Financing of the armament
The following explanations take as their premise the fact that the execution of the armament program is by its speed and extent the mission of German policy, that everything else therefore must be subordinated to this purpose, unless the neglect of other questions would endanger the main goal. Even after 16 March 1935, the difficulty continues to exist, that one cannot attempt the influencing of the German people by propaganda for support of the armament, without endangering internationally our position. The financing of the armament program, already almost impossible, is being made especially difficult by that.
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Further, another prerequisite must be presented. The printing press can only be used for the financing of armament to the extent which the maintenance of money value allows. Each inflation increases the prices of foreign raw materials, and increases the prices within the country; thus it is a snake, which bites its tail. The fact that our armament had to be camouflaged completely until 16 March 1935, and for the biggest part even afterwards, has led to that, that the printing press has already been made use of at the start of the armament program; whereas it would have been natural to put it at the final point of the financing. Of the 3775 millions in the portfolio of the Reichsbank plus 866 millions set aside in bills of exchange=total of 4641 millions, the bills of exchange to finance armament represent 2374 millions (status of 30 April 1935). The Reichsbank has invested most of the German mark sums, available to its administration and belonging to foreigners, in armament bills of exchange. Thus our armament was partly financed with the property of our political opponents. Also used for the financing of the armament program were the 500 millions RM, which came together through the Reich loan placed at the savings banks in Jan 1935. In the regular budget the following amounts were provided for the armed forces: fiscal year 1933/34 RM 750 millions, fiscal year 1934/35 RM 1100 millions, fiscal year 1935/36 RM 2500 millions.
The sum of the deficits of the budgets increase since 1928, according to the estimate 1935/36, up to 5 to 6 billions RM. At present this total deficit is already being financed by short-term credits from the money market. Thus it already burdens in this amount the possibilities of use of the public market for armament. The Reich Minister of Finance is justified in saying in his budget explanations: "Since an annual deficit ... is an impossibility permanently, since one cannot count with certainty on an increased tax income, covering the deficit and other previous debts; since on the other hand only a balanced budget offers a secure basis for our great future task in the armament policy, fundamentally and consciously—a budget policy must be followed, which will solve the problem of financing of armament by organic and planned decrease of other expenses, not only from the point of view of income, but also of expenses, that means saving." '
How urgent this demand is can further be construed from the fact that an unending number of tasks were attacked and are in the process of execution by state and party, all of which cannot be covered by the budget but by subscriptions and credits, which must be raised besides the regular taxes by business. This simul-
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taneous existence of various budgets, which however all serve a more or less public purpose, present the greatest obstacle to the gaining of a clear picture of the financing possibilities of armament. A whole series of ministries and numerous agencies of the party have their own "budget in addition to their share of the Reich budget, and thus accordingly income and expense possibilities, which, although they are based on the financial sovereignty of the state, are not subordinated to the control of the Minister of Finance and thus also not to the control of the cabinet. Exactly as in the field of politics, the too far reaching delegation of legislative authority to individuals in Germany has led to the condition of many states within the state, thus the condition of parallelism and divergence [Nebeneinander und Gegeneinander] of numerous state and party agencies has absolutely a disastrous effect on the financing possibility of armament. If in this field, no concentration and no unified control is introduced finally, one must fear the worst for the solution of the almost impossible task of financing of armament.
Thus the following tasks result:
1. A commissioner must at first determine all sources and incomes, which are derived from Reich, State and Party funds, as well as from profits of public or party enterprises.
2. Then, a commission, appointed by the Fuehrer must investigate how these funds were used up to now, and how much can be taken from these funds in the future from their present purpose, and made available to the financing of armament.
3. The same commission has to examine the assets of all public and official party organizations, how the assets have been invested, and to what extent these assets can be utilized for the financing of armament.
4. The Reichministry of Finance is to be commissioned to investigate the possibilities of an increased tax income by the introduction of new taxes or the increase of existing tax rates. '
The financing of armament previously by the Reich Bank was a necessity under the existing political conditions, and the political success has proved the correctness of this action. However, now other methods of financing of armament must be attempted under all conditions. With that, all not absolutely necessary expenses in other fields must be refrained from, and the entire, actually small, financial power of Germany must be concentrated on this one goal, the financing of armament. Whether the financial problem will succeed with this method of approach is as yet doubtful, but without such concentration it will fail with certainty.
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Memorandum 9.III.1936 on the supply situation in the field of fuels and its effect on the Wehrmacht.
The simultaneous throttling and blocking of foreign sources of liquid fuel has caused an increasingly critical situation of supply of the German market since the beginning of the year 1936.
This situation calls for a description of the serious effects on the preparedness for action of the Wehrmacht and of the extraordinary measures which necessitate a decision in this matter.
The supply of the Wehrmacht is based on the home production, the reserves which can be made available in case of mobilization
The anticipating measures taken during the last 2 years by the Reich Cabinet to increase the home production of fuel, will not bring about an essential improvement of the supply situation during the current year because of the time required for factory construction and the uninterrupted increase of demand, but cannot bring an appreciable relief until the year 1938. The list in enclosure 1 of the requirements in case of mobilization and of the supply of these requirements by production, as well as the graphs added to the other enclosures, show the influence to be expected from the German production on the entire supply.
The expanding German production favors mainly light fuels, especially fuel for airplanes, and in addition, oil for airplane engines. As to the other kinds required by the Wehrmacht in case of war, we cannot expect any improvement for the time being; as to heating oils it may be anticipated that the situation will deteriorate. The developments of new processes (Uhde and Pott), the extent of which will shortly permit an opinion, offers certain possibilities of auxiliary supply which do not appear on the graphs, because the extent of the production possible until 1938 cannot yet be foreseen.
The inadequacy of the supply on the basis of home production is a fact which cannot be eliminated during the next 2-3 years, even with the greatest efforts and in spite of the planning started for additional expansion of production.
II. Reserves.
To assure the requirements of the Wehrmacht it becomes necessary to bridge the supply gaps by reserves. For the first period of mobilization the Wehrmacht relies on the reserves of business, especially of great importing corporations, which also
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in peace time consider stored reserves for about 3 months as indispensable for smooth distribution. The Wehrmacht ought to be enabled to count on the amount of these reserves remaining constant. '
Beyond that the Wehrmacht accumulates its own reserves in large storage houses so that considerable national reserves will be available as buffers in case of supply difficulties.
III. Dependency of the overall supply on imports.
The obstacle to importing encountered to a large extent during the last weeks, and which have been brought about by an accumulation of economic-political events in foreign trade, endanger not only the maintenance of industrial reserves but also the continuation of the storage policy of the Wehrmacht. They shake the very foundations of the motorization program of industry and consequently also of Wehrmacht mobilization of mechanized vehicles to the extent planned for in case of war.
In particular large gaps have been opened:
1. due to the Russian prohibition of exporting petroleum, by which the benzol-association supplying about 20% of the German market got into considerable difficulties.
2. due to suddenly considerably increased demands of the Rumanians, who offer fuel only in exchange for foreign bills proper [Bardevisen] and/or at greatly increased prices in marks. The contribution of Rumanian imports to the supply of German requirements was 40% during the last year. The firm Olex which contributes 11% to the German market has already been forced, due to the obstruction of Rumanian deliveries, to decrease its business considerably and will face a close-down of its market supply if relief is not procured before June 1936. Due to this reduction of imports similar stoppages are to be expected by the other great organizations of distribution during the same period.
IV. Means to secure the supply.
In considering how to meet the situation the following devices are unbearable for the Wehrmacht:
1. Reduction of mechanized traffic because this would, in addition to precarious economic and psychological effects, bring about a throttling of German motorization, which in view of the requirements of the Wehrmacht in case of war, would be a shock to mobility and supply of replacements.
2. Just as undesirable is to be considered the diminishing of reserves. The industrial reserves constitute the basis for mobili-
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zation, which has to rely on firm figures which remain about constant. As a decrease of reserves has already started, the further development in this direction is to be counteracted immediately. Aid from the reserves of the Wehrmacht cannot be granted because these modest quantities being ultimate reserves cannot be diminished under any circumstances.
Consequently, only the following means are to be considered:
1. Conceding to the Rumanian demands of paying imports in marks on a considerably raised price-basis.
2. Additional payments in foreign bills proper [Bardevisen] of imports from Anglo-Saxon countries.
3. Investigation to what extent an improvement can be achieved by accelerating or expanding the facilities for .German production.
The first course has been followed by the authorization to negotiate new contracts on the basis of the Rumanian demands. Adequate and punctual delivery to the market, however, is not yet assured hereby.
Re. 2. Foreign bills [Devisen] for the minimum of the indispensable import requirements can probably be obtained only by reduction of import of other necessities. The narrow limits of the presently assured raw materials for armament do not allow for a decrease of such imports which are indispensable for the Wehrmacht. In particular we cannot do without the necessary quantities of metals required by the Wehrmacht for current pro-curemenl s.
Re. 3. As a result of investigations made, essential changes cannot be expected at a date within sight.
V. Uniform management of the 'petroleum industry.
During the last few months the Wehrmacht has repeatedly emphasized 1 he unavoidable call for a uniform and planned steering of the entire German petroleum industry. The present dangerous situation of the German fuel industry puts this necessity again into the spotlight. The lack of stern guidance in the present moment must lead to severest damages to the public and the defense of the country. The duty of a management according to plans of the petroleum industry must be in the first line to avert the permanent threat to mechanized traffic and the preparedness of the Wehrmacht for action lying in the extensive dependency on forces outside of the German sphere of control.
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Enclosure 1 to "memorandum on the supply situation in the field of fuels and its effect on the Wehrmacht" of 9 March 36.
Mob. requirements Supply-of requirements by production
1936 t/Jahr 1938 t/Jahr 1936 % 1938 %
Light fuels for car engines 900 000 1 530 000 43 60.5
Light fuels for airplane engines 460 000 600 000 39 61.5
(illegible), Fuel oil 650 000 1 280 000 11.6 22
Heating oil 800 000 1 200 000 30.6 22
Lubricating oil for car engines 80 000 150 000 22.5 23
Lubricating oil for airplane engines 35 000 55 000 - 22
Ila Needed raw materials 4/28/1936 with consideration of the program for the supply of ammunition, amounting to 200 million marks [Mil. RM.] (for the months of April 1936 to March 1937=12 months)
Supply needed, submitted to R.Wi.Min. (letter of 1/1336.)
Copper 5400 t/month (without plate VIII)
lead 2300 t/month (without plate VIII)
zinc 3100 t/month (without plate VIII)
Supply needed, considering the 200 Mill-plan.
Copper 5850 t/month (without plate VIII)
lead 3350 t/month (without plate VIII)
zinc 4020 t/month (without plate VIII)
Therefore the additional need amounts to
Copper 450 t/month
lead 1050 t/month
zinc 920 t/month
Raw materials needed by parts of the Armed Forces (for the months of April 1936 to March 1937)
copper 4830 670 175 175 5850
lead 2750 280 300 20 3350
zinc 2420 160 260 1180 4020
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SECRET
Raw materials needed by the armed forces during the years 1935 and 1936
Raw materials need 1936 t/month 1936
Iron and steel
Iron ore Fe 130,000 80,000
Manganese ore Mn 7,000 4,000
Chromium 0,5 C 220 88
0,5 C 160 86
Wolfram 80 15
Molybdenum 40 8
Vanadium 3 1
Tantalum 2 0.5
Silicon 400 250
Non-iron metals
Copper 7,500i) 4,670
Lead 6,5002) 3,520
Nickel 275 174
Tin 150 89
Zinc 3,1003) 1,830
Aluminum 2,720 1,900
Antimone 55 25
Cadmium 10 0.62
Mercury 20 12
Cobalt 10 3
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Raw materials need 1936 t/month 1935
Leather goods (economy) skins and pelts 1 300 1 400
natural tanning matter 800 860
Wood special foreign timber Grain, fodder and further 170 150
agricultural products
linseed 1 500 1 900
Coal and Salt
oil coke and Pitch coke—of these 1500
t/month to produce the aluminum needed by the armed forces. 1 700 1 300
Various goods diamonds, amounting to a value of RM. 15 000- ai 000RM
/month
cane 200 160
mica 18 15
magnesite 1 200 1 000
Rubber and asbestos
rubber 280 150
asbestos [spinasbest] Fat for industrial purposes 100 70
glycerine 165 120
Petroleum oils
gas for plane engines 7 000 4 000
light fuel f. motor vehicles 3 000 1 500
lubrication oil f. plane engines 700 200
lubrication oil f. motor vehicles 500 150
gas-oil, (diesel) 7 500 1 200
heating oil | 15 000 6 000
Note: 1. for cables 2100 t/months; starting on 1 Apr. 36 possibly only 6000 t/month, including 2100 t/ for cables;
Note: 2. for cables 4200 t/months; starting 1 Apr. 36 7800 t/months which means 5500 t/month for cables;
Note: 3. from this amount: sheet-zinc in the limits of the quota of the association of zinc-rolling-mills 340 t/month; starting 1 Apr. 36 possibly only 2700 t/month including sheet-zinc.
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Situation re fuel
Fuel for motorized vehicles Fuel for airplanes Gas-Oil Diesel Heating fuel Oil for motor vehicles Oil for airplane engines
Peace 36 Case of mobil. 38 Peace 36 Case of mobil. 38 Peace 36 Case of mobil. 38 Peace 36 Case of mobil. 38 Peace 36 Case of mobil. 38 Peace 36 Case of mobil. 38
Total need of armed forces and economy t/year 1,000,000 1,650,000 80,000 600,000 800,000 1,300,000 500,000 1,200,000 75,000 150,000 5,000 55,000
Production in entire Reich-ter-ritory t/year 900,000 80,000 280,000 270,000 20,000
Missing quantity t/year 1,100,000 750,000 520,000 520,000 1,020,000 230,000 930,000 55,000 130,000 5,000 55,000
New planning 700,000 300,000 200,000 9 20,000 15,000
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Copy
Berlin, 15 May 1936
Prime minister General Goering
Raw material and Foreign exchange staff
Top Secret
To the Reichminister of war Generaldfeldmarschall von Blomberg Enclosed, a record of the conference of the council of ministers of 12 May 1936 in the afternoon is forwarded.
By order
/s/ Loeb
Lt. Col. in the General Staff
Top Secret
Record of the council of ministers on 12 May 1936 1700 hours Chairman: Prime minister General Goering.
Reichminister of War Generalfeldmarschall von Blomberg. Reichsbank President and acting Reich and Prussian minister for Economy Dr. Schacht
Reichminister of Finance Graf Schwerin von Krosigk Prussian minister of Finance Prof. Dr. Popitz as the recording secretary Lt. Col. in the General Staff Loeb
Minister Schacht: shows the development up to now when two years ago, the decision for rearmament was made, it was decided to carry out the financing mainly outside the means of the Reich-ministry of Finance. This meant the commitment of the last reserve from the very beginning. A decision which did not seem without hazards. The memorandum of 3 May 1936 says the same thing.
In the course of the last two years, the program was increased more and more in its extent and speed. Thus the requirements to the Reichsbank were increased steadily.
It would be necessary to create, as basis for financing, a steady, prosperous economy, and therefore renounce the execution of other, partially irrational ideas and aims of the party. The psychological prerequisite was not disturbed by the party as such, but by many individual groups of the party, again and again; personal attacks against Dr. Schacht and thus against the economy followed. Dr. Schacht has emphasized again and again, that one must follow a cultural and legal policy, which will leave economy alone. However one must not describe it as greedy and selfish from the beginning.
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Also money theories of the most variable kind have been published repeatedly, thus causing anxiety for the economy; to counteract this was practically impossible, as the propaganda machine of the party did not permit this.
Despite all this, Dr. Schacht continued to work, because he stands with unswerving loyalty to the Fuehrer, because he fully recognizes the basic idea of national socialism and because at the end, the disturbances, compared to the great task, can be considered irrelevant. Previously, approximately 11 billion marks besides the budget have been raised for rearmament and reemployment without shaking the rates of exchange and currency; the rate of interest could be lowered.
The Fuehrer has repeatedly emphasized in personal talks and cabinet meetings, that the speed of rearmament must be kept up until the spring of 1936. This was agreed to and carried out.
Prime Minister Goering: has never heard about this time limitation.
Minister Schacht: The main question for the further execution of the program is, how much money can be gotten out of business. Some 2 billion can be consolidated annually by long term loans, 8 to 9 billion cannot be asked for; the possibility of making available depends on the development of the money market. Full concentration of the money market through the Reichsbank is necessary.
If the Reichsbank should have to issue more notes than could be born by the currency, one must reach back to other factors.
Dr. Schacht will never be part to an inflation; the Fuehrer also has decided in this sense. The danger of such a development is imminent. If a road is to be taken, which contains this danger, Dr. Schacht would like to drop out on time, so that he does not disturb the new course.
Dr. Schacht considers it impossible, that prices can be fixed by the state, if the same money policy is continued.
Prime Minister Goering: What is the basis of currency with the Reichsbank?
Minister Schacht: This question has nothing to do with the gold standard. It is a question of something imponderable, to recognize the time of which must be left up to fine sensitivity. If ' by a surplus of money, the danger of devaluation of the mark exists, the state can and must take action from the financial side by taxes, etc. Considering the material factor, it must be determined, that we are dependent for numerous goods oh foreign countries. Even small percentages as a whole have considerable effect. In many cases, the necessity for import is caused by trade
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political relations; therefore the raw-material situation may not only be viewed and attacked from the production within Germany. The foreign relations must be decreased all of a sudden. For instance the negotiations with Standard and Shell were carried out on this basis.
Prime Minister Goering: When substitutes [ersatzstoffe] are sufficient in quantity, we shall no longer need the import, which presents us such difficulties.
Minister Schacht: In a series of cases, to be able to carry out the import, work from within Germany was utilized for compensation, for instance tankers for oil import corporations.
However it is especially required that nothing be said about intentions and measures of this field in public, so as not to aggravate the importers.
Prime Minister Goering: If the Fuehrer has expressed himself in this direction, he did it to counteract the increasing pessimism in the country in respect to this field.
Minister Schacht: In any case, all anxiety must be prevented. Foreign exporters have already shown less readiness to deliver against certificate of foreign exchange, since they apparently have no confidence in the cashing of these certificates.
Prime Minister Goering: Our raw material situation is generally known to the world. The article published in the papers on 28 April 1936 did not contain anything secret. Actually the confidence abroad should have been increased by this publication, because generally the opinion was held abroad that Dr. Schacht was protected by the Prime Minister against the party.
Minister Schacht: The situation at present is thus:
Some 64 million marks are already claimed by reimbursement.
We must buy especially crude rubber and textiles; we have practically no crude rubber. Cellulose wool is not an adequate substitute, especially not for export goods.
The necessity for the closing down of manufacturing plants will soon result from this accordingly.
It must be decided whether the available gold should be all . spent at the present speed or whether it should already be slowed down. .
Swedish ores are still available for about 3 months. The export to Sweden becomes more difficult, and thus the import possibilities decrease.
Prime Minister Goering: is of the opinion that our export to Sweden continues, so that one can further count on import.
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Minister Schacht: The raw material supply of Germany amounted at the beginning of the war to a value of about 7 to 8 billions; now it is less than 1 billion.
Prime Minister Goering: has heard repeatedly, that export business was refused by the Reichminister for Economy. In the future, the departments will be caused by him to re-examine such occurrences; perhaps then it will work differently than until now.
Minister Schacht: Increase of our export appears improbable in the near future. Further obligations arise through the Foreign Office, the Reichsbank, Post Office, Party and other agencies; soon the consular service cannot be paid any more.
The time will come, when we will have no longer any reserves of either raw materials or foreign exchange at our disposal.
Prime Minister Goering: If we have war to-morrow, we must help ourselves by substitutes. Then money will not play any role at all. If that is the case, then we must be ready to create the prerequisites for that in peace. The account just described could have also been presented, in his opinion, in the meeting this morning.
Minister Schacht: Publication is recommended for only the smallest circle.
Prime Minister Goering: It is necessary to inform the people required for the execution.
Minister Schacht: In his opinion only the ministers, not the state secretaries. In addition, each department must be called in individually. -Prime Minister Goering: The psychological prerequisites for the correct approach to the work must be created everywhere. The actual work is done by the state-secretaries and the experts. In the future one must go much more into detail; confidence in the persons employed in this is absolute necessity.
Prime Minister Goering: summarizes the explanation by Minister Schacht: In short, demands on the Reichsbank can no longer be covered; only 64 million marks are still available.
Minister Schacht: declares that besides these 64 million Reichsmarks in the private banks, there are another 72 million gold with the Reichsbank.
Prime Minister Goering: continues with the summary: The shortage of raw material is known in its extent. A considerable increase is no longer possible, in the opinion of Minister Schacht.
Minister Schacht: The production of raw materials within Germany finds its limitation there, when an increase of prices of export goods is created by it.
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Prime Minister Goering: One can separate requirements within Germany and export. Even the smallest details are important. The following appears necessary.
1. Increase of export despite all difficulties.
2. The raw material coverage within Germany.
3. The possibly necessary resettlement of workers and food fundamentals for the execution of all measures.
These problems all affect each other, so that the participation of all departments is necessary.
Appropriate example: Position of the farmer, who does not utilize the available possibility of intensifying of fertilizing, because the capital lost is not bearable for him in case of bad harvests. In such a case, the risk lying with the weather must be partially taken from the farmer by a special organization.
The Reichministry of Finance must also be consulted greatly in reference to the regular budget. Re-awakening of thriftiness in all fields belongs to this program.
Minister Popitz: The final conclusions made by Dr. Schacht are clear and convincing, under the condition that the bases for these conclusions are correct. That must be examined. It must be determined again, whether the principles, according to which the present raw material and foreign currency policy has been carried out with such a big success, are unalterable and correct.
The time when perhaps an inflation is feared is unclear; actually it is already here, even if it has a bearable extent.
An increase of export cannot be expected with the present system. However it is to be examined, whether there is not a better system. The basis of the present economic policy is deflationary. However it appears impossible to integrate the deflation into an actually existing inflation. It must be discussed, whether forced economy of export is to be continued.
It is to be examined further, whether the money for rearmament can be drawn out from the remaining economy. In no case may the condition arise, that the Reichminister for Finance and the Reichminister for Economy push the responsibility for the providing of funds to each other.
The difference between 2 billion Reichsmarks, which the Reichsbank believes to be able to raise on a long term basis, and the 8 to 9 billion Reichsmarks required for armament, cannot be covered by taxes. Therefore the following suggestion:
1. The raw material question, which can be solved comparatively simply, must be attended to at once by a special committee.
2. Illuminate critically the export question, so to say, in a scientific manner.
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Minister von Krosigk: Economy of foreign exchange in detail is necessary. In that, small things also play a part. Equal saving is necessary in spending money within Germany. In contrast to Minister Popitz, he is of the opinion that expenses for armament must be taken over more and more by the regular budget. Expenses above this budget are to be covered
a. by long term consolidation of annually some 2 billion marks.
b. by short term bills of exchange and similarly.
The financing has succeeded up to now by these two means.
However the danger exists, the short-term bills of exchange can no longer be negotiated, so that flooding of the Reichsbank with MEFO bills would have an increased printing of banknotes as consequence.
Minister Popitz: In this case, printing of bank notes is only necessary if the money is absolutely necessary for payment of wages among other unavoidable things.
Minister von Krosigk: The decisive question for that is, whether inflation would actually happen by printing of banknotes to this extent. He does not believe so. The increase of prices observed so far was not caused by monetary reasons, but can be derived from increase of prices for raw materials and agricultural products. Thus one cannot speak of an inflation.
Prime Minister Goering: does not believe that an inflation would happen from the monetary angle.
Measures which in a state with a parliamentary government would probably bring about inflation, do not have to have the same results in a totalitarian state.
Important for this is the application of an appropriate propaganda, so that the co-operation of the propaganda ministry, promised by the Fuehrer, is of great importance.
Minister Schacht: gives a summary of the holdings of bills of exchange in the Reichsbank at present:
4.353.000. 000.—RM bills of exchange
3.731.000. 000.—RM of which are in MEFO bills of exchange
2,200,000.—MEFO bills of exchange are deposited in clearing accounts.
More than 5 billions in bills of exchange are deposited thus, that they can be presented immediately in case of disturbances of the money market, caused by any measure. Therefore any disturbance must be prevented under all conditions.
Prime Minister Goering: agrees to be the "shield" for the measure of financial nature, so that no disturbances would happen.
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The regular budget is to take over the current up-keep of the armed forces, but not the costs of the reconstruction.
Minister Popitz: It is to be examined whether the regular budget cannot be relieved from interests and amortization quotas of advance drawings. Even the observing of the international bank law cannot prevent the using of these recognized necessary measures in this direction.
If the economy is started by increased export, naturally the circulation of money will increase and with that the possibility of further financing.
If the money, which had to be put into circulation, is only used for payment of wages, no inflation can take place.
Prime Minister Goering: orders:
1. Determination as rapidly as possible of the basis of payment.
2. Beginning of the execution work in the realm of raw material production within Germany.
3. Examination of the question of the export system.
In the next conference, contemplated for Friday afternoon, the examination of the export system is to take place.
First under his chairmanship (Goering's) the ministers Dr. Schacht, Graf Schwerin von Krosigk and Prof. Dr. Popitz will consult each other. Then, immediately thereafter, the suggestions voiced there are to be discussed by a board of experts. The following were named for this board:
By Minister Schacht: .
Reichsbank Director Brinkman Reichsbank Director Blessing Ministerialdirektor Dr. Sarnow By Minister von Blomberg:
Dr. Trendelenburg By Minister Popitz: .
Dr.' Springorum Dr. Sogemeier Further
Reg. Bürgermeister Kroogmann Prof. Wayemann
and others, who will be appointed by the Prime Minister.
Prime Minister Goering: states that he can expect and demand discipline from the party, so that the protection of the individual auditor, called, is guaranteed.
Close of the conference; 1910.
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Summary of the raw material situation 2 May 1936
Iron ores Aluminum Crude Rubber Cellulose wool Notes
Total requirement for the armed forces and the industry (estimated) peace 1936 case of mobil. 1938 peace 1936 case of mobil. 1938 peace 1936 case of mobil. 1938 peace 1936 case of mobil. 1938
9.5 million 11 million 105,000 9 160,000 75,000 85,000 12,000- 70,000 depending on import of natural fiber
Production entire Reich industry 1.8 million 96,000 1000 12,000- -70,000
Deficit 7.7 million 9.2 million 9,000 64,000 74,000 84,000 any increase in production would be taken up by the market
Excess -- — -- -- --Tentative plans for expansion of own production 1.2 million proposal Keppler 2400 first increase until end of 1936 70,000 t
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Berlin, 30 May 1936
Behrenstrasse 68-70
Telephone A 2 0048
Prime Minister General Goering Raw Material and Foreign Exchange Staff Journal No. * * * /36
[initial] BG th 2/6
[initial]
Rubber Stamp Top Secret
To the Reichminister of War Generalfeldmarschall von Blomberg Berlin
Enclosed, a report of the conference of the council of ministers of 27 May 1936, is forwarded.
By Order
Loeb
Lt. Col. in the General Staff
1 Inclosure:
Top Secret
Copy of meeting of Minister on 27 May 36, at 1130 o'clock. Chairman: Ministerpraesident Generaloberst Goering Reichskriegsminister Generalfeldmarschall von Blomberg Reischsbankpraesident und kommissarischer Reichs- und Preus-sischer Wirtschaftsminister Dr. Schacht Reichsfinanzminister Graf Schwerin von Krosigk Preussischer Finanzminister Prof. Dr. Popitz Recording Secretary: Lt. Col in the General Staff Loeb
Prime Minister Goering: The two sessions of the board of experts held so far have brought forth interesting discussions. Naturally, opinions frequently disagree. The experts are invited to state their concepts in writing.
Today, discussion concerning the question of substitute-material. What objections are made to the production of war-raw materials within the Reich?
Minister Schacht: Principly there is nothing to object; a solution of the raw material problem by self-producing is absolutely necessary and agreed with, theoretically.
Difficulties are encountered with regard to :
1. serious monetary strain because of investments. Providing money by taxing capital is impossible. Circulation of money can not be increased beyond a certain amount. Previous measures
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executed correctly and without danger to monetary value. Further increase seems precarious; matter of confidence. This point of view alone, however, not determining; possible that funds could be drawn from industrial profits.
2. special scruples, regarding the cases where prices for substitue [Ersatz] material are far beyond world-market prices, and therefore the products cannot compete, (for example: tires made from Buna). Adjustment would further increase the excise tax on exports. Inflation cannot be chosen, as this would immediately upset the state's budget.
It must be attempted to produce those raw materials within Germany which are economically favorable; for other raw materials ready reserves for the case of mobilization [Mobfall]. Especially clear is the situation of flax; the complete covering of the requirement is possible; however not with hemp.
Certain raw materials for tear must be stocked.
These viewpoints are recognized and followed by the Reich ministry for Economy. The execution i^. mainly dependent on the question of funds. Therefore, necessity to save in all fields, to make saved funds available for investment.
Prime Minister Goering: All measures are to be considered from the standpoint of an assured waging of war.
Ready reserves must ordinarily be accumulated already in peace in certain amounts.
It is to be attempted to use cheap imported raw materials for export purposes, expensive raw materials from within Germany. In cases where the price differences are small, probably creation of a settlement is preferred.
Minister Schacht: This settlement can be carried out either by compulsory mixing or by a price settlement by the state of the expensive raw materials. „ ... =
In any case, price supervision must be introduced again.
Minister Popitz: Placing of the burden of increased prices on the consumer is possible when the difference is only small.
The other possible method is sales monopoly or wholesale monopoly of certain goods.
Minister Schacht: It is recommendable not to influence individual, large fields, for instance textiles, by prices; but to concentrate funds for the monetary subsidation of other fields of raw materials.
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Minister von Krosigk: The question cannot generally be judged theoretically, but only practically with the use of individual examples.
Prime Minister Goering: At first, the specially urgent petroleum question is to' be treated.
General agreement to that. -Minister von Krosigk: Present experience is that the beginning of new methods of sale or price guarantee by the Reich results thus, that soon new and cheaper production methods are found. This recommends a not too sudden expansion of production.
Prime Minister Goering: Waiting for new methods is no longer appropriate. Plan of the Reich forestry office for the utilization of wood is ready. Import of timber must be cut down in any case; strongest demands on German forests to be preferred at present and can be advocated.
It is to be decided, whether at the beginning, a risk bonus over 6% profit is to be granted.
Minister Schacht: turns against higher profits than 6%. Guarantee of interest-bearing is to be preferred, and must be sufficient.
Minister von Krosigk: discusses the advantages of the amortization program.
Minister von Popitz: In contracts many times rapid cancellation is contemplated.
Minister Schacht: At the beginning more consideration is recommended, later stronger concentration, with profit sharing by the Reich.
Minister Popitz: requests that the cancellation periods be reexamined by a special committee.
Prime Minister Goering: The summary is to be prepared for the next committee meeting about:
1. Inventory of German Raw Material possibilities.
2. Form of the present decrease.
3. Mobilization requirement.
4. How shall raw materials be handled? Especially clarifications whether production within Germany is to start already in peace or whether the stocking or reserves is more important.
Subject of petroleum also can be considered concluded, therefore is to be handled immediately.
In the next council of Ministers, discussion of the agricultural question, then Minister Darré and State secretary Backe present.
Minister von Blomberg: In the fuel industry it is to be decided whether conversion to solid fuels should already be carried out in peace, or whether, as in France, it is to be prepared for the mobilization case. If possible and recommendable, increased use of tar coke [Schwelkok], no diesel oil for railroads.
Prime Minister Goering: Economy also absolutely necessary and to be insisted on in other fields of raw materials.
Minister von Blomberg: Examine as an example substitution of heavy metal by light metal (for instance cans of aluminum) : general increase of the use of glass, especially for aerial bombs, maybe also for grenades; use of plastics for wide fields, even as far as transmissions. Certain hopes can be set on China. Therefore prevent political estrangement. Careful advances in the approaching of Japan necessary, at present the recognition of Manchukuo would be disastrous for Mr. Klein's current plans in China.
Prime Minister Goering: Common front of China with Japan against Soviet Russia can probably be produced.
[in green pencil] I did not express myself so specifically BL/ .
Minister von Blomberg: Japan is doubtful as a factor of military power.
Prime Minister Goering: Furthermore, the danger of Japan's turnabout always exists.
Results of the China affair cannot be viewed clearly because of the unclear inner political situation.
Minister Schacht: always has supported the attempts of Mr. Klein, because he especially hopes for food, raw materials from China.
Minister von Blomberg: recommends further collaboration with the Kaiser Wilhelm Gesellschaft, with whom the Reichministry of War had very good experiences. At its head is the scientific authority; other imminent changes for solution proposed by the party unbearable.
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Minister Popitz: Nomination of Geheimrat Bosch is possible for this post, when his resignation from the IG is possible.
Minister Schacht: General complaints about the deterioration of German science ; this is also harmful for export, since the missing replacement limits the execution of German engineering missions abroad and thus German orders from abroad.
Minister Popitz: Seconds these complaints. Actions by the party which remove the most important people is unbearable. Explanation by examples.
In the liberal arts, the consequences are not being' felt immediately, all the more so in the natural sciences. If service etc., should be limited to the first two semesters of study, then full time and freedom for scientific activity.
Prime Minister Goering: In Prussia then, difficulties are partially removed. Influence of the liaison staff not always fortunate. Role of Professor Wagner.
Puts to discussion a taking over of a Spanish tin source, which is being offered from the Swedish side.
Minister Schacht: Basically in agreement, particularly when in a partnership enterprise German achievements will result by deliveries of machines.
Prime Minister Goering: asks Minister Schacht to conduct negotiations in this spirit during his visit in Belgrade relative to Jugoslavia in the near future.
Minister Schacht: The copper mining in Jugoslavia must take place by excluding the French, who sell copper for foreign exchange only.
Prime Minister Goering: During the next ministerial session, the investigation of the problems in the agricultural sector has to be conducted in such a way that direct statements of Minister Schacht/Minister Darré should be made about the single problematic issues.
End of the session 13 o'clock.
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Fuel-supply situation (1st draft of a plan for solution) 27 May 1936
Light vehicle fuel Airplane fuel Gas oil Heating oil
Peace 36 case of mobil. 38 Peace 36 case of mobil. 38 Peace 36 case of mobil. 38 Peace 36 case of mobil. 38
Total requirement Armed
Forces and Industry tons/
years 2,000,000 1,650,000 80,000 600,000 800,000 1,300,000 500,000 1,200,000
Production in the entire
Reich industry tons/years 1,300,000 220,000 270,000
Deficit from requirements
of mobilization tons/years 950,000 1,080,000 930,000
To be covered by conversion (substitute fuel) 200,000
Necessary new plans 950,000 880,000 930,000
Proposal for a solution 3 Fischer plants of 320,000 tons 4 IG-Pott plants of 3 Fische r whole-Pott
each by the end of 1937l 220,000 tons/year each or distilling plants of
by end of 1937 310,000 tons/year each
Costs 380 million RM 400 million RM 370 million RM
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Copy of draft Top Secret
31 August 1936
The War Minister and Supreme Commander of the Armed Forces No. 2001/36 Top Secret WH
4 copies—
1st copy—draft
2nd copy—Reich Air Ministry
3rd copy—Reich Ministry for Finances
4th copy—President of the Reichsbank
1. To the Reich Minister of Air and the Supreme Commander
of the Air Forces General Goering
Berlin W 8
Dear General Goering!
The negotiations conducted until now in the commission for foreign exchange and raw materials which is under your leadership, have already shown the necessity of dealing also with the financing of the armed forces there also. I believe the time has now arrived that the commission should take up the treatment of this problem.
As a preparation of such a discussion I suggest the following: I. Overstepping of the 1936 budget.
It has been proven, particularly from the decree issued 7 March 1936, that the sum of about 10 billions of RM which was provided for the Wehrmacht for 1936 is not sufficient.
1. Additional expenses in the army are needed in first place for
a. the remilitarizing of the Rhineland
b. the fortification of the Rhineland
c. the setting up of all the 36 divisions already by 1 Oct 1936
d. the speeding-up of motorization, particularly the establishment of 4 fully motorized Infantry divisions.
e. the necessity of markedly increasing the reserve ammunition because of the increased number of divisions.
f. industrial preparations in a great variety of fields
2. In the navy the required faster increase of personnel, the building of a 4th entry to Wilhelmshaven and the refortification of Helgoland cause additional expenses.
3. Air Force
a. According to an order of the Fuehrer, the setting up of all air force units has to be completed on 1 April 1937. Therefore considerable expenditures have to be made in 1936 which at the time when the budget for 1936 was made, were planned for later years only. Special additional expenses are caused by the creation of sufficient ground force personnel.
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b. In the air force the first introduction of new types has to take place in 1937. Therefore the required industrial preparations have to begin in 1936.
It follows that an additional sum of at least 3.6 billions of RM will be needed by the Wehrmacht for 1936.
Of this about 1 billion RM is allotted to Army and Navy together. In the case of the Army and Navy, the execution of the orders and, in consequence, the dead-lines for the payments of the deliveries lagged quite considerably behind the placing of the orders. Therefore it can be assumed that these 1 billion RM will not be needed in cash before 1 Apr 1937. However, the orders for these 1 billion RM have been placed and in the fiscal year 1937 these 1 billion RM will also be needed in cash.
In the air force the additional expenditures amount to 2600 millions RM. Here the execution of the orders from the budget funds of 1936 as well as of the orders for the additional requirements is in full progress. The 2600 millions RM for the air force have to be made available in the fiscal year 1936.
As yet it cannot be ultimately settled whether the introduction of the two years' service will lead to further additional expenses.
II. Requirements for 1937
The preparatory works for the budget of 1937 have not been concluded. At present the requirements for 1937 are estimated to be for:
1. the army 6.5 billions RM
2. the navy 1.2 billions RM
3. the air force 6.0 billions RM
Total
13.7 billions RM
Besides these 13.7 billions RM about 500 millions RM will be needed for the Reich defense requirements of the civilian departments.
III. Permanent requirements
According to a recently conducted survey, the component of the armed forces will have the following permanent requirement after the rearming is completed:
1. Army 3.6 billions RM
2. Navy 0.73 billions RM
3. Air Force 2.507 billions RM
Total
6.837 billions RM
At present it is hardly possible to make an accurate estimate of the permanent requirements. In the case of the Army it is very
693256—46—57
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likely that the amount for the permanent requirement will be considerably raised.
Later I will submit further material, particularly a statement about the requirements for the years until the completion of the rearming, as soon as the necessary inquiries are concluded.
I submitted copies of this letter to the Reich Minister for Finance, and to the President of the Reichsbank.
Heil Hitler!
Yours, [unsigned |
2. To the Reich Minister for Finances Berlin W 8
3. To the President of the Reichsbank Dr. Schacht Berlin SW 111
Copy (of 1) for your kind information
4. WV
Remark:
Chief WA Chief WH
signed P
1. Major v. Wolff has given the letter addressed to General Goering to Lt. Col. Bodenschatz on 31 Aug.
2. I have personally handed the letters 2 and 3 to the President of the Reichsbank, Dr. Schacht, and to the Reich Minister of Finance, Count Schwerin von Krosigk, on Aug 31.
signed P
Copy authenticated Hollender Ministerial Councillor 30 Sept 36.
Note
[initialed] B [Blomberg?] [initialed] K 2/9 [Keitel]
President Schacht called me to him today at 1300 and requested me to forward the following to the Minister of War:
Schacht returned from the Fuehrer with the greatest anxiety, since he could not agree to the economic program planned by the Fuehrer.
The Fuehrer wants to speak at the party convention [Parteitag] about economic policy, and wants to emphasize there that we now want to get free with all our energy from foreign countries by production in Germany.
Schacht requests urgently that the Reichminister of War warn the Fuehrer from this step. '
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If the Fuehrer emphasizes in front of the masses in Nürnberg, he will receive a great amount of applause from the audience, but with it he will bring failure to the entire commercial policy. There is only one thing in our needy position: the promotion of export. Every threat against foreign countries however, will show contrary results.
We have reverses in the field of fuels until the middle of next year, there will not be large amounts in the field of rubber. The Renn-process in the field of ores is having great difficulties.
If we now shout out our decision abroad to make ourselves economically independent, then we cut our own throats, because we can no longer survive the necessary transitory period.
Also, it must always be pointed out that German materials are at present much too expensive to be used for export, and export alone makes further armament possible.
If the food-basis of the people is not to be endangered, the Fuehrer must refrain from his plan.
President Schacht concluded that he again requests urgently to listen to this warning, and that he forwards it to the minister of war, as he will not participate in to-morrow's conference.
Thomas 2/9 [in blue pencil]
|Translator's note: the following is written in pencil in the
original:]
THOMAS in his memorandum:
The missing million in cash must be saved, since there is no more possibility to obtain it by increase of export.
English armament-ore! Our own procurement is a must.
iYear Plan without antagonizing foreign countries.
Card file?
Speed of armament ? Yes—
Extent of armament not sufficient. Backing by foreign exchange and raw' materials is absolutely necessary.
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Top Secret [rubber stamp]
1st copy 5 Sept 1936
Wi II
File No 66 b 9910 II z-a
Minutes on a Conference in the Reichministry for Economy on
3 Sept 1936
Reichministry for Economy and the competent experts of ''the Reichministry for Economy and the supervisory agencies
Chairman: Ministerialdirektor Sarnow
Present:
Ministerialdirektor Dr. Landwehr Ministerialdirigent Dr. Spitta Oberregierungsrat Dr. Michals
Reichministry of War, W.A.
Major Czimatis Commander Griebel Regierungsbaurat Wissman Intendanturrat Nierhoff Reichministry of War, V.A.
Lt.Col. Ploch "1 Reichministry for Air and
Col. Witting I Supreme Commander of the
Dipl.ing. Bresser Gen.Direktor Schirner, combined alum, plants Dr. Westrick, combined alum, plants Dir. Byer, Alum. Sales Corp.
Air Force
Only during the conference on aluminum
Subject:
I. Possibilities of allotment of foreign exchange to the armed forces and economy.
II. Aluminum supply.
I. After extensive study of the connected disadvantages, the Reichministry for economy has dropped the principle that one could desist from exporting all products with more than 40% foreign raw materials. Therefore an additional need for foreign exchange results for the upkeep of the export of 2 million marks with the supervisory board for base metals. Furthermore the allotment of cash foreign exchange to the supervisory board for bast fibres must be increased from 10 million marks to 17 million marks.
Intendanturrat Nierhoff made reports on the need of the Armed Forces of textiles and leather in the year 1937, which has increased considerably from the requirements of the year 1936 (see inclosure). To fulfill these Armed Forces requirements, cash foreign exchange is necessary in the following amounts:
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Group of goods
Additional Armed Forces requirements of cash foreign exchange in millions of marks
1. Wool
24
shredded wool [Reisswolle] mohair wool
3
0.75
2. silk
0.55
3. bast fibres
0.25
4. cotton
4
5. leather
22.5
Total
55.00
Accordingly, the following overall picture results:
Amount of cash foreign exchange necessary previously for the upkeep of economy and for the covering of requirements of the Armed Forces. 11+6.8 million marks
Amount of cash foreign necessary for the upkeep of export. 21+8 million marks
Additional requirement of cash foreign exchange necessary for the Armed Forces. 11+6.8 million marks
Available amount of cash foreign exchange 14-0 million marks.
II. Aluminum
Report on the requirements of aluminum for the Armed Forces are contained in the summary given to the Reichministry for Economy on 29 Aug.
Major Czimatis explained that the Reichministry of War did not renounce the limitations of the allotments of aluminum to the general industry, as it was said in the letter of the Reichministry for Economy of 21 Aug 1936, but that the demands for full delivery to the Armed forces for the programatic rearmament, especially for the Air Force, will be kept up.
The Reichministry for Economy considers the full delivery to industry urgently necessary also in the interest of the Armed Forces, since by a "strangulation" installations important to the Armed Forces (power issues) would also be affected immediately, and one could therefore count on an increased requirement of copper and thus of foreign exchange.
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The administration of aluminum by the supervisory board for base metals is being absolutely refused by the Reichministry for Economy.
Generaldirektor Schirner reports that the negotiations for the import of 1000 tons of aluminum from Switzerland against delivery of German clay and pitch-coke are favorable. Also, the payment of processing wages is to be done with clay. However, the import of these 1000 tons is distributed over 6 to 7 months.
1000 tons more can be obtained in a comparatively short time from the Aluminum Ltd. from Canada. The negotiations for this are still in process.
Schirner reported that the stocks of aluminum in the plants is so high that he, in case the Reichministry for Air should agree to a temporary decrease of the stocks, could guarantee full delivery for both the Armed Forces and Industry until the opening of the new plants in Toging and Bitterfeld.
Lt. Col. Ploch consents that the stocks be decreased temporarily.
The Reichministry for Economy orders that the supervisory board for base metals first determine by revision the exact size of the stocks of aluminum for the Duren Metal works and the combined Light Metal works [Vereinigten leicht Metall Werke].
However, if difficulties should arise in the delivery to the Armed Forces with aluminum, then the Reichministry for Economy is ready to take up negotiations again.
MW
[initials in pencil]
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Inclosure
Textile and Leather Requirements of the Armed Forces
Raw materials Requirement in the year 193-6 in tons Requirement in the year 1937 in tons Required additional cash foreign exchange requirements in millions of marks
Sheared wool 7 200 18 152 24
Wool scrap [Reisswolle] 1 040 4 900 3
Combings 11 42 -Mohair wool - 260 0.75
Wool from tanned hides [Gerberwolle] 761 1 236 -Silk 23 72 0.5
Cocoons * 72 72 -Silk yarns * 48 48 -Cotton of which quality cotton Por- 8 600 16 200
tiers and shelter halves (Egypt) about 4 000 4
Cotton scraps 560 835 -Artificial silk 310 670 -Cellulose wool 1 080 3 130 -Cleaned flax [Schwingflachs] 3 600 4 800 -Flax scrap 7 070 10 500 -Jute 2 100 2 100 -Soft hemp and hard fibers 1 100 1 635 0.25 **
of which hard fiber about 200
Sleek leather 11 000 24 000
Skins for uppers 7 100 13 900
Tanned leather 4 100 —
Leather for soles 9 500 22.5 ***
Total 55.00
* figures by Reichministry for air
** for 400 tons soft, hemp and 200 tons Manila and Sisal
*** for 22 500 tons hides corresponding to 11 200 tons leather
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It must be considered in the calculation of the foreign exchange requirements for the upkeep of the export of woolen goods, that the wool industry cannot stand more than a 10% decrease of the present amount, if it is to retain its export capability. Instead of Australian wool, one must reach back to about 50% of the available South-African wool for exports. The wool available through the limitations of value of the clearing agreement is entirely used for export. The calculated amount of foreign exchange and the most urgent requirement within Germany of 12 million marks only applies under the condition that there are until the end of September still 2 million marks in cash foreign exchange available.
One can count for the requirement of the Armed Forces on an amount of 10,000 tons raw wool, based on existing agreement. 24 million marks in cash foreign exchange are required for the additional amount of 8,152 tons with the price basis of 3,000-marks per ton.
Intendanturrat Nierhoff explained: that a decrease of the demands for quality for the Armed Forces is no longer bearable. Already 20% cellulose wool is being earmarked for uniform cloths, and a mixing of 30% scrap wool for overcoats.
The amount of foreign exchange of 4 million marks for quality cotton is therefore necessary, because one cannot count any more on the hitherto existing compensating transactions—especially with Egypt after circular 237.
The amount of foreign exchange estimated for export of 17 million marks for the supervisory board for bast fibres is distributed as follows:
10 million marks for jute 6 million marks for Sisal 1 million marks for Manila
The production of hides in Germany is reported as 140,000 tons per year. Even with the basis that the consumption of leather within Germany is decreased to a minimum, the 22,500 ton hides, corresponding to 11,200 tons leather for the Armed Forces, can only be procured with cash foreign exchange (22.5 million marks).
The raw hide requirement has been determined individually with consideration for the time required to tan the individual types of leather.
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[in pencil] Top Secret!
Conference at General Field Marshal Goering's at 1000, 14 Oct. 38, in the Reich Air Ministry
[in pencil] attention H.G.
General Field Marshal Goering opened the session by declaring that he intended to give directives about the work for the next months. 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 utmost energy and ruthlessness.
The amount of foreign exchange has completely dwindled on account of the preparation for the Czech enterprise, and this makes it necessary that it should be strongly increased immediately. Furthermore, the foreign credits have been greatly overdrawn and thus the strongest export activity—stronger than up to now—is in the foreground. For the next weeks an increased export was first priority in order to improve the foreign exchange situation. The Reich Ministry for Economy should make a plan about raising the export activity by pushing aside the current difficulties which prevent export.
These gains made through the export are to be used for increased armament. The armament should not be curtailed by the export activity. He received the order from the Fuehrer to increase-the armament to an abnormal extent, the air force having first priority. Within the shortest time the air force is to be increased five fold, also the navy should get armed more rapidly and the army should procure large amounts of offensive weapons at a faster rate, particularly heavy artillery pieces and heavy tanks. Along with this manufactured armaments must go; especially fuel, powder and explosives are moved into the foreground. It should be coupled with the accelerated construction of highways, canals, and particularly of the railroads.
To this comes the Four Years' Plan which is to be reorganized according to 2 points of view.
In the Four Years' Plan in 1st place all the constructions which are in the service of armament are to be promoted and in 2nd place all the installations are to be created which really spare foreign exchange.
The substitutes produced by the Four Years' Plan are to be brought rapidly into circulation. The Reich Ministry for Economy and the other agencies should make suggestions by the be-
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ginning of November for rapidly increasing the introduction of the substitutes. The import of materials for which we have substitutes has to be drastically curtailed.
General Field Marshal Goering enlarged then upon the main problem of the session: how can these requirements be fulfilled.
He is faced with unheard difficulties. The treasury is empty, the industrial capacity is crammed with orders for many years. In spite of these difficulties he is going to change the situation under all circumstances. Memoranda were of no help, he desires only positive proposals. If necessary, he is going to convert the economy with brutal methods in order to achieve his aim. The time has come when private enterprise can show whether it has a right for continued existence. If it fails, he is going over to state enterprise without any regard. He is going to make barbaric use of his plenipotentiary power which was given to him by the Fuehrer.
All the wishes and plans of the state, party and other agencies which are not entirely in this line have to be rejected without pity. Also the ideological problems cannot be solved now, there will be time for them later. He urgently cautions against making promises to the workers which can not be kept by him. The wishes of the labor front recede entirely into the background. Industry has to be fully converted. An immediate investigation of all productive plants is to be initiated in order to determine whether they can be converted for armament and export or whether they are to be closed down. The problem of the machine industry has the first consideration in this respect. There is no place for printing and laundry machines and other machines of that kind, they all have to produce machine tools. In the field of machine tools the priorities of the orders are to be investigated, and wherever possible, increase in productive capacity is to be introduced. It follows without saying that work has to be conducted in 3 shifts.
It remains now to decide who is going to carry out this task; the state of the self-administrative industry. He requested a proposal from General Director Zangen for the methods to realize these plans. He warns all agencies, particularly the labor front, price controller, etc., from interfering with these proposals in any way. He is going to proceed ruthlessly against every interference on the part of the Labor Front. The Labor Front would not receive raw materials and workers for its tasks any more. Similarly all other party requirements have to be set aside without consideration. Foreign workers can continue being employed
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except in the particularly secret sections of the enterprise. At the present time the plants should not be burdened with unnecessary demands, such as athletic fields, casinos or similar desires of the Labor Front. Measures proposed by the Labor Front have to be submitted to him for approval.
Raw materials and power are to be subjected to accurate management. Similarly the distribution of men has to be organized in an entirely different way than it has been done until now. The retraining did not function; all agencies failed. The recommitment of the youth into the industry will be organized by him on a very large scale. Large state apprenticeships are to be created ; besides, the plants will be obliged to hire a certain number of apprentices. A retraining of hundreds of thousands of people will have to take place. Much more work will have to be performed by women than until now. Above all, the young women have to be employed much more. Work periods of eight hours do not exist any more ; wherever necessary, overtime is to be performed, double and triple shifts are a matter of course. Where the workers will protest, as in Austria, for example, General Field' Marshal Goering will proceed with forced labor ; he will create camps for forced labor. The Labor Front should not carry false social ideas among the workers. It is a fact that one generation has driven the cart into the mud through the mutiny of the workers and by being guilty of not having shot these workers on the spot. Therefore, we had to put the thing in order again.
Much is to be done at once in the field of transportation. The Ministry for Transportation should submit a request about the construction of rolling stock and about other requirements. The branch-canal near the Hermann Goering Works is particularly important. It cannot continue that the Armed Forces interfere with the car park. If that will continue, he will make a decision, because it is impossible that the people should starve on account of it.
In the agriculture it is of importance to employ foreign workers. Similarly the problem of the agricultural machine has to be promoted. Of particular importance is the erection of storehouses.
The Sudeten land has to be exploited with all the means. General Field Marshal Goering counts upon a complete industrial assimilation of Slovakia. Czechia and Slovakia would become German dominions. Everything possible must be taken out. The Oder-Danube Canal has to be speeded up. Searches for oil and ore have to be conducted in Slovakia, notably by State Secretary Keppler,
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In the second part of his discussion General Field Marshal Goering took up the Jewish problem. The Jewish problem had to be tackled now with all methods, because they have to get out of the economy. However, the wild bustle of commissars as it developed in Austria has to be prevented under all circumstances. These wild actions have to cease and the settling of the Jewish problem should not be regarded as a system of providing for inefficient party members. Thereupon Ministry Councillor Fisch-boeck was allowed to speak. He revealed that in the beginning there were 25,000 commissars in Austria. Today there are still 3,500 who are useless almost without exception. In Austria the party is of the opinion that Aryanization is a duty of the party and that it is connected with the recompensation of the old party members.
In Austria there is still a total of 2 billions of Jewish property. The large enterprises are being bought up by the Control Bank; it is difficult to oust the Jews from the small industrial enterprises.
General Field Marshal Goering took a strong stand against the opinion that the Aryanization is the duty of the party. ' It is the duty of the State alone. However, he could not release foreign exchange for shipping away the Jews. In an emergency situation ghettos should be erected in the individual large cities.
State Councillor Schmeer cautioned against more lenient methods in the fight against the Jews; Jewish labor units should be established, then the people would emigrate of their own accord. State Councillor Neumann warned and expressed the opinion that one should use more precaution in this matter, particularly in Austria.
Thereupon the meeting was quite surprisingly closed by General Field Marshal Goering without recording the minutes of the meeting or making decisions.
HG.
Material for the Conference with Goering on 25 Nov 1938 (General Keitel, Brig. Gen. Thomas)
27 Oct 1938
W.Wi Id.
For the consideration of the assignment of tasks to people, state and the Armed Forces, judging of the requirements of raw materials, especially steel, appears necessary.
This is shown as follows, as far as it can be judged from here. The inclosed summary shows that one must count, according to
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the Fuehrer's directives, on a steel requirement for armament production, which amounts to 1.08 million tons monthly from 1 Jan 1939 on, that is, it must be increased by about 48% of the present contingent. Added to this requirement are the increased demands of the Four Years' Plan, the demands of export and the amount necessary for the upkeep of the production machine of German economy in the amount of 1.83 million tons monthly from 1 Jan 1939 on; thus this results in a total requirement of 2.9 million tons monthly from 1 Jan 1939 on, against which there is only a monthly production of at present 1.8 million tons monthly.
Furthermore, it must be pointed out, that with the increased use of steel, an increased use of the already scarce non-ferrous metals is necessarily coupled; the latter also are closely associated with the procurement of foreign exchange.
The increased rearmament of the armed forces must further affect deeply the supply requirements of the armed forces, especially munitions and fuels. Therefore, it must be expected that the future requirements of the armed forces will exceed the present plans (accelerated program for powder and explosives, fuel program), which will have an increase of the steel requirements not yet planned as result.
Secret
Summary of the Iron and Steel Requirements of the Armed Forces and Industry tons per month
Contingent of the IVth quarter 1938 Contingent of the Jst quarter 1939 Requirement from 1 Jan 1939 on in contrast to the contingent of 1st quarter 1939
I. Armed Forces 584,333 573,133 1,088,300 —515,167
II. War economical organization of German industry 306,600 306,600 613,500 —306,900
III. Export in case it is possible to reach the stage of beginning of 1938 380,000 380,000 550,000 —170,000
IV. Upkeep of the production machine of the German industry 582,800 582,800 582,800
V.- Other requirements 83,500 83,500 83,500
Total 1,937,233 1,926,033 2,918,100 —992,067
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Summary on the Iron and Steel Requirement of the Armed Forces (tons per months)
Contingent of the IVth quarter 1938 Contingent of the 1st quarter 1939 Requirement from 1 Jan 1939 on in contrast to the contingent of 1st quarter 1939
Army 300 307 268 000 525 000 —259 000
(For fortifications) (86 667) (85 000) (165 000) (— 80 000)
Navy 78 000 74 000 140 500 — 66 500
(For. "Gruenewiese") ( ) ( - ) (35 000) (— 35 000)
Air Force 16-8 400 191 133 247 300 — 56 187
(For fortifications) (13 333) (15 000) (15 000) ( - )
Reich communication measures [RV-Mass-nahmen] 39 566 42 000 175 500 —133 500
(For increased extension of the Reich railroad) ( ) ( - ) 130 000 (—130 000)
Armed Forces
Total 584 333 573 133 1 088 300 —515 167
Chief OKW
58a UO 38 top secret 1157/38 top secret
Top Secret
7 Dec 1938
7 copies 7th copy
[in pencil]
To the State Secretary Neumann Received copy without receipt K. 12 Dec 38 Documents for the conference at Field Marshal Goering's on 13 Dec 1938 with Supreme Commanders General Keitel, Neumann, Koerner, Gen. Thomas.
To
the Supreme Commander of the Army the Supreme Commander of the Navy the Reichs Marshai of the Air Force and Supreme Commander of the Air Force
> one copy each
The Fuehrer and Supreme Commander of the Armed Forces authorized me to inform the Supreme Commander of the following:
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1301-PS
The strained financial situation of the Reich makes it necessary that for the rest of the current fiscal year 38/39 the expenses of the Armed Forces, which in the last months under the strain of extraordinary circumstances have undergone a very considerable increase, should be lowered again to a level which would be tolerable for some time.
It will be at the discretion of the Supreme Commander to decide what measures should be taken for this purpose according to the priorities in the armament program. According to the Fuehrer's request.
ARMY
The equipping with arms will have first priority, the providing of ammunition and the building of fortifications for the army will be considered in second place only.
NAVY
The building of ships, of ports and docks will have first priority over all other requirements, also over that of providing ammunition.
AIR FORCE
The equipping with arms will have first priority, the providing of ammunition will have to be considered in second place only.
If necessary, the initiation of new enterprises will have to be delayed, the execution of current enterprises and orders will have to be distributed over a longer period of time. The allotted quota of raw materials which will be decreased starting 1 Jan 39, will also compel us to a certain extent to do this. It has to be achieved that
in the Army in the Navy in the Air Force
during the period from 1 November 1938 to 31 March 1939 (end of the fiscal year) not more than
(Army): 3.7 billion RM (used until now 4.9)
(Navy): 650 million RM (Air Force): 2.5 billion RM
should be expended in the form of cash and delivery treasury scrips.
It is not yet definitely established how much can be allotted for the next fiscal year 1939/40 in the form of cash and delivery
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1301-PS
scrips. At present, the branches of the Armed Forces cannot expect greater quotas than the following :
5.2 billion RM for the Army 1.4 billion RM for the Navy 4.9 billion RM for the Air Force
signed: Keitel
W H
58 a U0 38 g K 1157/38 g K
Top Secret Copy
for information
[illegible signature] to
the Chief of the Air Force the Chief of the W Stb Chief of the War Industry Staff Adjutant
1 March 1939
Draft
To the adjutant's office of General Field Marshal Goering.
On behalf of Brig. Gen. Thomas I request an appointment for a conference for the general before the departure of the General Field Marshal on following urgent subjects:
1. The branches of the Armed Forces—particularly the Navy —submitted requests for additional amounts of non-ferrous metals and of steel. General Thomas requests instructions what attitude he should take in regard to this question during the absence of the General Field Marshal.
2. The General Field Marshal has to make decisions in 2 matters concerning foreign policy.
[signature illegible]
Captain.
TRANSLATION OF DOCUMENT I30I-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-I30I
HLSL Item No.: Unknown