Memorandum from SCHACHT to HITLER, [Identified by SCHACHT on 16 October 1945]
May 3, 1935
Financing of Armament
The following explanations are based upon the thought, that the accomplishment of the armament program with speed and in quantity is the problem of German politics, that everything else therefore should be subordinated to this purpose, as long as
m
[eluding approx. 387,000 men and 225,000 women.
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the main purpose is not imperilled by neglecting all other questions. Even after March 16, 1935 the difficulty remains, that one cannot undertake the open propagandistic treatment of the German people for support of armament without endangering our position internationally (without loss to our foreign trade). The already nearly impossible financing of the armament program is rendered hereby exceptionally difficult.
Another supposition must be also emphasized. The printing press can be used only for the financing of armament to such a degree, as permitted by maintaining of the money value. Every inflation increases the prices of foreign raw materials and increases the domestic prices, is therefore like a snail biting its own tail. The circumstance that our armament had to be camouflaged completely till March 16, 1935 and even since this date the camouflage had to be continued to a larger extent, making it necessary to use the printing press (bank note press) already at the beginning of the whole armament program, while it would have been natural, to start it (the printing press) at the final point of financing. In the portfolio of the Reichsbank are segregated notes (for this purpose: armament) of 3,775 millions and 866 millions, altogether 4,641 millions, out of which the armament notes amount to RM 2,374 millions (Status of April 30, 1935). The Reichsbank has invested the amount of marks under its jurisdiction, but belonging to foreigners in * * *
notes of armament. Our armaments are also financed partly with the credits of our political opponents. Furthermore 500 million Reichsmarks were used for financing of armament, which originated out of Reichsanleihe [Federal loans] placed with savings banks. In the regular budget the following amounts were provided. For the budget period 1933/34 RM 750 millions, for the budget period 1934/35 RM 1,100 millions, and for the budget period 1935/36 RM 2,500 millions.
The amount of deficits of the budget since 1928 increases after the budget 1935/36 to 5-6 millions RM. This total deficit is already financed at the present time by short term credits of the money market. It therefore reduces in advance the possibilities of utilization of the public market for the armament. The Minister of Finance correctly points out at the defense of the budget: "As a permanent yearly deficit * * * is an impossibility; as
we cannot figure with security with increased tax revenues in amount balancing the deficit and any other previous debits, as on the other hand a balanced budget is the only secure basis for the impending great task of military policy, for all these reasons we have to put in motion a fundamental and conscious budget
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policy which solves the problem of armament financing by organic and planned reduction of other expenditures not only from the point of receipt, but also from the point of expenditure,
e.g., by saving.
How urgent this question is, can be deducted from the following, that a large amount of task has been started by the state and party and which is now in process, all of which are not covered by the budget, but from contributions and credits, which have to be raised by industry in addition to the regular taxes. The existing of various budgets side by side, which serve more or less public tasks, is the greatest impediment for gaining a clear view over the possibilities of financing the armaments. A whole number of ministries and various branches of the party have their own budgets, and for this reason have possibilities of incomes and expenses, though based on the sovereignty of finance of the state, but not subject to the control of the Minister of Finance and therefore also not subject to the control of the cabinet. Just as on the sphere of politics the much too far reaching delegation of legislative powers to individuals brought about various states within the states, exactly in the same way the condition of various branches of state and party, working side by side and against each other, has a devastating effect on the possibility of financing. If on this territory concentration and unified control is not introduced very soon, the solution of the already impossible task of armament financing is endangered.
We have the following tasks:
(1) A deputy is entrusted finding all sources and revenues, which have its origin in contributions to the Federal government, to the state and party, and in profits of public and party enterprises.
(2) Furthermore experts, entrusted by the Fuehrer, have to examine, how these amounts were used and which of these amounts can in the future be withdrawn from their previous purpose.
(3) The same experts have to examine the investments of all public and party organizations, to which extent this property can be used for the purpose of armament financing.
(4) The federal ministry of finances is to be entrusted to examine the possibilities of increased revenues by way of new taxes or increasing of existing taxes.
The up-to-date financing of armaments by' the Reichsbank under existing political conditions was a necessity and the polit-
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ical success proved the correctness of this action. The other possibilities of armament financing have to be started now under any circumstances. For this purpose all absolutely non-essential expenditures for other purposes have not to take place and the total financial strength of Germany, limited as it is, has to be concentrated for the one purpose of armament financing. Whether the problem of financing, as outlined in program, succeeds, remains to be seen, but without such concentration it will fail with absolute certainty.
TRANSLATION OF DOCUMENT II68-PS
Date: Date Unknown
Total Pages: 1
Language of Text: English
Source of Text: Nazi conspiracy and aggression (Office of United States Chief of Counsel for Prosecution of Axis Criminality. Washington, D.C. : U.S. Government Printing Office, 1946.)
Evidence Code: PS-II68
HLSL Item No.: Unknown