintage, 1972), p. 147.
15. André François-Poncet, The Fateful Years. Memoirs of a French Ambassador in Berlin, 1931–1938 (London: Victor Gollancz, 1949), p. 55.
16. Mommsen, ‘Reichstag Fire,’ p. 150.
17. Delarue, Gestapo, p. 67.
18. Max Gallo, The Night of the Long Knives (New York: Da Capo Press, 1997 [1972]), pp. 41–2.
19. John Weitz, Hitler’s Banker: Hjalmar Horace Greeley Schacht (Boston: Little, Brown & Company, 1997), p. 140.
20. Delarue, Gestapo, pp. 70–71.
21. François-Poncet, Fateful Years, p. 55.
22. Fischer, Nazi Germany, p. 285.
23. Ibid.
24. Gallo, Long Knives, p. 100.
25. Delarue, Gestapo, p. 141.
26. Douglas Reed, The Prisoner of Ottawa, Otto Strasser (London: Jonathan Cape, 1953).
27. Ian Kershaw, Hitler: 1889–1936: Hubris (New York: W. W. Norton & Co., 1998), p. 515.
28. François-Poncet, Fateful Years, p. 133.
29. Ibid., p. 153.
30. Edmond Vermeil, Germany’s Three Reichs. Their History and Culture (London: Andrew Dakers Limited, 1945), p. 291.
31. Paul Maquenne, L’hérésie économique allemande (Paris: Guerre 39, Union Latine, 1940), p.115.
32. François-Poncet, Fateful Years, p. 221.
33. Hans Ulrich Thamer, Il Terzo Reich (Verführung und Gewalt, Deutschland 1933–1945) (Bologna: Il Mulino, 1993 [1986]), p. 222.
34. Hjalmar Schacht, My First Seventy-six Years: The Autobiography of Hjalmar Schacht (London: Allen Wingate, 1955), p. 295.
35. Karl Erich Born, Die Deutsche Bankenkrise 1931, Finanzen und Politik (München: R. Piper & Co. Verlag, 1967), p. 118.
36. N. J. Johannsen, A Neglected Point in Connection with Crises (New York: Augustus M. Kelley Publishers, 1971 [1908]), pp. 35, 80; emphasis added.
37. Born, Deutsche Bankenkrise, pp. 174ff.
38. Karl Schiller, Arbeitsbeschaffung und Finanzordnung in Deutschland (Berlin: Junker und Dünnhaupt Verlag, 1936), pp. 35–67.
39. Jan Marczewski, Politique monétaire et fi nancière du IIIe Reich (Paris: Librairie du Recueil Sirey, 1941), p. 58.
40. Kenyon Poole, German Financial Policies 1932–1939 (Cambridge, MA: Harvard University Press, 1939), p. 37.
41. Marczewski, Politique monétaire, pp. 32–3.
42. Poole, German Financial Policies, p. 47. 43. Schacht, Autobiography, p. 297. Preparata 03 chap06 288 10/3/05 12:01:23 pm Notes 289 44. Gallo, Long Knives, p. 158. 45. Schacht, Autobiography, p. 320.
46. Weitz, Hitler’s Banker, p. 157.
47. Norbert Mühlen, Schacht: Hitler’s Magician. The Life and Loans of of Dr. Hjalmar Schacht (New York: Alliance Book Corporation, 1939), p. 157.
48. Schacht, Autobiography, p. 302.
49. Peter Padfi eld, Himmler, Reichsführer-SS (London: Macmillan, 1990), p. 115.
50. Hitler, Secret Conversations, p. 350.
51. Edward Norman Peterson, Hjalmar Schacht: For and Against Hitler (Boston: Christopher Publishing House, 1954), p. 149; emphasis added. 52. Poole, German Financial Policies, p. 29.
53. R. J. Overy, War and Economy in the Third Reich (Oxford: Clarendon Press, 1994), p. 38.
54. Otto Nathan, Nazi War Finance and Banking (NBER Paper No. 20, 1944), p. 43.
55. Samuel Lurie, Private Investment in a Controlled Economy (New York: Columbia University Press, 1947), p. 15.
56. Ibid., pp. 58–9.
57. Thamer, Terzo Reich, p. 414.
58. Avraham Barkai, Nazi Economics. Ideology, Theory and Policy (New Haven: Yale University Press, 1990), p. 165.
59. Hitler, Secret Conversations, p. 372.
60. Poole, German Financial Policies, p. 111.
61. Lurie, Private Investment, p. 36, and Barkai, Nazi Economics, p. 255.
62. Marczewski, Politique monétaire, p. 88.
63. Poole, German Financial Policies, pp. 118–20.
64. Lurie, Private Investment, p. 158.
65. Ibid., p. 59. 66. Ibid., pp. 57–8, 154.
67. Barkai, Nazi Economics, p. 158.
68. Bank of England, OV 34/9, from two memoranda, respectively, by G. H. S. Pinsent, 6 December 1938 (p. 79), and C. F. Cobbold, 24 August 1939 (p. 231).
69. Overy, War and Economy, p. 42.
70. David Schoenbaum, Hitler’s Social Revolution. Class and Status in Nazi Germany, 1933–1939 (New York: W. W. Norton & Company, Inc., 1980 [1966]), pp. 145–8.
71. Schacht, Autobiography, p. 317.
72. Fischer, Nazi Germany, p. 377.
73. Stephen Roberts, The House That Hitler Built (New York: Harper & Brothers Publishers, 1938), p. 172.
74. H. W. Arndt, The Economic Lessons of the Nineteen Thirties (London: Oxford University Press, 1944), pp. 187–8.
75. Bruno Bettelheim, L’économie allemande sous le nazisme: un aspect de la décadence du capitalisme (Paris: Librairie Marcel Rivière et Cie., 1946), p. 180.
76. Mühlen, Schacht, pp. 120–35.
77. Weitz, Hitler’s Banker, p. 206.
78. Neil Forbes, Doing Business With the Nazis. Britain’s Economic and Financial Relations With Germany, 1931–1939 (London: Frank Cass, 2000), p. 97.
79. Ibid., p. 107.
80. Cleona Lewis, Nazi Europe and World Trade (Washington DC: Brookings Institution, 1941), p. 16.
81. Forbes, Doing Business, p. 181.
82. Bank of England, OV 34/201, p. 10, a memorandum dated October 14, 1934, speaks of ‘Standstill bills’ being drawn ‘under credit lines granted before July 1931’ (emphasis added), which can only be understood as a provision for initiating a Preparata 03 chap06 289 10/3/05 12:01:24 pm 290 Conjuring Hitler new cycle of fresh lending to German importers by these specifi c short-term bills, which were renewed as soon as they were paid off.
83. John Gunther, Inside Europe (New York: Harper & Brothers, 1938), p. 99.
84. Forbes, Doing Business, pp. 113, 116.
85. Ibid., pp. 173, 174.
86. Mühlen, Schacht, p. 35.
87. Martin Gilbert, The Roots of Appeasement (New York: New American Library, 1966), p. 155.
88. Henry Clay, Lord Norman (London: Macmillan & Co., 1957), pp. 318–22.
89. Dorothy Woodman, Hitler Rearms. An Exposure of Germany’s War Plans (London: John Lane; Bodley Head Limited, 1934), p. 201.
90. John Hargrave, Montagu Norman (New York: Greystone Press, 1942), p. 218.
91. Ernst Hanfstaengl, Hitler: The Missing Years (New York: Arcade Publishing, 1994 [1957]), p. 204.
92. Anthony Sutton, Wall Street and the Rise of Hitler (Sudbury: Suffolk: Bloomfi eld Books, 1976), pp. 15–16.
93. William Dodd, Ambassador Dodd’s Diary, 1933–1938 (New York: Harcourt, Brace and Company, 1941), pp. 166, 170, 176.
94. Bettelheim, L’économie allemande, p. 78.
95. Charles Higham, Trading With the Enemy: An Exposé of the Nazi-American Money Plot, 1933–1949 (New York: Delacorte Press, 1983), p. xvi.
96. Andrej Gromyko, L’espansione internazionale del capitale, storia e attualità (Roma: Editori Riuniti, 1985 [1982]), p. 151.
97. Padfi eld, Himmler, p. 206.
98. Schacht, Autobiography, p. 370.
99. Ibid. pp. 366ff.
100. Padfi eld, Himmler, p. 208.
101. Hitler, Secret Conversations, pp. 514–15.
102. Weitz, Hitler’s Banker, p. 240.
103. Schacht, Autobiography, pp. 383–4.
104. Ron Chernow, The Warburgs. The Twentieth-Century Odyssey of a Remarkable Jewish Family (New York: Random House, 1993), pp. 480–5.
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