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paratory measures that are urgently necessary may be carried out. The existence of such preparations, or the intention of them must be kept in strictest secrecy in the zone

itself as well as in the rest of the Reich." (EC-405) Preparations of various types were thereupon discussed.

The rapid success of German rearmament is attributable to the work of Schacht. In the fall of 1934, the Nazi conspirators announced the "New Plan”, which aimed at the control of imports and exports in order to obtain the raw materials needed for armaments and the foreign currency required to sustain the armament program. The "New Plan” was the creation of Schacht. Under the plan, Schacht controlled imports by extending the system of supervisory boards for import control, which was previously limited to the main groups of raw materials, to all goods imported into Germany. The requirement of licenses for imports enabled the Nazi conspirators to restrict imports to those commodities which served their war aims.

Subsequently, in February 1935, the Devisen Law was passed (Reichsgesetzblatt 1935, I, 105). Under it, all transactions in

, volving foreign exchange were subject to the approval of Devisenstellen (Foreign Exchange Control Offices). By thus controlling the disposition of foreign exchange, the conspirators were able to manipulate foreign trade so as to serve their ends.

Every aspect of the German economy was geared to war under the guidance of the Nazi conspirators, particularly Schacht. In a study of the economic mobilization for war as of 30 September 1934, it was stated that steps had already been taken to build up stock piles, to construct new facilities for the production of scarce goods, to redeploy industry to secure areas, and to control fiscal and trade policies. The task of stock piling, it was announced, had been hampered by the requirement of secrecy and camouflage. Reserves of automobile fuels and stocks of coal were accumulated, and the production of synthetic oil was accelerated. Civilian supply was purposely organized so that most plants would be working for the German Armed Forces. Studies were made of the possibility of barter trade with supposedly neutral countries in case of war. (EC-128)

Financing of the armament program presented a difficult problem for the conspirators. In 1934 and 1935, the German economy could by no possibility have raised funds for the Nazis' extensive rearmament program through taxes and public loans. From the outset, the armament program involved “the engagement of the last reserves.” Moreover, apart from the problem of raising the huge sums required to sustain this program, the Nazi conspirators were exceedingly anxious, in the early stages, to conceal the extent of their armament activities.

After considering various techniques of financing the armament program, Schacht proposed the use of "mefo" bills. One of the primary advantages of this method was the fact that through its use figures indicating the extent of rearmament, which would have become public through the use of other methods, could be kept secret. “Mefo” bills were used exclusively for armament financing. Transactions in “mefo” bills worked as follows: "Mefo” bills were drawn by armament contractors and accepted by a limited liability company. The spelling of the word "mefo” is taken from the name of this company, Metallurgische Forschungsgesellschaft, m.b.h. (MEFO). This company had a nominal capital of one million Reichsmarks and was merely a dummy organization. The bills were received by all German banks for possible rediscounting with the Reichsbank. The bills were guaranteed by the Reich. Their secrecy was assured by the fact that they appeared neither in the published statements of the Reichsbank nor in the budget figures.

The "mefo” bill system continued to be used until 1 April 1938. Up to that date 12 billion Reichsmarks of "mefo” bills for the financing of rearmament had been issued. Since it was no longer deemed necessary to conceal the vast progress of German rearmament, “mefo” financing was discontinued at that time. (EC436)

Further sources of funds upon which Schacht drew to finance the secret armament program were the funds of political opponents of the Nazi regime, and Marks of foreigners on deposit in the Reichsbank. As Schacht boasted in a memorandum to Hitler dated 3 May 1935:

"Our armaments are also financed partly with the credits of

our political opponents." (1168-PS) The outstanding “mefo” bills represented at all times a threat to the stability of the currency because they could be tendered to the Reichsbank for discount, in which case the currency circulation would automatically have to be increased. Thus, there was an ever-present threat of inflation. Schacht nevertheless continued on his course, because he stood with unswerving loyalty to the Fuehrer, because he fully recognized the basic idea of National Socialism, and because he felt that at the end, the disturbances, compared to the great task, could be considered irrelevant.

High-ranking military officers paid tribute to Schacht's con

trivances on behalf of the Nazi war machine. An article writteni
for the "Military Weekly Gazette" in January 1937 stated:

"The German Defense Force commemorates Dr. Schacht to-
day as one of the men who have done imperishable things
for it and its development in accordance with directions from
the Fuehrer and Reich Chancellor. The defense force owes
it to Schacht's skill and great ability that, in defiance of all
currency difficulties it, according to plan, has been able to
grow up to its present strength from an army of 100,000

men.”
After the reoccupation of the Rhineland, the Nazi conspirators
redoubled their efforts to prepare Germany for a major war. The
Four Year Plan was proclaimed by Hitler in his address at the
Nurnberg Party Convention on 9 September 1936. It was given
a statutory foundation by the decree concerning the execution of
the Four Year Plan dated 18 October 1936 (Reichsgesetzblatt
1936, I, 887). By this decree Goering was put in charge of the
plan. He was authorized to enact any legal and administrative
measures deemed necessary by him for the accomplishment of his
task, and to issue orders and instructions to all government agen-
cies, including the highest Reich authorities. The purpose of the
plan was to enable Nazi Germany to attain complete self-suffi-
ciency in essential raw materials, notably motor fuel, rubber, tex-
tile fiber, and non-ferrous metals, and to intensify preparations
for war. The development of synthetic products was greatly ac-
celerated despite their high costs.

Apart from the self-sufficiency program, however, the Nazi conspirators required foreign exchange to finance propaganda and espionage activities abroad. Thus, in a speech on 1 November 1937 before the Wehrmachtakademie, General Thomas stated :

“If you consider that one will need during the war consider-
able means in order to organize the necessary propaganda,
in order to pay for the espionage service, and for similar pur-
poses, then one should be clear that our internal Mark would
be of no use therefore, and that Foreign Exchange will be

needed." (EC-14)
This need for foreign exchange was reduced in part by virtue
of the espionage and propaganda services rendered free of charge
to the Nazi state by leading German industrial concerns.
orandum dated at Essen on 12 October 1935, which was found in
the files of the Krupp company, contains the subheading: “Con-
cerns:--distribution official propaganda literature abroad with
help of our foreign connections." It goes on to say that on the
morning of 11 October the district representative of the Ribben-

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trop Private Foreign Office, Dienststelle Ribbentrop, made an appointment by telephone with Mr. Lachman to arrive at an appointed time. The memorandum continues:

“In answer to my question, with whom I was dealing and which official bureau he represented, he informed me that he was not himself the district representative of Ribbentrop's Private Foreign Office, but that a Mr. Landrat Bollman was such and that he himself had come at Mr. Bollman's order."

(D-206) After discussing the confusion in the field of foreign propaganda, the memorandum states that Ribbentrop's Foreign Office is creating a private organization for foreign propaganda, and that for this purpose the support of the Krupp firm and especially an index of addresses are needed. This request received the following response:

“I informed Mr. Lachman that our firm has put itself years ago at the disposal of official bureaus for purposes of foreign propaganda, and that we had supported all requests ad

dressed to us to the utmost." (D-206) These activities are demonstrated by another document found in the files of the Krupp company. A memorandum prefaced by Herr Sonnenberg, on 14 October 1937, reports a meeting at Essen on 12 October 1937. The government's request for assistance in foreign intelligence activities met this response:

“On our part we undertook to supply information to the Com

bined Services Ministry (R.K.M.) as required.” (D-167) Meanwhile the conspirators' program of self-sufficiency was proceeding with great speed. The production of steel, for example, as shown in official German publication, rose as follows:

1933
1934
1935
1936
1937
1938

Tons 74,000 105,000 145,000 186,000 217,000 477,000

The production of gasoline increased at an even greater tempo: from 387,000 tons in 1934 to 1,494,000 tons in 1938 (Statistical Yearbook of the German Reich, 1939-1942).

The Nazi conspirators pressed the completion of the armament program with a sense of urgency betraying their awareness of the imminence of war. At a meeting on 4 September 1936 Goering pointed out that "all measures have to be taken just as

if we were actually in the state of imminent danger of war." He pointed out that:

66* * ** if war should break out tomorrow we would be forced to take measures from which we might possibly still shy away at the present moment. They are therefore to be taken." (EC-416)

The extreme urgency was manifested by Goering's remark that existent reserves will have to be touched for the purpose of carrying us over this difficulty until the goal ordered by the Fuehrer has been reached; in case of war they are not a reliable backing in any case." (EC-416) Schacht was advised by a top secret letter dated 31 August 1936 that Hitler ordered all formations of the air force to be ready by 1 April 1937. (1301-PS)

66*

After their successes in Austria and the Sudetenland, the Nazi conspirators redoubled their efforts to equip themselves for the war of aggression which they planned to launch. In a conference on 14 October 1938, shortly before the Nazis made their first demands on Poland, Goering stated:

66*

Everybody knows from the press what the world situation looks like, and therefore the Fuehrer has issued an order to him to carry out a gigantic program compared to which previous achievements are insignificant. There are difficulties in the way which he will overcome with the ut

most energy and ruthlessness." (1301-PS)

The supply of foreign currency had sunken because of preparations for the invasion of Czechoslovakia. Replenishment was considered necessary. At the same conference, on 14 October 1938, Goering declared:

"These gains made through the export are to be used for an increased armament. The armament should not be curtailed by export activities." (1801-PS)

Goering had received the order from the Fuehrer to increase armaments to an abnormal extent, the air force having first priority, and interpreted it as follows:

"Within the shortest time, the air force should be increased five fold; also the navy should create war weapons more rapidly, and the army should produce large amounts of war weapons at a faster rate, particularly heavy artillery and heavy tanks. Along with this a larger production of armaments must go, especially fuel, rubber, powders and explosives must be moved to the foreground. This should be coupled with an accelerated expansion of highways, canals, and particularly of the railroads." (1301-PS)

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