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Automotive History

This site has been established in order to publish various Working Papers for general study and comment on automotive history.



“The significance of the economic measures adopted and applied by the conspirators can be properly appraised only if they are placed in the larger social and political context of Nazi Germany. These economic measures were adopted while the conspirators were directing their vast propaganda apparatus to the glorification of war”

In May of 1939 Major-General George Thomas, former Chief of the Military-Economic Staff in the Reich War Ministry, reported that the German Army had grown from seven Infantry divisions in 1933 to thirty-nine Infantry divisions, among them four fully motorised. [1]

The task of mobilising the German economy for aggressive war began promptly after the Nazi conspirators’ seizure of power. It was entrusted principally to Dr. Hjalmar Schacht, Hermann Göering, and Dr. Walter Funk, Minister of Economics before Schacht.


Hitler claimed that shortly after becoming Reichschancellor on 30 January 1933, he had had a discussion with then President of the Reichsbank, Hans Luther, also a former Chancellor, and was stunned at how little money Luther had been willing to make available to speed up German rearmament. Shortly afterwards, Otto Meissner, state secretary in the Chancellery suggested that Luther be appointed Ambassador in Washington instead. Luther was therefore forced to give up his position in the Reichsbank leaving the position open. Dr Hjalmar Horace Greeley Schacht was a financial wizard who was far more sympathetic to German rearmament expenditure, probably because three days after Hitler’s accession, Schacht had stated that he wanted to be President, and Luther would be forced out.[2] Schacht served as Commissioner of Currency and President of the Reichsbank from 1923 to 1930; Schacht was therefore appointed President of the Reichsbank on 17 March 1933[3]. After his appointment, Hitler announced his “New Deal” which went into effect 1 May 1933, which mobilised popular opinion, and a year later was celebrated in every city, town and village in Germany. The “New deal” was a popularist attempt at seeming to try and improve standards of living, and introducing work programmes that would soak up unemployment.[4] These programmes would involve building the motorway network, or autobahnen, which just happened to go to Germany’s frontiers!

Schacht’s appointment coincided with the June 1933 World Economic Conference in London. Schacht evidently favoured international stabilisation of currency, though not necessarily on a gold standard: something that Roosevelt was also calling for, though discussions between Schacht and Roosevelt resulted in no headway being made to that end. The Secretary of State, Cordell Hull, sailed for London and took with him a legislative proposal to establish trade agreements with willing nations, but Roosevelt cabled him that he was not going to submit the proposals to Congress. He had therefore arrived with the “highest of hopes but arrived with empty hands”.[5]


As a result of persecution of Jews, and in reply to threats of a German boycott of U.S. goods, Jewish organisations in the U.S. called for a full-scale boycott of German-made goods. Persecution continued throughout the latter part of 1933, and in reprisal Jewish leaders organised boycotts of German products. Although the movement came nowhere near its objectives, in 1933-34, Germany’s exports to the U.S. declined proportionately over twice as much as its exports to the rest of the world. It was thus understandable why Germany seemed to find alternative markets, for instance in South and Central America. American imports of German goods declined slightly in relative proportion to Germany’s worldwide sales, the U.S. increased its dollar value import of German products from nearly $64 million in 1934 to over £91 million in 1937. The crises in 1938 and the outbreak of war caused sharp decline to $63 million in 1938 and $52 million in 1939. However, although Hull emphasised on more and freer trade, the U.S. government maintained a distant attitude and neither supported nor denounced the boycotts[6].

The need for stabilising international currency was compounding difficulties for foreign manufacturers. The pound and U.S. dollar were unstable, and the Reichsmark was overvalued by 40% because of the German efforts to maintain stability by clinging to the gold standard. This in turn meant that German manufacturers were experiencing difficulties with exports as they received too few marks to offset domestic production costs. Tariff and other unilateral economic policies, added to the German economic distress caused by the tremendous foreign indebtedness compounded this: in February 1933 debts exceeded RM24 Billion. Schacht had to act, and sought a moratorium at a meeting of foreign representatives in Berlin at the end of May 1933. This failed, and on 9 June it was announced that from 1 July foreign creditors would receive in transferable loan currency only 50% of interest due. Germany would pay the remaining 50% in the name of a particular creditor into a Konversionskasse für Auslandschulden, the creditor receiving scrip notes for the sum due which he could only use for the purchase of German goods or convert into transferable currency by selling the scrip to the Gold Discount Bank at a 50% discount! The American creditors holding $1.2 billion worth of debt would receive therefore just 75% of interest due. Schacht then caused Hull concern as he threatened to begin making interest payable to creditors dependant on the balance of trade between creditor countries and Germany; because the U.S. had by far the largest favourable balance of trade, exports exceeding imports, American creditors would receive the lowest interest rates. Hull felt that this “challenged the most-favoured-nation foundation of his traditional liberal economics”.[7]

This was followed from September 1933 by selective import quotas, which further outraged Hull as they positively discriminated against the U.S. exporters. Schacht oversaw positive discrimination in the payment of debts: Swiss and Dutch bondholders were to receive 100% interest due on German bonds, and in December 1933 the Reichsbank announced a further six months’ continuation of the discrimination on long-term debt interest payments, and threatened to reduce payments on bonds from 75% to 65% whilst the Dutch and Swiss got their full due. In January 1934, Roosevelt approved the State Department note to Germany suggesting reciprocal action if this continued. At the end of January 1934, the Germans agreed to redeem scrip payments at 76.9% instead of 75% and to work towards ending discriminatory payments by June 1934[8]. The debt settlement of 31 January 1934 was temporary, and “wholly unsatisfactory to neither Germany nor the United States”[9]. However, Schacht and other Reichsbank officials met representatives of Germany’s creditors in the next few months to reach agreement on all loans. This having failed, Schacht gave notice in April that a moratorium was inevitable, whilst the State Department continued to contend that only a settlement that treated U.S. creditors the same as others was acceptable. The inevitable happened, and on June 14 Germany announced it was suspending payment on all its foreign debts amidst increasingly difficult negotiations. Protests by Hull seem to have fallen on deaf ears in Germany, though British threats to seize payments for German goods and use that money to discharge German debt through a new Debts Clearing Office resulted in an agreement being reached by the Germans because of the favourable balance of trade with the U.K. The U.K. was then guaranteed most-favoured nation treatment in the payment of debts, and so the D.C.O. was abolished. Presumably, the Reichsbank and the Ministry of Economics had the trade balance and threat of seizure of payments in future dealings.[10] The Economist 3 November 1934 stated that Mr Runciman had announced in the House of Commons the previous Thursday that the negotiations between the British and German Governments had resulted in an agreement over Germany’s debts. The Germans agreed that 55% of the value of German exports to the U.K. should be definitely earmarked for the payment of British exports to Germany, and this was believed to be sufficient to provide payment in full to British exporters. Foreign exchange permits for the importation of British goods were at the outset to be issued without restriction though the Germans reserved the right to restrict their issue temporarily after consultation with the British Government. Germany undertook to provide £400,000 immediately to pay outstanding debts and to expedite payment by realising German commercial claims on the U.K. If this was not sufficient, a further percentage of the proceeds of German sales would be allocated for the purpose. The percentage was fixed at that stage at 10% and in any case it was sufficient to repay all outstanding debts within twelve months. The sondermark arrangement was to continue. Their comment is apt “Moreover even if Anglo-German relations are satisfactorily regulated by this Agreement, it does nothing to improve the general economic position of Germany, which is one of the major hindrances to world recovery. We have been able to establish ourselves in a favoured position, but the wider question of Germany and her creditors appears to be as still as far from solution as ever”.[11] On the same page were references of equal interest: firstly, Dr. Schacht as Minister of Economics had compulsorily formed a consortium to produce synthetic oil from lignite [coal] to make Germany self-sufficient in oil production, and also a comment on Lord Nuffield’s demand that it was the duty of every “Englishman” to refrain from buying foreign motorcars. This is discussed further below.

The U.S. also had a favourable balance of trade with Germany, but in its favour, and thus could not seize payments for goods Americans imported from Germany. The U.S. creditors therefore had to accept the unilateral debt settlement terms. However, after protests, in October 1934 Germany granted American creditors 75% of the service due on Dawes loans. A year later [October 1935] Germany gave a final settlement: reduction of interest on Dawes loans from 7 to 5%, on Young loans from 5½ to 4% and on other non-governmental debts, averaging 7%, to 3% as opposed to the 4% given other creditors. These continued until the War. However, U.S. opinion was angry as their debt was discriminated against and was in breach of treaty obligations. The threats by the U.K. established a precedent, that the Germans need only meet obligations to those countries that could force payment. However, the inability to pay the foreign indebtedness was only partly because an adjustment was required in order for Germany to pay: Schacht’s economics were seeing monies that should have been used to pay debt funnelled into rearmament[12].


Although the U.S.-German debt problem had to a large extent been resolved, the State Department and the German Foreign Ministry were still required to resolve the problem of mutual trading. The U.S.-German Treaty of Friendship, Commerce and Consular Rights of 1923, which became effective in 1925, expired in 1935 and renouncing or renewing the treaty required one year’s notice on either side. The Germans, for reasons stated below, wanted a new treaty to allow greater opportunity to export to the U.S. but to omit most-favoured-nation status so that they could negotiate bilateral tariff and import quotas that excluded American goods. However, Hull and the State Department felt that the status was at the heart of reciprocal trade, and were consequently for renewal of Article VII of the 1923 Treaty that guaranteed each the status. The Americans were also too aware of the discriminatory import quotas of Autumn 1933. By February 1934, the emphasis was on the continued deterioration in Germany’s foreign exchange and that everything should be done to improve it including increased sales to the U.S. with whom the Reich had its largest unfavourable balance of trade. Luther saw Hull in March and his Assistant Secretary Sayre in April to press Germany’s case. However, the State Department replied [with fingers crossed] that whilst they would like to see more reciprocal trade the time was not right for discussions and that advance commitments might endanger passage of the Reciprocal Trade Agreements Act which was to give the President authority to alter tariffs by as much as 50%.[13]

The difficulty of trading with Germany was, and would continue to be, the items and quantities thereof that could be imported into the U.S. This is something that German U.S. subsidiaries experienced when repatriating profits. The commercial attaché in Berlin, Douglas Miller, submitted a brief to the State Department in April 1934 that whereas the Germans required American cotton, copper and petroleum, there was nothing other than small manufactured articles and potash, “none of which are of staple character and many of which are subject to changes in popular taste” that the Germans could hope to sell in the U.S. in large enough quantities to increase their foreign exchange. Further, German import quotas on U.S. products changed too quickly to guarantee a steady export market and the Reichsmark was set at an artificially high gold rate. Thus, foreigners could not take any money out of Germany, and as Miller mentioned in a report in June 1934, Schacht had set up a government currency scheme that created different types of marks. These gave advantages to German manufacturers over foreign manufacturers by restricting the use of certain marks to the purchase of German goods and prevented foreigners with German businesses from taking capital out of the country.[14] It is interesting to note that American oil companies sold over $12 million of oil to Germany, increasing in each year to $34 million in 1938.[15] Further sources of funds upon which Schacht drew to finance the secret armament program were the Marks of foreigners on deposit in the Reichsbank. This must also have applied to foreign Corporations!

On 5 June 1934, Congress passed Hull’s Reciprocal Trade Agreements Act, and yet on the same day the State Department Economic Office sent a memorandum to Roosevelt urging against negotiations with Germany for the reasons in the previous paragraph, and because the Nazi experiment was “leading Germany further away from normal commercial relations with the western world”, and there it was possible that internal revolution or war would result.[16]


Through Schacht’s financial genius monetary measures were devised to restore German industry to full production; and through the control of imports and exports, which he devised under his new plan of 1934, German production was channelled in accordance with the requirements of the German war machine. This program was not undertaken in a vacuum; it was deliberately designed and executed to provide the necessary instrument of the Nazi conspirators’ plans for aggressive war. In 1934, Schacht was appointed the new Minister of Economics in August 1934[17]. In September 1934 Schacht admitted to the American Ambassador in Berlin William E. Dodd that the Hitler Party was absolutely committed to war, and that the people too were ready and willing.[18]. At the same time Schacht promulgated his New Plan for the control of imports and exports in the interest of rearmament which came into effect 1 September 1934.

The Reich government’s armament plans obviously required huge quantities of raw materials. Schacht was a proponent of the view that as much of the requisite raw materials as possible should be produced within Germany. At the same time, however, he recognised that large imports of raw materials were indispensable to the success of the conspirators’ gigantic armament program. To that end, he fashioned an intricate system of controls and devices, which he called the “New Plan” (Reichsgesetzblatt, 1934, I, pp. 816, 829, 864; Reichsgesetzblatt, 1935, I, p. 10).

There were three main features of the “New Plan” as devised by Schacht:

(1) restriction of the demand for such foreign exchange as would be used for purposes unrelated to the conspirators’ rearmament program;

(2) increase of the supply of foreign exchange, as a means of paying for essential imports which could not otherwise be acquired; and

(3) clearing agreements and other devices obviating the need for foreign exchange.

Under the “New Plan”, economic transactions between Germany and the outside world were no longer governed by the autonomous price mechanism; they were determined by a number of Government agencies whose primary aim was to satisfy the needs of the conspirators’ military economy (EC-437).

Schacht accomplished the negative task of restricting the demand for foreign exchange “by various measures suspending the service on Germanys foreign indebtedness, by freezing other claims of foreigners on Germany, by a stringent system of export controls and by eliminating foreign travel and other unessential foreign expenditures.” (EC-437).

From 1 September, Germany was to buy only what it could pay for, and transactions on imports were not allowed until foreign exchange was in the Reichsbank. Further, imports would have to equal German exports to each country. The net consequence of the New Plan was that Germany turned away from the U.S. and western Europe for raw materials and instead to Latin America and the Balkans. In 1933, ¾ of Germany’s cotton imports came from the U.S., but this declined to just ¼ in 1935 as imports were switched to suppliers in Argentina, Brazil, Peru, Egypt and India. The special State Department committee on trade with Germany was asked in the autumn of 1934 to make a final decision on how to proceed. The committee recommended no action being taken as if the New Plan succeeded then trade with Germany would be of little value to the U.S., and if it failed, the U.S. might gain more favourable terms. The start of trade warfare in reciprocation to the New deal would have meant a loss of export trade to Germany and put at risk $1 billion invested by Americans.[19] Let alone the millions invested by U.S. corporations!

Schacht advised the Military Tribunal in Nuremberg that the New Plan was “a logical consequence of the economic development which followed the Treaty of Versailles”. By the removal of German property abroad, the entire organization for German foreign trade was taken away and therefore great difficulties arose for German exports. Without those exports payment of reparations etc. was out of the question. Nevertheless, Schacht claimed, all the great powers, particularly those who were competing with Germany on the world market, resorted to raising their tariffs in order to exclude German merchandise from their markets or to make it more difficult for Germany to sell her goods, so that it became more and more of a problem to develop German exports. When Germany, in spite of this, tried by lower prices at the cost of lower wages to maintain or to increase her export trade, the other powers resorted to other means to meet German competition. Schacht recalled the various devaluations of foreign currencies that were made, again impeding the competition of German products. When even that did not suffice, the system of quotas was invented, i.e. the amount of German goods, which were imported into a country could not go beyond a certain quota and any excess was prohibited. The Netherlands, France, and other nations established such quotas for German imports; so here also German export was made increasingly difficult. All these measures to hinder German export led to the situation that German nationals also could no longer pay even private debts abroad. Schacht stated to the Tribunal that for many years he had warned against incurring these debts, but he was not listened to. Germany, against his advice, had within five years contracted as large a foreign debt as the United States had throughout the 40 years before the first World War. Germany was a highly developed industrial nation and did not need foreign money, and the United States at that time was going in more for colonial development and could make good use of foreign capital.[20]

The German economy “hit bottom”: when the country was no longer able to pay our interest abroad, some countries resorted to the method of no longer paying German exporters the proceeds from the German exports, but confiscated these funds, and out of this paid themselves the interest on our debts abroad, effecting a settlement, which was the so-called “clearing system.”. The private claims were confiscated in order to meet the demands of foreign creditors. To meet this development, Schacht in his official positions looked for a way out to continue German exports. He set out a very simple principle: “I will buy only from those who buy from me.” Therefore, he looked around for countries that were prepared to cover their needs in Germany, and he prepared to buy his merchandise there.

Schacht’s influence subsequently spread throughout Eastern Europe and the Balkans. In March 1935, a military revolt was attempted in Greece with the object of strengthening the republican regime. However, the coup was put down and in November the King returned. The King, George II, subsequently appointed General Metaxas, as Prime Minister. However, Metaxas took the opportunity for his own ends, turned fascist, dissolved parliament, introduced a dictatorship, and Schacht’s “economic penetration” of Greece.[21]

The New Plan involved extensive use of clearing agreements and other arrangements made by Schacht to obtain materials from abroad through the expenditure of foreign exchange. The principle of the clearing system was as follows: The importer made a deposit of the purchase price in his own currency at the national clearing agency of his country, which placed the same amount to the credit of the clearing agency of the exporting country. The latter institution then pays the exporter in his own currency. Thus, if trade between the two countries was unequal, the clearing agency of one acquired a claim against the agency of the other. That claim, however, was satisfied only when a shift in the balance of trade gives rise to an offsetting claim.

This device was used by Schacht as a means of exploiting Germany’s position as Europe’s largest consumer in order to acquire essential raw materials from countries which, because of the world wide economic depression, were dependent upon the German market as an outlet for their surplus products. Speaking of his system of obtaining materials abroad without the use of foreign exchange, Schacht stated:

“It has been shown that, in contrast to everything which classical national economy has hitherto taught, not the producer but the consumer is the ruling factor in economic life. And this thesis is somewhat connected with general social and political observations, because it establishes the fact that the number of consumers is considerably larger than the number of producers, a fact which exercises a not inconsiderable social and political pressure.” (EC-611)

Schacht’s clearing agreements were particularly effective in Eastern Europe and the Balkans where agricultural exports had been considerably curtailed by competition from the more extensive and efficient overseas agriculture. The success of Schacht’s ruthless use of Germany’s bargaining position is indicated by the fact that by August 1937, there had been imported into Germany approximately one half billion Reichsmarks of goods in excess of the amount delivered under the clearing arrangements. In his letter to Göering dated 5 August 1937, Schacht stated:

“…in clearing transactions with countries furnishing raw materials and food products we have bought in excess of the goods we were able to deliver to these countries (namely, South-eastern Europe and Turkey) roughly one half billion RM ...” [22]

Lord Robert Vansittart of Bexley [“Van”] states in his memoirs that Schacht had the “Midas touch”, and the more he claimed for it, the greater his contribution to Hitler. In Eastern Europe, Van, when Permanent Under-Secretary of State at the Foreign Office, found Schacht “most formidable”, as he “rolled up little countries like flies in his web”. He ordered their goods at “good prices” and then forced them to buy from Germany many things that they did not, and a few that they did want, otherwise they would not get their money “with which he juggled till bewildered customers grew cross-eyed”. Although Schacht disclaimed later, he “served Hitler’s turn”, and his machinations made all Balkan products so expensive that Van was baffled in trying to sell a fraction of them in Britain. Vainly, Van appealed to big U.K. tobacco companies to imitate the Americans and blend their cigarettes with 7% of Balkan tobacco, which was rejected. He tried, at, say 5%, or at least 1% but the companies argued that smokers would detect the adulteration. This failure left Schacht to take all of their tobacco and increased Balkan dependence with “gadgets, contraptions and spare parts” [23]

Van further states that the Governor of the Bank of England, Montagu Norman was “picturesque, poseur, and infatuated by Dr. Schacht”. Returning from a visit to see Norman, Schacht let it out on the ferry to an acquaintance that in fact worked for British Intelligence, that Van had seen through him [Schacht]: Van as head of the Secret Intelligence Service would have learnt about the comment through this route. Van stated that the “compliment” was not true, but nothing ever came of the information[24].


In October 1934, the Germans gave one year’s notice of the termination of the 1923 Treaty, though it still covered the period until the spring of 1935 by when it was obvious to both side’s trade officials that a lack of a new treaty would be mutually disadvantageous. On 3 June 1935, a new Treaty of Friendship, Commerce and Consular Rights was negotiated, but excluding new trade concessions for the Germans and the Article VII provisions guaranteeing mutual most-favoured-nation status. Subsequent German efforts to increase exports to the U.S. in exchange for purchase of cotton and other goods at higher-than-world prices were rebuffed by the State Department and from 1935 German goods were excluded from the special tariff concessions afforded the goods of the 16 nations [“most-favoured nations”] that by 1938 had entered into reciprocal trade agreements with the U.S.[25]

Despite this, efforts were made to continue to trade. George N. Peek was Roosevelt’s special adviser on foreign trade and also president of the Export-Import Bank that was created in 1934 to foster and underwrite foreign trade. Peek believed in protective tariffs and bilateral trade agreements negotiated on a quid pro quo basis, concerned only with selling or bartering as much as nations could[26]. It just happened that Peek’s and Schacht’s views coincided!

James D. Mooney states in his unpublished biography that George Peek, as official assistant to President Roosevelt for exploring foreign trade, asked him [Mooney] to see the German government about acquiring “a lot of excess lard that the western farmers had”. Mooney consequently travelled to Berlin shortly afterwards and saw Dr Schacht and Dr Kurt Schmitt, the then Economics Minister, as well as one of Schmitt’s assistants who was an economics expert. The three Germans kept saying to Mooney that they did not want any lard, but very badly wanted cotton for their textile industry as if the Germans could remanufacture “some” textiles, they could then ship them abroad and pay for some of the raw materials that they needed. The discussions went on for two or three days, and Schacht and Schmitt continued to say that they did not want lard, but cotton. On the third evening, Mooney went to see the economics expert who was an intellectual in the foreign trade department. Mooney persuaded the official to discuss taking lard and cotton, and the following day confirmed with Schacht and Schmitt that they would indeed do so. Mooney then cabled Peek in Washington accordingly[27]. There is no date on this but it could have been in January 1934, as Schacht had not replaced Schmitt as Minister for Economics, and Mooney would have been in Berlin in January anyway, attending the Berlin Motor Exhibition [at which Hitler announced his vision for a “people’s car”].

Dr Schacht approached U.S. Ambassador Dodd in February 1934 and stated that Germany would agree to purchase $500 million worth of American cotton over the following few years at a fixed price higher than the world price if the U.S. agreed to lower interest rates on German bonded indebtedness and perhaps increase import of German manufactures. The State Department made no response, and in the absence of this, Peek’s office announced that it had negotiated a trade agreement with Germany whereby the U.S. would sell Germany 800,000 bales of cotton through Peek’s Import-Export Bank. Germany would pay 25% of the price in U.S. dollars, and the remaining 75% plus a 22½% premium in German marks which could only be used for the purchase of certain German goods. The Export-Import Bank could then sell the marks at a discount to Americans interested in importing German goods. Mooney states that Schacht had a “conventional loyalty” to Hitler, but never hesitated to criticise the “palace guard around Hitler”. He was very sarcastic about those surrounding the Chancellor, and showed no fear in discussing with Mooney the different people Hitler had gathered around him. This may have contributed to his ultimate removal as explained below. Mooney apparently secured a letter from Schacht confirming that Germany would enter into an arrangement to acquire the lard and cotton and then delivered it personally to Peek. However, the agreement fell apart between Peek and the State Department and nothing ever came of it.[28] The reality was that Roosevelt, not yet convinced that Hull’s trade programme as per the Reciprocal Trade Agreements Act, generally agreed with Peek’s proposal and so stated in a note on 19 November 1934 to Hull, and urged a compromise between Hull and Peek who supposedly represented the practical angle of trade. Hull was totally against the proposal since it violated the most-favoured-nation principle, and acceptance of a higher price for cotton than world markets in exchange for discounted marks exchangeable only for German goods, granted German exports advantages not available to other countries. Hull declared that Chile had threatened trade retaliation by dumping nitrates, and Brazil trade negotiations with the U.S. would have to be postponed in the event of a U.S.-German barter agreement. Roosevelt therefore withdrew support for the plant and cut off Peek’s hopes about barter with other countries. [29].

Mooney comments that when he next travelled to Berlin, which was around 1 May 1934, when he saw Hitler, Schacht was not furious at the waste of time at the previous negotiations, but took the attitude that another try should be made.[30] Peek made further efforts to effect the same trade arrangement in March and April 1935, but failed and then resigned from the administration in November 1935.[31]


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 mobilisation for war as of 30 September 1934, it was stated that steps had already been taken to build up stockpiles, 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 stockpiling, 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 organised so that most plants would be working for the German Armed Forces. 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. Studies were made of the possibility of barter trade with supposedly neutral countries in case of war.[32] However, the concept of barter was encouraged with immediate effect with any country that could provide raw materials.

Although Peek had failed over the cotton export deal, Hull and the State Department backed off their policies sufficiently so that those who wished to barter with Germany could do so through “clever devices”. The State Department’s strictures also went unheeded as American corporations “pursued private profit even to the detriment of public and national long-range interest, frequently using methods that were not only frowned upon by the government but illegal”. General Motors Export Corporation placed its worldwide facilities available in 1931 to open new markets in Latin America. This put G.M.’s subsidiary in direct competition with other U.S. companies and the Export Company and subsidiary assembly operations in the same countries. By 1937, officials of Adam Opel A.G. were encouraging their representatives in various countries to suggest barter arrangements to increase sales. By 1939, Graeme K. Howard, General Manager, General Motors Overseas Operations Group, and a Corporation Vice-president, was openly attacking Hull’s trade programme for its opposition to Germany’s efforts at bilateral trade policies and the State Department for not making agreements under the Reciprocal Trade Agreements Act with “have-not” nations.[33]

In respect of the latter point, Professor Henry A. Turner at Yale comments: “It is quite true that Graeme Howard, as well as other G.M. executives, criticised U.S. trade policy toward Germany. They wanted a bilateral treaty in the hope that it would generate German exports and therefore German holdings in dollars in the U.S.A. Such dollar holdings, they hoped, would make it possible to repatriate some of the millions of marks generated by Opel’s profits which G.M. could not get out of Germany because of that country’s currency controls. In others words, their motive was interest, not ideology. They were, I should add, not the only Americans who viewed Nazi Germany as a ‘have-not nation’ that could be tamed by trade. That view extended even into the upper reaches of the State Department, as Offner demonstrates.”

However, other countries or interested parties in those countries with U.S. masters, were willing to entertain barter arrangements and supply raw materials that were essential to the German war effort. Australia’s main export, wool, was subject to restrictions and tariff charges in many countries, and the prospects were bleak for the future trade in this most important commodity. However, it is assumed that Mooney, being responsible for Opel, saw a prime opportunity which would serve the best interests of both G.M.’s German and Australian subsidiaries, and also be another means of extracting a Dividend from Opel for G.M.. In 1935, the Government of Australia was anxious to promote trade with Germany, and in return Germany was prepared “even anxious” to purchase primary products from Australia, especially wool, but in view of the exchange control restrictions, Australia had to find a way of purchasing more German products to balance the wool purchases. General Motors-Holden’s placed an order for 20,000 Electric windscreen wipers from Robert Bosch A.G., probably in October or November 1935. This then set the precedent for a substantial barter arrangement of Opel car components in exchange for Australian wool. In December 1935, the German Government had informed the German Foreign Office, who in turn had instructed the Consul-General in Sydney that the Germans would approve a compensation deal for wool in exchange for Opel cars. The German Government had selected Simonius Vischer and Co. as the wool importer through whom the special quota for wool would be passed, and earmarked RM 3 million, equal to and therefore £Sterling, A£ 300,000. The order for 20,000 electric wipers was then increased to 30,000: these could not have been supplied from anywhere else in the world. These were supplied on a barter arrangement for Australian wool, but the substantive trade deal broke down from the Australian government side because of political reasons, and no trade deal was agreed. G.M.-Holden’s though had not concerned themselves with a formal Australian-German Trade Agreement because from experience, including that with the Bosch wipers, trade with Germany was conducted under barter arrangements because of the exchange control restrictions.[34]

The Australian barter proposals were for the direct benefit of General Motors, and between two G.M. subsidiaries. This would have been at the instance of James D. Mooney, and reflects the continuous attempts to extract dividends out of Adam Opel. There appears to have been official blindness as to the ultimate purpose of the wool, even in the eyes of the Australian farmers who were only too happy to offer their wares when rumours spread via the press. Although Schacht may have officially contended that cotton, and no doubt wool, were for textile and clothing manufacture and re-export, tariff barriers and restrictions on imports would have precluded them from being readily received in British Empire countries and the Dominions. The provision for war was thus overlooked, negligently, recklessly or deliberately in the interests of trade in time of depression.

Van confirms in his memoirs that despite all the Intelligence and the information on Schacht’s activities, nothing came of it. In an anachronistic comment he says “Our people vied in woolliness, bleating programmes for sheep, while the Sturmabteilung [Ernst Röhm’s S.A.] were reckoned at anything from 300,000 to 1,000,000 and Rumbold, our Ambassador in Berlin, claimed to have seen the equivalent of eight Army Corps in one place”[35]. The reference to the S.A., the Nazi “brownshirt” stormtroopers is from 1933, whilst that of the interest in selling British wool to the Germans would appear to be later, but rather poignant nevertheless.


On the invitation of Göering, approximately 25 of the leading industrialists of Germany, together with Schacht, attended a meeting in Berlin on 20 February 1933. This was shortly before the German election of 5 March 1933. At this meeting Hitler announced the conspirators’ aim to seize totalitarian control over Germany, to destroy the parliamentary system, to crush all opposition by force, and to restore the power of the Wehrmacht. Among those present at that meeting were Gustav Krupp, head of the munitions firm, Alfried Krupp, A.G.; four leading officials of the I. G. Farben Works, one of the world’s largest chemical concerns; Albert Vogler, head of United Steel Works of Germany; and other leading industrialists. This meeting is described in the following affidavit of George von Schnitzler:

Detailed measures of financing a future war were discussed and it was pointed out that the Reich Finance Ministry and the Reichsbank, which was headed by Schacht, would regulate the financial aspects of the war economy.[36]

The Economist in October 1934, Schacht in his position as Minister of Economics, made his first moves at making Germany self-supporting in essential raw materials. In one month he made an association of ten lignite producing concerns and gave a Reich Commissar sweeping powers to compel it to produce benzene by the I.G. Farbenindustrie’s hydrogenation process. It was estimated that Germany would in later years produce 1.25 million tons of benzene against the then requirement of 1.45 million tons. I.G. Farben and other companies were fused into a compulsory syndicate and were to finance a newly founded company, Braunkohlen Benzin A.G. with a capital of RM 100 million under the control of the Commissar. It was pointed out that Hitler’s plan to self-sufficiency in four years from 1937 also coincided with the proposed completion of the autobahnen to the frontiers. Was Germany going to achieve this? Whatever the real nature and causes of external pressure on Germany, her internal economic policy could hardly fail to arouse misgivings abroad, or to push farther and farther away any hope of a return to normal relations between Germany and her neighbours, they commented.[37] In the end, the process proved hopelessly uneconomic, and cost several times that of imported oil. By 1937, the synthetic oil processing had to be subsidised by the Government.

Schacht was designated Plenipotentiary for the War Economy on 21 May 1935, with complete control over the German civilian economy for war production in the Reich Defence Council, established by a top secret Hitler decree Reichsgesetzblatt for 1934, Part 1, p. 565. A letter dated 24 June 1935, at Berlin, and signed by von Blomberg, reads in part: “The Fuehrer and Reich Chancellor has nominated the President of the directorate of the Reichsbank, Dr. Schacht, to be Plenipotentiary-General for War Economy. “I point out the necessity of strictest secrecy once more.” [38]

As Minister of Economics and Plenipotentiary General for War Economy Schacht made detailed plans for industrial mobilisation and the co-ordination of the Army with industry in the event of war. He was particularly concerned with shortages of raw materials and started a scheme of stockpiling and a system of exchange control designed to prevent Germany’s weak foreign exchange position from hindering the acquisition abroad of raw materials needed for rearmament. On 3 May 1935, he sent a memorandum to Hitler stating that “the accomplishment of the armament programme with speed and in quantity is the problem of German politics, that everything else therefore should be subordinated to this purpose.”[39]

The secret defence law of 21 May 1935 in effect gave Schacht charge of the entire war economy. In case of war he was to be virtual economic dictator of Germany. His task was to place all economic forces into service for the conduct of war and to secure economically the life of the German people. The Ministers of Economics, Food, Agriculture, Labour, and Forestry, as well as all Reich agencies directly under the Fuehrer, were subordinated to him. He was to be responsible for the financing well as for the conduct of the war; and he was further authorised to issue ordinances within his sphere of responsibility, even if these deviated from existing laws.[40]

Schacht, by April 1936, began to lose his influence as the central figure in the German rearmament effort when Göering was appointed Co-ordinator for Raw Materials and Foreign Exchange. Göering advocated a greatly expanded programme for the production of synthetic raw materials, such as rubber, gasoline and steel in a period of four years, so that Germany would be fully prepared for aggressive war. Schacht opposed this, however, on the ground that the resulting financial strain might involve inflation. On 4 September 1936 Göering announced, at a Cabinet meeting attended by von Blomberg, Schacht, and others, that Hitler had issued instructions to the Reich War Minister on the basis that “the show-down with Russia is inevitable,” and added that “all measures have to be taken just as if we were actually in the stage of imminent danger of war.”[41] The influence of Schacht suffered further when on 16 October 1936, Göering was appointed tentiary for the Four-Year Plan with the task of putting “the entire economy in a state of readiness for war” within four years[42]. Schacht had opposed the announcement of this plan and the appointment of Göering to head it, and it is clear that Hitler’s action represented a decision that Schacht’s economic policies were too conservative for the drastic rearmament policy which Hitler wanted to put into effect.

Although the Nazi government officials provided the leadership in preparing Germany for war, they received also the enthusiastic and invaluable co-operation of the German industrialists. A “memorandum on the Four-Year Plan and Preparation of the War Economy,” dated 30 December 1936[43], and marked “Secret Command Matter”, sets out that the Führer and Reich Chancellor had conferred powers in regard to mobilisation preparations in the economic field that need further definition. The third paragraph refers specifically to Minister-President, Generaloberst Göering as Commissioner of the Four-Year Plan, by authority of the Fuehrer and Reich Chancellor granted 18 October 1936. The existence of this program involved the reorganization and control of the whole German economy for war. [44]

As an additional means of assuring that the conspirators’ military needs would be met, Schacht adopted a host of controls over the productive mechanism of Germany, extending, inter alia, to the allocation of raw materials, regulation of productive capacity, use of abundant or synthetic substitutes in place of declining stocks of urgently needed materials, and the erection of new capacity for the production of essential commodities. The structure of regulation was built up out of thousands of decrees in which governmental agencies under Schacht’s control issued permits, prohibitions, and instructions These decrees were the outgrowth of carefully laid plans of the Ministry of Economics, of which Schacht was the head, concerning “economic preparation for the conduct of war”, and in accordance with its view that “genuine positive economic mobilisation” demanded that “exact instructions for every individual commercial undertaking are laid down by a central authority’.

The plan to allocate raw materials was carried out through myriad “orders to produce” specifying that certain commodities must or must not be produced; “orders to process or use” prescribing the type and quantity of raw material which could or could not be used in the production of a given commodity; orders specifying that scarce raw materials could be used only as admixtures with more plentiful but inferior products; and other like measures. In a secret report issued in September 1934 by the Ministry of Economics it was said:

“Rules are to be initiated for the allotment of scarce raw materials etc; and their use and processing for other than war, or otherwise absolutely vital, goods is prohibited.”[45]

The military aspects of Schacht’s plans to increase the production of scarce raw materials within Germany, and thereby reduce Germany’s dependence upon foreign countries for materials needed in the rearmament program, are likewise revealed in the aforementioned report of the Ministry of Economics of September 1934:

“The investigations initiated by the Raw Materials Commission and the measures introduced for enlarging our raw materials basis through home production as well as for furthering the production of substitute materials will directly benefit war economy preparations.” [46]

James D. Mooney states that two German representatives travelled to New York in the autumn of 1936 to plead that G.M. put up $1,000,000 to finance Adam Opel’s own rubber requirements in Germany as demanded by a newly-introduced government ruling. G.M. put up the money, but only after receiving assurances that the expenditure would be liquidated by means of barter transactions and exports of Opel cars and trucks. It was further agreed that the German government would assume the financing responsibility for crude rubber in about a year. G.M. did not therefore put up dollars in cash, but compounded their difficulties in extracting dividends out of Adam Opel by having to enter into barter and export deals. One of the two representatives was an Adam Opel director from 1935, and President of the company, Professor Dr Karl Lüer, who was appointed Chairman of the company in 1942[47]. R.K. Evans was the incumbent General Manager of Adam Opel at the time, although his replacement, Cyrus R. Osborn had been sent to Germany in early 1936 on “special assignment” and shortly afterwards became Assistant to Evans. Osborn had been on General Manager G.K. Howard’s staff in New York from March 1934, making important manufacturing studies, and then Vice-president of Engineering Department, G.M. Export Division in Detroit in December 1934.[48]

In 1936, as a means of preserving the Reich’s foreign reserves, the Nazi government blocked the German Ford subsidiary from buying needed raw materials. Ford headquarters in Dearborn responded, just as the Nazis hoped it would, by shipping rubber and other materials to Köln/Cologne in exchange for German-made parts. The Nazi government took a 25% “cut” out of the imported raw materials and gave them to other manufacturers, an arrangement approved by Dearborn.[49] To elaborate: Ford Werke A.G. were required to finance their rubber requirements in the same way, and in 1937 this covered the importation of imports of non-ferrous metals and 5,000 tons of pig iron. In 1938 it was extended to include such strategic material in express terms. The Reich Ministry of Economics conditioned its consent upon Ford Werke’s increasing its export of vehicles to 10,000 or ¼ of total production and exacted for its own disposition 30% of the rubber imported by Ford and also 20% of the pig iron imported, though this did no deter Ford in the U.S. from supplying these materials to Germany.[50]

In October 1936 the Four-Year Plan under Göering had been announced, under which amongst other things the gaining of foreign currency was give priority. This was followed by the appointment in November 1938 of the Plenipotentiary for Automotive Affairs, Adolph von Schell. Schell then headed the new Automotive Office Group, which was to accelerate efforts to rationalise domestic production to meet the demands of mobilisation and subsequently called a meeting on 24 November 1938 where he and Göering explained to invited leading automotive companies of the task of harnessing the industry to military needs. Schell’s intention was to increased domestic output by reducing the number of models and standardising models in co-operation with automotive manufacturers. This was not completely achieved by the outbreak of war, though Schell’s office continued to have a general oversight of coordinating automotive production with military requirements until it was subsumed into the Ministry of Armaments and War Munitions under Speer. [51]


The rearmament of Germany proceeded at a rapid pace. By summer of 1935 the Nazi conspirators were emboldened to make plans for the reoccupation of the Rhineland, and at the tenth meeting of the working committee of the council the question of measures to be taken in connection with the proposed reoccupation of the Rhineland was discussed.

At that meeting, on 26 June 1935, it was said that the Rhineland required special treatment because of the assurances given by Hitler to the French that no military action was being undertaken in the demilitarised zone. Among the matters requiring special treatment was the preparation of economic mobilisation, a task specifically entrusted to Schacht as secret Plenipotentiary for the economy. In this connection it was stated: “Since political entanglements abroad must be present under all circumstances, only these preparatory measures that are urgently necessary may be carried out. The existence of such preparations, or the intention of them must be kept in strictest secrecy in the zone itself as well as in the rest of the Reich.”[52] Preparations of various types were thereupon discussed.

The rapid success of German rearmament is attributable to the work of Schacht: the Nazi conspirator’s “New Plan”, was 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 involving foreign exchange were subject to the approval of Devisen, stellen (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.

High-ranking military officers paid tribute to Schacht’s contrivances on behalf of the Nazi war machine. An article written for the “Military Weekly Gazette” in January 1937 stated: “The German Defence Force commemorates Dr. Schacht today as one of the men who have done imperishable things for it and its development in accordance with directions from the Fuehrer and Reich Chancellor. The defence force owes it to Schacht’s skill and great ability that in defiance of all currency difficulties it, 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. Hitler proclaimed the Four-Year Plan in his address at the Nuremberg 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, I, 887.). By this decree Göering was put in charge of the plan. He was authorised to enact any legal and administrative measures deemed necessary by him for the accomplishment of his task, and to issue orders and instructions to all government agencies, including the highest Reich authorities. The purpose of the plan was to enable Nazi Germany to attain complete self- sufficiency in essential raw materials, notably motor fuel, rubber, textile fibre, and non-ferrous metals, and to intensify preparations for war. The development of synthetic products was greatly accelerated despite their high costs.

Apart from the self-sufficiency 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, Major-General Thomas stated: “If you consider that one will need during the war considerable means in order to organise the necessary propaganda, in order to pay for the espionage service, and for similar purposes, then one should be clear that our internal Mark would be of no use therefore, and that Foreign Exchange will be needed.” [53]

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. A memorandum dated at Essen on 12 October 1935, which was found in the files of the Krupp company, contains the subheading: “Concerns:-distribution official propaganda literature abroad with help of our foreign connections.”

After Göering’s appointment, Schacht and Göering promptly became embroiled in a series of disputes. Although there was an element of personal controversy running through these disputes, Schacht disagreed with Göering on certain basic policy issues. Schacht, on financial grounds, advocated a retrenchment in the rearmament programme, opposed as uneconomical much of the proposed expansion of production facilities, particularly for synthetics, urged a drastic tightening on government credit and a cautious policy in dealing with Germany’s foreign exchange reserves. As a result of this dispute and of a bitter argument in which Hitler accused Schacht of upsetting his plans by his financial methods, Schacht went on leave of absence from the Ministry of Economics on 5 September 1937, and resigned as Minister of Economics and as Plenipotentiary General for War Economy on 16 November 1937[54]. However, the dissenting Soviet Judge stated in his Dissenting Judgement that “Schacht used swindler’s tactics and coercion ‘in an effort to acquire raw material and foreign currency for armaments’ as per Affidavit of Vice-President of the Reichsbank, Puhl.[55]

After their successes in Austria and the Sudetenland, the Nazi conspirators redoubled their efforts to equip themselves for the war of aggression that they planned to launch. Thus, during a conference in the Reich Aviation Ministry on 14 October 1938[56] under the chairmanship of Göering, Göering referred to Hitler's orders for an abnormal increase of armament, particularly weapons for attack, and directed the Ministry of Economics to submit suggestions on how to finance this rearmament by increasing exports.

The report of Göering’s remarks states in part:

"General Field Marshal Göering 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." [57]

With the planned invasion of Czechoslovakia in mind, the Reich ordered 3,150 trucks from Ford Werke in Cologne, and Ford in Dearborn, Michigan secretly diverted pre-built components to the Cologne factory for rapid assembly in night shifts, as the alternative would have been to import U.S. trucks to satisfy demand.[58]


In the months immediately after the march into the Rhineland, the State Department preferred to interpret the law so as not to involve itself in trying to force Germany to change tactics. This policy obliged Germany to certain demands that led to a dispute over “countervailing duties” on German imports into the U.S. Section 303 of the Smoot-Hawley tariff mandated the Treasury Department that if it discovered that foreign governments provided bounties or subsidies for export of goods to the U.S. that were dutiable upon entrance, to impose additional or countervailing duties upon those goods equal to the amount of the subsidy.

In order to increase the available supply of foreign exchange “Schacht repeatedly requisitioned all existing foreign exchange reserves of German residents, required all foreign exchange arising out of current exports and other transactions to be sold to the Reichsbank, and by developing new export markets. Exports were encouraged by direct subsidies and by accepting partial payment in German foreign bonds or in restricted Marks which could be acquired by foreign importers at a substantial discount.” (EC-437). Certain German currency practices notably the use of Aski or registered marks, indicated subsidy of exports to the U.S. Similar procedures worked for other types of currency and bonds. Schacht himself devised the “aski” accounts. This scheme obviated the need for free currency (i.e. Reichsmarks freely convertible into foreign currency at the official rate-U.S. dollars, pounds sterling, etc). The system worked as follows: The German foreign exchange control administration would authorise imports of goods in specified quantities and categories on the condition that the foreign sellers agreed to accept payment in the form of mark credits to accounts of a special type held in German banks. These accounts were called “aski”, which was an abbreviation of Auslander Sonderkonten fuer Inlandszahlungen for “foreigners’ special accounts for inland payments”. The so-called “aski” Marks in such an account could be used to purchase German goods only for export to the country of the holder of the account; they could not be converted into foreign currency at the official rates of exchange. The German government established Aski mark prices for American goods that were considerably higher than world market prices, and so exporters could afford to sell their Aski marks at a discount to importers who purchased German goods. The importers then received more marks for their dollars than if they had exchanged them at the official rate, and obtained more German goods for their money. The Aski marks could neither be exchanged for dollars nor taken out of the country: they could only be used in Germany for the purchase of specific German products.

Using the various means at their disposal, the German government then subsidised its export manufactures that competed with American goods. A vast network of organisations was erected to effectuate the various measures under the New Plan. One of these was the supervisory agencies (Ueberwachungsstellen). These agencies, which were under Schacht’s control as Minister of Economics, decided whether given imports and exports were desirable; whether the quantities, prices, credit terms, and countries involved were satisfactory; and in short, whether any particular transaction advanced the conspirators’ armament program. The overriding military purpose of the series of controls instituted under the “New Plan” is plainly shown in Schacht’s letter of 5 August 1937 to Göering, wherein he said:

“The very necessity of bringing our armament up to a certain level as rapidly as possible must place in the foreground the idea of as large returns as possible in foreign exchange and therewith the greatest possible assurance of raw material supplies, through exporting.” [59]

Exports to the U.S. chiefly involved cameras, surgical and optical instruments, bicycles and various cotton, rayon, calf, kid leather and paper items that constituted about 15% of total German exports to the U.S. In late November 1935, the State Department advised the German embassy that if Germany subsidised exports to the U.S., the Treasury Department would have to impose the countervailing duties. The Germans replied that they were not a “subsidy” under the Smoot-Hawley Tariff because the German government made no payments to exporters and that if the restrictive mark system resulted in additional costs then German consumers paid them. General Counsel to the Treasury Department informed Cordell Hull on February 3 1937 that it was common knowledge that practically if not all German exports to the U.S. were being subsidised and that his Department would impose countervailing duties. The special German trade delegation in Washington proposed several measures to improve trade with the U.S. including perhaps the restoration of most-favoured-nation standard. German willingness to depart from discriminatory bilateral arrangements appealed to the State Department. Arguments were put forward that currency manipulation was just another form of currency depreciation practised by many countries including the U.S. If duties had to be invoked against Germany, Argentina, Brazil, Chile, Uruguay, Hungary also had to have countervailing duties: Germany had to use Aski marks to bolster sales if German purchases were not to drop further. Imposing duties would eliminate any possibility of a new trade agreement with Germany. High duties ran contrary to the trade agreement programme.

In the end the Treasury Department were obliged to announce on 11 June 1936 that thirty days from then countervailing duties ranging from approximately 20 to 55% depending on the amount of subsidy would be imposed on appropriate German goods. This then brought protests from Germany and U.S. cotton and tobacco merchants and importers of German wares. However, within a month of the countervailing duties being imposed, the German government advised the State Department that it would no longer allow payments from Aski accounts for German goods delivered to the U.S., and the Treasury removed the duties.

A few months later, in October 1936 American businessmen pressed the Treasury to alter its interpretation of the law so that by clever bookkeeping and financial devices the old Aski practices could be taken up in a new guise. The Treasury Department agreed that there would be no countervailing duties on German goods purchased by Americans with Aski marks provided that the person or company using the marks owned them originally and continuously [received the marks for goods sold to Germany and not bought at a discount from another American exporter].

The bookkeeping worked as follows:

“A” ordered from German exporter “B” chemicals costing 9,000 registered marks. “A” purchased $2,700 worth of cotton from American firm “C” at $2,700 = ¾ the dollar value of 9,000 registered marks. “A” sold cotton to German firm “D” interested in buying U.S. cotton. “D” deposited credit of 9,000 registered marks with German chemical company “B” or its bank in the name of American importer of German chemicals, “A”. “B” then shipped the chemicals to “A”. American cotton firms never shipped cotton to American importers of German goods but only invoices for such goods and importers in turn shipped invoices to German purchasers of cotton. The “Cotton barter” scheme worked equally for copper and petroleum. Fluctuations in these dealings resulted chiefly from the amount of discount the German government allowed American businessmen on their money and merchandise and how quickly the Germans delivered promised goods. Bartering continued uninterrupted to March 1939. March 18 1939, barter system violated Smoot-Hawley and countervailing duties applied again. Three extra years American diplomats allowed things to go on to make up their minds. [60]

The threat of countervailing duties was not restricted to the United States. The Ottawa Agreements of 1932 and 1937 established agreements on tariffs on imports into the United Kingdom, the British Empire, and the Dominions, and between each other including Canada. The Agreements resulted in Committees being established in Empire countries that could sanction increased duties to offset subsidies.


Wilhelm Vocke, was appointed by Reich President Ebert a member of the Reichsbank Directorate in 1919, and dismissed from office on 1 February 1939. He was therefore for about 20 years a member of the Reichsbank Directorate, and for 10 of those years he was under Dr. Schacht. Vocke, when cross-examined at Nuremberg, stated that Schacht often expressed the view that only a peaceful development could restore Germany and not once did he hear him say anything which might suggest that he knew anything about the warlike intentions of Hitler. Vocke recalled three or four incidents which confirmed this. The first was the 490 million gold mark credit that was repaid in 1933. Luther Schacht’s predecessor as President of the Reichsbank, was in charge when the bank’s cover disintegrated in the crisis in 1931 when the cover for the issue of notes had to be “cut down”. Luther in his despair sent Vocke to England in order to acquire a large credit in gold from the Bank of England that was hoped would restore confidence in the Reichsbank. Bank of England Governor Norman was quite prepared to help Vocke, but said that it would be necessary for that purpose to also approach the Federal Reserve Bank of New York, the Bank of France, and the International Bank in Basel, Switzerland. This was done and the credit amounted to 420 million gold marks, though the inclusion of the Bank of France created political difficulties that delayed the credit for about 10 or 12 days. When Vocke returned to Berlin he was shocked to hear that the greater part of the credit had already been used up. The gold was “torn from our hands” he put it. Vocke put it to Luther that “the credit has lost its usefulness and we must repay it immediately. Our honour is our last asset. The banks, which have helped us, shall not lose a single pfennig”. Luther did not have sufficient understanding for that, and he said in so many words: “what one has, one holds. We do not know for what purpose we may still have urgent need of the gold”. Thus, the credit was extended and dragged out over years. When Schacht was appointed to the bank in 1933, Vocke thought that the new President would understand his position, which he apparently did immediately. Schacht agreed with Vocke, and repaid the credit without hesitation. Vocke claimed that it never entered his superior’s head for what other purpose such an enormous sum of gold would be used for, and stated that if Schacht had known of any plans for a war, he would have been a fool to pay back 420 million gold marks. Further, Schacht always advocated close co-operation with the United States, with England, and with France, that Schacht admired Roosevelt and was proud of the fact that Roosevelt, through the diplomat Cockerill, kept in constant touch with him. Schacht was convinced of the necessity of remaining on the best terms with England and France and for that very reason he disapproved of Ribbentrop being sent to London and actively opposed this plan.

The Tribunal stated that they knew about the method of financing the [repayment of] the credit, namely by “MEFO bills”. One of the primary advantages of the MEFO bill 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 a company, Metallurgische Forschungsgesellschaft, m.b.h. (M.E.F.O.). The company had a nominal capital of one million Reichsmarks and was merely a dummy organization. All German banks received the bills for possible rediscounting with the Reichsbank, and the Reich guaranteed the bills for payment five years after each was issued. 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. Secrecy was assured by the fact that the MEFO bills appeared neither in the published statements of the Reichsbank nor in the budget figures. Schacht in his testimony agreed that the MEFO bills were to serve as a “brake on rearmament” because the signature of the Reich Government, to the bills was binding for their repayment, and there was simply no money available to repay them.

American Counsel, Mr. Justice Jackson cross-examined Schacht on the question of the MEFO bills when they were approaching their maturity date, which for the first bills was at the earliest in the spring of 1939. They had all been issued for 5 years and Schacht assumed that the first MEFO bills were issued in the spring of 1934, so that the first MEFO bills became due in the spring of 1939. When the financial time-bomb” was ready to explode, Schacht still President of the Reichsbank asked the Minister of Finance whether he could repay them, because after 5 years he had to repay them. The first MEFO bills would have become due for repayment and of course he said he could not! Schacht said that throughout all of the financial dealings the Reichsbank became somewhat worried as to whether they would get their bills paid back or not. In the second half of 1938 the Finance Minister got into difficulties and he went to see Schacht in order again to borrow money. Schacht replied “Listen, in what kind of a situation are you anyway for you will soon have to repay the first MEFO bills to us. Are you not prepared for that?” By the Autumn of 1938, the Reich Finance Minister had done nothing whatever to fulfil his obligation to meet payment of the MEFO bills; and that, of course, in the Autumn of 1938, made for exceedingly strained relations between the Reichsbank and the Reich Finance Minister.

Further, German taxes did not yield sufficient revenue to discharge those bills: a risk was taken in the MEFO bills, which Schacht admitted from the very beginning was “not really a risk if a reasonable financial policy were followed”. That is, if from 1938 on further armament had not continued and additional foolish expenditures not been made, and instead the money accruing from taxes and bonds had been used for meeting the payment of the MEFO bills. Schacht claimed that the MEFO bills were not paid as taxes and other revenue was used to carry on rearming. By the time that Schacht resigned, the bills could not be repaid out of the current financial year’s taxes.[61] Further, the subscriptions to the Fourth Reich Loan of 1938 had produced unsatisfactory amounts of funds as a result of shortage of public prescription. Schacht admitted that during the period 1 April 1938 to 1 January 1939, therefore, armaments had to be continued to be financed as otherwise the MEFO bills had to be refunded by the Reich which had no money to do so, and Schacht and the Reichsbank could not procure any money for refunding because that would have had to come from taxes and loans: the answer was to continue to carry the MEFO bills. The Reichsbank therefore held that if the Finance Minister had made funds available for the repayment of the MEFO bills, instead of directing the monies towards armament, then the problem would have been resolved. Schacht stated that a large part of the MEFO bills were already on the financial and capital market. When the government too heavily burdened the market, the holders brought in their MEFO bills to the Reichsbank as the bank had promised to accept them. This ridiculous situation, Schacht claimed, resulted in him forcing through his resignation as President of the Reichsbank.

Vocke gave evidence after Schacht and stated that, in 1938 the feeling that the tremendous and limitless armaments program would lead to war, became stronger and stronger, especially after the Munich Agreement. In the meantime Schacht had realised, that there was only one thing to do and that was to fight against Hitler’s armament program and warmongering by every possible means. The final resort was the memorandum by which Schacht forced his resignation. The Reichsbank memorandum dealt with the question of currency. The memorandum stated “If the financing of armaments is continued, German currency will be ruined and there will be inflation in Germany. The memorandum also spoke of limitless credits, of unrestrained expansion of credits, and unrestrained expenditure”, and by expenditure it meant armaments. The memorandum had to deal with the question of currency, but at the same time, it made quite clear what the bank wanted: limitation of expenditure, limitation of foreign policy, of foreign policy aims. It was hoped that the memorandum would result in a halt of what was felt by the bankers to be intolerable expenditure which had brought the country to ruin. By the end of 1938 there was no more money available, instead there was a cash deficit of nearly 1,000 million marks. The Tribunal stated that Schacht finally signed the memorandum, in December 1938, after a last attempt to speak with Hitler in Berchtesgaden.

By the time the memorandum was written there was a financial crisis. The Government was confronted with the 3,000 million MEFO bills that were about to fall due and which had to be covered, and the Minister of Finance had a cash deficit of 1,000 million. The Minister of Finance came to see us and asked us to tide the cash deficit over, because otherwise he could not pay the salaries on 1 January. The Reichsbank refused and told the Minister that the best thing that could happen would be that bankruptcy should become manifest in order to show how impossible it was to continue this system and this policy. He then received money from private banks instead! Vocke claimed that the Reichsbank had for years fought against the MEFO bills, which were to mature in March 1938, and from then on the Reichsbank did not give any more armament credits.

What he want to ask you is now, in your opinion as a lawyer, could the financing of armaments by these MEFO bills be reconciled with banking law? The MEFO bills and the construction of that transaction had, of course, been legally examined beforehand; and the point of their legality had been raised with us, and the question as to whether these bills could be brought under banking law had been answered in the affirmative. The more serious question, however, was whether these bills fulfilled the normal requirements that an issuing bank should demand of its reserves. To that question, of course, the answer is definitely “no.” If one asks, why did not the bank buy good commercial bills instead of MEFO bills, the answer is that at that time there had been no good commercial bills on the market for years-that is, since the collapse due to the economic crisis. Already under Bruening schemes for assisting and restoring economy and credit had been drawn up, all of which followed similar, lines, that is, they were sanctioned according to their nature as normal credits along the lines of a semi-public loan; for the Bank was faced with the alternative of standing by helplessly and seeing what would happen to the economy or of helping the Government as best it could to restore and support the economy. All issuing banks in other countries were faced with the same alternative and reacted in the same manner. Thus the armaments bills, which, economically speaking, were nothing more than the former unemployment bills, had to serve the same purpose. From the point of view of currency policy the Reichsbank’s reserves of old bills, which had been frozen by the depression, were again made good. All the regulations under banking law, the traditional regulations concerning banking and bills policy, had only one aim, namely, to avoid losses.

It has been alleged that the MEFO bill system continued to be used until 1 April 1938, and that 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 re-armament, MEFO financing was discontinued at that time.[62]


In the course of the preparations for war, a clash of wills ensued between Göering and Schacht, as a result of which Schacht resigned his position as head of the Ministry of Economics and Plenipotentiary for the War Economy in November 1937, and was appointed Minister without Portfolio. Schacht was re-appointed as President of the Reichsbank for a one-year term on 16 March 1937 and for a fourth term on 9 March 1938, but was dismissed on 20 January 1939. On 29 November 1938, Schacht made a speech in which he pointed with pride to his economic policy, which had created the high degree of German armament, and added that this armament had made Germany’s foreign policy possible. [63] The Vice-President of the Reichsbank, Dr. Puhl, confirmed that Schacht’s resignation from the Reichsbank could be explained by “his desire to extricate himself from a dangerous situation” which developed, as the result of Schacht’s “own crooked financial operations”.[64]

A letter was produced in evidence before the Military Tribunal written by a certain Morton, a former citizen of Frankfurt-on-Main, who emigrated to England. The letter was directed to the Treasury Solicitor in England. Its text included “I last heard from Schacht indirectly. Lord Norman who was then Mr. Montague Norman {sic.}, Governor of the Bank of England, told me confidentially in 1939 shortly before the outbreak of the war, that he had just come back from [presumably the International Bank in] Basel where he had seen Schacht who sent me his greetings. Lord Norman also told me that Schacht, who had returned to Germany from Basel, was in great personal danger as he was very much in disgrace with the Nazis.” [65]

Even though dismissed from the presidency of the Reichsbank, Schacht was retained as a minister without portfolio and special confidential adviser to Hitler. Funk stepped into Schacht’s position as president of the Reichsbank (Voelkisher Beobachter of 21 January 1939). Funk was uninhibited by fears of inaction, and like Göering, under whom he had served in the Four-Year Plan, he recognised no obstacles to the plan to attack Poland. In a letter written on 25 August 1939, only a few days before the attack on Poland, Funk reported to Hitler that the Reichsbank was prepared to withstand any disturbances of the international currency and credit system occasioned by a large-scale war. He said that he had secretly transferred all available funds of the Reichsbank abroad into gold, and that Germany stood ready to meet the financial and economic tasks that lay ahead.[66]

On 19 January, Hitler dismissed Schacht as President of the Reichsbank on receipt of the memorandum form the bankers. Schacht continued as Reich Minister without Portfolio but on 22 January 1943, Hitler dismissed him because of his “whole attitude during the present fateful fight of the German nation.” After the failure of the assassination plot on Hitler, Schacht was arrested by the Gestapo on 23 July 1944 and confined in a concentration camp until the end of the war. Schacht was arrested and charged before the Military Tribunal at Nuremberg, but ultimately found Not Guilty, with the Soviet judge dissenting.[67].


The International Military Tribunal indicted Funk under four counts. Funk, who had previously been a financial journalist, joined the Nazi Party in 1931, and shortly thereafter became one of Hitler’s personal economic advisers. On 30 January 1933, Funk was made Press Chief in the Reich Government, and on 11 March 1933, became Under Secretary in the Ministry of Propaganda under Dr. Goebbels and shortly thereafter a leading figure in the various Nazi organisations which were used to control the press, films, music and publishing houses. Funk took office as Minister of Economics and Plenipotentiary General for War Economy in early 1938 and as President of the Reichsbank in January 1939. He succeeded Dr. Schacht in all three of those positions. Funk became active in the economic field after the Nazi plans to wage aggressive war had been clearly defined. One of his representatives attended a conference on 14 October 1938, at which Göering announced a gigantic increase in armaments and instructed the Ministry of Economics to increase exports to obtain the necessary exchange: see above.

Immediately before Funk actually took over the Reich Ministry of Economics there was a major reorganization of its functions, which integrated the Ministry with the Four-Year Plan as the Supreme Command of the German military economy. Göering accomplished the reorganization in his capacity as Commissar for the Four-Year Plan, by a decree dated 4 February 1938 ("The Four-Year Plan" (Der Verjahresplan) official monthly bulletin, issued by Göering, Vol. II, 1938, p. 105). Under this decree, the jurisdiction of the Economics Ministry was defined as covering the following fields of Germany's economy: German raw and working materials, mining, iron industry, power industry, handicrafts, finance and credit, foreign trade, devisen, and exports. As a result of this decree, sectors of the German economy, which were strategic in the organization of war and armaments economy, were placed under the immediate control of Dr. Funk. Furthermore the Reich Office for Economic Development, charged by the decree, with "research, planning and execution of the Four Year Plan", was incorporated into the Reich Ministry of Economics. Similarly, the Reich Office for Soil Research and the Office of the Reich Commissar for the exploitation of Scrap Materials were made subject to that Ministry. Thus, it is clear that the reorganization decree concentrated significant responsibilities in the hands of Funk and thereby made him one of the chief agents of economic mobilisation during a decisive period.

Subsequently, a secret law expressly charged Funk charged with the task of mobilising the German economy for war. On 4 September 1938, while the conspirators were engaged in intensive planning for aggression against Czechoslovakia, Hitler signed a revision of the so-called Reich Defense Law (2194-PS). This law conferred upon Funk substantially the same authority that had been vested in Schacht by the Reich Defense Law of 21 May 1935 (2261-PS). The law of 4 September 1938 provided in part:

"It is the task of the GBW [Chief Plenipotentiary for Economics] to put all economic forces into the service of the Reich defence, and to safeguard economically the life of the German nation. To him are subordinate: the Reich Minister of Economics, the Reich Minister of Nutrition and Agriculture, the Reich Minister of Work, the Reich Chief of Forestry, the Reich Commissar for Price Control. He is furthermore responsible for directing the financing of the Reich defence within the realm of the Reich Finance Ministry and the Reich Bank.

"The GBW must carry out the demands of the OKW which are of considerable importance for the armed forces; and he must insure the economic conditions for the production of the armament industry directed immediately by the OKW according to its demands. If the demands of the armed forces cannot be brought into accord with the affairs of economy, then the Fuehrer and Reich Chancellor decides.

"The GBW has the right within his sphere to issue laws with the consent of the OKW and GBV which differ from the existing laws."

The law of 4 September 1938, which at the specific direction of Hitler was not made public, was signed by Hitler and by Funk, among others, as "Chief Plenipotentiary for Economics" [68]

On 30 May 1939, the Under Secretary for the Ministry of Economics attended a meeting at which detailed plans were made for the financing of the war. On 25 August, 1939, Funk wrote a letter to Hitler expressing his gratitude that he had been able to participate in such world shaking events; that his plans for the “financing of the war”, for the control of wage and price conditions and for the strengthening of the Reichsbank had been completed; and that he had inconspicuously transferred into gold all foreign exchange resources available to Germany. On 14 October 1939, after the war had begun, Funk made a speech as Chief Plenipotentiary for Economics in which he stated that the economic and financial departments of Germany working under the Four-Year Plan had been engaged in the secret economic preparation for war for over a year and a half prior to the launching of the aggression against Poland, advanced Germany's economic preparation for war. He stated:

"Although all the economic and financial departments were harnessed in the tasks and work of the Four Year Plan under the leadership of Generalfeldmarschall Göering, the war economic preparation of Germany has also been advanced in secret in another sector for well over a year, namely, by means of the formation of a national guiding apparatus for the special war economic tasks, which had to be mastered at that moment, when the condition of war became a fact. For this work as well all economic departments were combined into one administrative authority, namely under the General Plenipotentiary for Economy, to which position the Fuehrer appointed me one and a half years ago." [69]

Funk was made a member of the Ministerial Council for the Defence of the Reich on August 1939 and a member of the Central Planning Board in September 1943.

In cross-examination before the Tribunal at Nuremberg, Funk was asked how he came to be appointed in succession to Schacht. Funk replied that he had just returned from a journey about the middle of January 1939, and was called to the Führer and found him in a state of great agitation. Hitler told Funk that the Reich Minister of Finance, Dr. Lammers, had informed him that Dr. Schacht had refused the necessary financial credits and that consequently the Reich was in financial straits, that Schacht was sabotaging his policies, and that he would not tolerate the Reichsbank’s interference with his policies any longer. Hitler further declared that from now on he himself, on the suggestions and demands of the Reich Minister of Finance, would fix all credits to be given by the Reichsbank to the Reich. He had given Lammers instructions to formulate a decree, together with the Reich Minister of Finance, by which the status of the Reichsbank, as established by the provisions of the Treaty of Versailles, would be changed, and whereby the terms for the granting of credits to the Reich would be determined by himself alone in the future.

The basic difference between Schacht’s position and Funk’s lay in the fact that during Schacht’s time the Reichsbank could determine the granting of credits to the Reich, whereas Funk had the authority taken from him, and the responsibility for domestic finances, therefore, was turned over to the Minster of Finance or to Hitler himself. Funk had a further office as successor of Dr. Schacht, of Plenipotentiary General for Economy that existed merely on paper. Schacht had been appointed Plenipotentiary General for War Economy. Funk, on the other hand, was the Plenipotentiary General for Economy [substantial difference?]. According to the Reich Defense Law of 1938, the Plenipotentiary General for Economy was to co-ordinate the civil economics departments in preparing for a war. However, in the meantime, those civil economic departments had been subordinated to the Delegate for the Four-Year Plan and Funk, as Plenipotentiary General for Economy, was also subordinate to the Delegate for the Four-Year Plan. Consequently, there was confusion and overlapping in matters of competence and authority as they had been laid down formally. The result was that a directive of the Führer in December 1939 which de jure and formally transferred the authority of the Plenipotentiary General for Economy, as far as the civil economic departments were concerned, to the Delegate for the Four-Year Plan, which just happened to be Göering. There remained only a formal authority to issue directives: Funk claimed that he could sign directives on behalf of the five civil economic departments, which, according to the Reich Defense Law, were subordinate to the Plenipotentiary. Funk retained authority over the Ministry of Economics and the Reichsbank, which he had in any case. Funk only had a closer connection with the Ministry of Economics itself. When Schacht was in office there also existed an office for the Plenipotentiary General for Economy, and a working committee was set up which consisted of the representatives of the various economic departments, as well as of the Ministry of the Interior, the Plenipotentiary for Administration, the O.K.W., and of the Four-Year Plan. When Schacht resigned, the direction of this committee and of the office of the Plenipotentiary for Economy was transferred to Dr. Posse, Schacht’s former State Secretary, whereas under Schacht State Counsellor Wohlthat had headed the office and the committee. These men had constant consultations in which they discussed measures necessary in the economic sphere for waging war. When questioned by Counsel, Funk gave evidence clarifying whether there was an office subordinate to Schacht as Plenipotentiary for War Economy. Funk replied that it was not an office as such, rather it was a committee of experts of the various departments which was led by the representative of the Plenipotentiary for War Economy, who was Schacht, and later by Funk’s representative as Plenipotentiary for War Economy. Under Schacht’s term of office it was State Counsellor Wohlthat and in Funk’s term of office it was Schacht’s former State Secretary, Posse. The expert for Schacht during Schacht’s term was Dr. Wohlthat.

Dr. Funk made a statement of his program in a speech before the Central Committee of the Reichsbank on 30 March 1939. It was delivered before the Central Committee shortly after Funk assumed his office as President of the Reichsbank, and represented his program as President of the Reichsbank in connection with various matters referred to in the evidence before the Tribunal. Funk stated that in those months [immediately before the war] he carried on international discussions about the necessity for a new order in international economic relations, and that he also pointed out Germany’s readiness to play a positive part. Funk did not think that he needed to read anything more from this speech as it was only meant to show that at that time he did not work on preparations for war but endeavoured to bring about international economic understanding, and that those, his efforts were recognised publicly in foreign countries, especially in England. Counsel said that Funk’s intention to establish favourable and confident relations with foreign countries, that is, with their financial and economic circles, was a deciding factor in a later measure to which Funk had already referred to namely that compensation to foreign shareholders in the Reichsbank, whom Counsel believed existed chiefly in the United Kingdom, the Netherlands, and Switzerland, was assessed and paid in a particularly loyal manner. Funk replied that he had already said that.

Funk gave evidence that in the months before the beginning of the war he concentrated his entire activity on international negotiations for bringing about a better international economic order, and for improving commercial relations between Germany and her foreign partners. At that time it was arranged that the British Ministers Hudson[70] and Stanley were to visit him in Berlin. The subject of short-term foreign debts had again to be discussed and settled namely the moratorium. Funk had worked out new proposals for this, which he claimed were hailed with enthusiasm, especially in England. In June 1939, an international financial discussion took place in his offices in Berlin, and leading representatives of the banking world from the United States, from England, from Holland, France, Belgium, Switzerland, and Sweden, took part in it. These discussions led to results that satisfied all parties. At the same time Funk carried out the exchange or transfer of Reichsbank assets in foreign countries. This exchange of gold shares was also considered very fair and satisfactory in foreign banking circles and the foreign press Funk suggested. In June of that year 1939 Funk went to the Netherlands to negotiate trade agreements. He also participated in the customary monthly discussions of the International Clearing Bank at Easel as late as the beginning of July 1939, and despite the strong political tension which existed at the time was convinced that a war would be avoided and voiced this conviction in all his discussions, at home and abroad. This is why during those months Funk claimed that he was barely interested in the discussions and consultations on the financing of the war and the shape of war economy. He had, of course, given instructions to the Reichsbank to use its available economic assets abroad as far as possible to obtain gold and generally to increase Germany’s foreign assets. But in the few months of his activity in this sphere before the war, the success of this endeavour of his was slight. Germany’s gold assets and foreign assets, as Schacht turned them over to Funk, remained on the whole unchanged until the war. In the evidential questionnaire to the Reichsbank Vice President, Puhl, was requested to enlighten on those transactions, since the Directorate of the Reichsbank and its managing director who, at that time, was Puhl, were bound to have information on this matter, but the answers had not been received by Counsel at the Tribunal at the time of Funk’s interrogation.

The Plenipotentiary for Economy existed alongside the Four-Year Plan, and in the main was charged with a smooth conversion of the civilian economy into a war economy in the case of war, and with the preparation of a war economy administration. When, in August 1939, there was a threat of war with Poland, Funk called together the chiefs of the civil economic departments, as well as the representatives of the Four-Year Plan, and, in joint consultation, they worked out measures necessary for converting the civilian economy into a war economy in the case of a war with as little disturbance as possible. These were the proposals which Funk mentioned in his letter to the Führer dated 25 August 1939, at a time when the German and Polish Armies already faced each other in a state of complete mobilisation. Funk stated that it was his duty to do everything to prevent dislocations of the civilian economy in the case of a war, and it was his duty as President of the Reichsbank to augment gold and foreign exchange assets of the Reichsbank as much as possible. This was necessary first of all because of the general political tension that existed at the time. It would also have been necessary, Funk stated, even if war had not broken out at all, and only economic sanctions had been imposed, as was to be expected from the general foreign political tension that existed at the time. Funk stated that it was equally his duty as Minister of Economics to do everything to increase production, even so he did not concern himself with the financial demands of the Wehrmacht, and had nothing to do with armament problems: the direction of peacetime as well as war economy had been turned over to the Delegate for the Four-Year Plan, namely Göering. Funk added that he should like to state his position on various matters, but the state secretaries could explain the details of those problems better than he could. Concerning the directives to occupied territories, the Reichs Marshal [Göering], as well as Reich Minister Lammers, had stated before the Tribunal that Funk, as Reich Minister for Economics, had no authority to issue instructions. The Reichs Marshal, during his testimony before the Tribunal had stated “For the directives and the economic policies carried out by the Minister of Economics and Reichsbank President Funk, the responsibility is fully and exclusively mine”.


The DuPont Chemical Corporation, owned the patents on synthetic petrochemicals and industrial processes that promised billions of dollars in future profits from the sale of wood pulp, paper; lead additives for gasoline, synthetic fibres and plastics. At the time, du Pont family influence in both government and the private sector was unmatched, according to historians and journalists.

Congressional records, F.B.I. reports and investigations by the Justice Department, during the 1930s and 1940s, have already documented evidence of this wider plot. A list of the corporations named include Du Pont, Standard Oil, and General Motors, all of which were proven to be conspiring with Nazi industrial cartels to eliminate competition world-wide and divide among themselves the Earth’s industrial resources and commercial markets, for profitable exploitation.[71]

The relationship between the DuPont family and General Motors goes back to 1915, and it was the DuPonts that acquired most of President William C. Durant’s stock interests in G.M. Corporation in 1920, and thereby saved Durant from bankruptcy and G.M. from imploding in the 1920 Stock Market crash. By 1929, the Du Pont corporation had a controlling interest in, and had interlocking directorships with, General Motors: Du Pont manufactured the Duco vehicle paints invented by G.M. Laboratories in 1923, and had license agreements with companies around the world including I.C.I. in London. Irenee du Pont, “the most imposing and powerful member of the clan,” according to biographer and historian Charles Higham, “was obsessed with Hitler’s principles. He keenly followed the career of the future Führer in the 1920s, and on September 7, 1926, in a speech to the American Chemical Society, he advocated a race of supermen, to be achieved by injecting special drugs into them in boyhood to make their characters to order.” Du Pont’s anti-Semitism “matched that of Hitler” and, in 1933, the DuPonts “began financing native fascist groups in America . . .” one of which Higham identifies as the American Liberty League: “a Nazi organization whipping up hatred of blacks and Jews,” and the “love of Hitler. “Financed . . . to the tune of $500,000 in the first year, the Liberty League had a lavish thirty-one-room office in New York, branches in twenty-six colleges, and fifteen subsidiary organisations nationwide that distributed fifty million copies of its Nazi pamphlets. . . .”.

“The DuPonts’ fascistic behaviour was seen in 1936, when Irenee du Pont used General Motors money to finance the notorious Black Legion. This terrorist organization had as its purpose the prevention of automobile workers from unionising. The members wore hoods and black robes, with skulls and crossbones. They fire-bombed union meetings, murdered union organisers, often by beating them to death, and dedicated their lives to destroying Jews and communists. They linked to the Ku Klux Klan. . . It was brought out that at least fifty people, many of them blacks, had been butchered by the Legion.”[72]

DuPont support of Hitler extended into the very heart of the Nazi war machine as well, according to Higham, and several other researchers: “General Motors, under the control of the Du Pont family of Delaware, played a part in collaboration” with the Nazis”.

Researchers Morton Mintz and Jerry S. Cohen, describe the Du Pont-G.M.-Nazi relationship in these terms: “. . . In 1929, [Du Pont-controlled] G.M. acquired the largest automobile company in Germany, Adam Opel, A.G. This predestined the subsidiary to become important to the Nazi war effort. In a heavily documented study presented to the Senate Subcommittee on Antitrust and Monopoly in February 1974, Bradford C. Snell, an assistant subcommittee counsel, stated that the Du Pont-G.M. Nazi collaboration, included the participation of Standard Oil of New Jersey in one, very important arrangement. G.M. and Standard Oil of New Jersey formed a joint subsidiary with the giant Nazi chemical cartel, I.G. Farben, named Ethyl G.m.b.H. [now Ethyl, Inc.] which, according to Snell: “provided the mechanised German armies with synthetic tetraethyl fuel [leaded gas]. During 1936-39, at the urgent request of Nazi officials who realised that Germany’s scarce petroleum reserves would not satisfy war demands, G.M. and Standard joined with German chemical interests in the erection of the lead-tetraethyl plants. According to captured German records, these facilities contributed substantially to the German war effort. I.G. Farben used Standard Oil’s assistance in procuring $20 million of aviation fuel and lubricants to stockpile for war. An I.G. Farben memorandum states: ‘The fact that since the beginning of the war we could produce lead-tetraethyl is entirely due to the circumstances that, shortly before, the Americans [Du Pont, G.M. and Standard Oil] had presented us with the production plants complete with experimental knowledge. Without lead- tetraethyl the present method of warfare would be would not be possible.’”[73]

Further, according to a 1992 article in the Village Voice, Brown Brothers Harriman, the Wall Street investment firm, “arranged for a loan of tetraethyl lead to the Luftwaffe in 1938. The development of Ethyl gasoline can in fact be attributed originally to General Motors Corporation. Shortly after the Great War it was discovered that “knock” caused by pre-ignition in engines could be reduced or eliminated by changing fuel or fuel setting. Thomas Midgley, Jnr. worked on the elimination of “fuel knock”, as against “ignition knock”, when he worked for Dayton Engineering Laboratories as assistant to Charles F. Kettering. Midgley was promoted to become chief of the fuel section of General Motors Research Corporation. Mixing benzol and cyclohexane with petrol, Midgley arrived at this early anti-knock formula. Following on from that, Midgley demonstrated a small sample of tetraethyl lead in January 1922 to Alfred P. Sloan, Jr. This wonder compound proved ideal, and in August 1924 G.M. Corporation formed Ethyl Gasoline Corporation, for the purpose of marketing tetraethyl lead as an anti-knock compound. This company was a 50-50 partnership between G.M. and Standard Oil of New Jersey. Du Pont initially manufactured ethyl fluid under a contract until 1948 when Ethyl Gasoline started manufacturing its own requirements. [74]In the U.K., General Motors’ Guy N. Vansittart, the Regional Director for Western Europe, and then British Isles, 1937 onwards, was a director of Associated Ethyl Company Limited [Company Number 344539, later Associated Octel Company Limited], a British licensee.

Mintz and Cohen describe a confrontation and conflict of interest that arose in Washington: “Four months after the United States entered World War II, the Justice Department obtained an indictment of Standard and its principal officers for having made arrangements, starting in the late 1920s with I.G. Farben involving patent sharing and division of world markets. Jersey Standard agreed not to develop processes for the manufacture of synthetic rubber; in exchange, Farben agreed not to compete in the American petroleum market. After war broke out in Europe, but before the attack on Pearl Harbour, executives of Standard Oil and Farben, at a meeting in Holland, established a modus vivendi for continuing the arrangements in event of war between the United States and Germany - although the arrangements interfered with the ability of the United States to make synthetic rubber desperately needed after it entered the war in December 1941. Rather than face a criminal trial, Standard and the indicted executives entered no-contest pleas - the legal equivalent of guilty pleas - and were fined the minor sums that were the maximum amounts permitted by law.

Another source book on this subject of U.S./Nazi corporate activities is “The Secret War Against the Jews” by Mark Aarons and John Loftus. Here is their version of the events: “Before the war Standard of New Jersey had forged a synthetic oil and rubber cartel with the Nazi-controlled I.G. Farben,” which “worked well until the United States joined the war in 1941. . . . Next to the Rockefellers, I.G. Farben owned the largest share of stock in Standard Oil of New Jersey. Among other things, Standard had provided Farben with its synthetic rubber patents and technical knowledge, while Farben had kept its patents to itself, under strict instructions from the Nazi government.”

Allen Dulles was one of America’s top spymasters, from his early days in the Office of Strategic Services (OSS) in World War II, to his position as Director of the Central Intelligence Agency (C.I.A.) in the 1950s and early 1960s (until President John F. Kennedy fired him over the Bay of Pigs disaster in 1961), and finally to his membership on the controversial Warren Commission, which investigated President Kennedy’s assassination. Loftus and Aarons describe the post-World War I role of Allen Dulles, and his brother, John Foster Dulles, in the following terms: “We first turn to Dulles’s creation of international finance networks for the benefit of the Nazis. In the beginning, moving money into the Third Reich was quite legal. Lawyers saw to that. And Allen and his brother John Foster were not just any lawyers. They were international finance specialists for the powerful Wall Street law firm of Sullivan & Cromwell. . . .”. The Dulles brothers were the ones who convinced American businessmen to avoid U.S. government regulation by investing in Germany. It began with the Versailles Treaty, in which they played no small role. After World War I the defeated German government promised to pay war reparations to the Allies in gold, but Germany had no gold. It had to borrow the gold from Sullivan & Cromwell’s clients in the United States. Nearly 70 percent of the money that flowed into Germany during the 1930s came from investors in the United States, many of them Sullivan & Cromwell clients. . . “Foster Dulles, as a member of the board of I.G. Farben, seems to have had little difficulty in getting along with whoever was in charge. Some of our sources insist that both Dulles brothers made substantial but indirect contributions to the Nazi party as the price of continued influence inside the new German order. .” [75]


James D. Mooney states in his unpublished autobiography that in the lifetime of the Weimar Republic, he met various leaders from time to time including Chancellor Heinrich Bruening, Hjalmar Schacht and others. Then, with the “start of Hitlerism”, he came to Nazi leaders especially well because the government began moving in more prominently on industry, which requires frequent meetings with various members of the regime.[76]Mooney made the following speeches that were of relevance to the American-German relations[77]:

18 January 1934 “International Trade”

23 January 1934 “Paper Money and Gold Prices in International Trade”

23 June 1934 “America’s Stake in International Trade”

10 August 1934 “Paper Money and Gold in International Trade”

9 October 1934 “Fallacies and Realities in International Trade”

20 December 1934 “International Economic Relations”

1934 “Developing Foreign Trade”

10 June 1935 “Economic Values of International Trade”

18 July 1935 “The International Money Situation”

17 September 1935 “The American Foreign Trade Situation”

1935 “Foreign Trade and Domestic Markets”

24 January 1936 “Remarks Before the Foreign Trade Council”

7 February 1936 “American Neutrality and Trade”

16 November 1936 “Stabilizing the Exchanges”

25 January 1935 “The Impending War in Europe- and a Gamble Toward Halting It”

17 April 1937 “American Economic Policies for the Impending World War”

1 May 1937 “What World War Will Mean for Us and What we Can Do About It”

18 May 1937 “Peace or War: A Trade Policy for America”

27 May 1937 “German-American Trade A Shadow of Its Former Self”

January 1938 Stabilizing The Exchanges”

14 January 1938 “Some Observations on Economics, Politics and Government”

27 January 1938 “European Observations”

25 May 1938 “Remarks at World Fair Dinner/Foreign Trade Week”

16 June 1938 “Gold, Paper Money and Commodity Prices”

19 January 1939 “Paper Money: A National and International Hazard”

4 February 1939 “Economic Policies for the Next World War”

1 June 1940 “War or Peace in America?” This was the pamphlet referred to by PM Magazine as Nazi propaganda.

There were also speeches in 1935 and 1936 to the British motor industry which were in fact of no great consequence, though this proves that he visited General Motors Limited on several occasions in those years.[78]

Mooney travelled extensively, throughout the world, and visited G.M.’s numerous manufacturing and assembly Plants. In this capacity he was afforded the opportunity of meeting with top-flight government officials and others in positions of power and influence, and with them discussed their own economic problems but also the impact of the international situation on their own countries and on economic affairs. He had the ability to adapt U.S. methods and technology to existing conditions of amazingly diverse natures.

Mooney expressed the inadequacies of traditional diplomacy by arguing that diplomats were frequently “willing to risk millions of lives rather than to try and see the other side and to arrive at conclusions which involve some give-and-take on both sides, but which are far, far, cheaper than the resort to war”. Hitler awarded the German Order of Merit of the Eagle in 1938 to Mooney: the is was the highest award that could be given to a foreigner, and the same decoration as awarded to Henry Ford in July 1938 by the German Consul in the U.S.

In the spring of 1939, Mooney was called to Germany to discuss a number of issues with the Nazi Government pertaining to the Opel concern. In the process, he became aware of the interest in securing gold loans in exchange for an agreement to stop Germany’s practice of subsidised exports and exchange controls, and discussed the same with Helmuth Wohlthat a member of Göering’s staff working on Germany’s “Four-Year Plan” and Dr. Puhl of the Reichsbank. Mooney subsequently arranged a meeting between U.S. Ambassador to London, Joseph Kennedy, and Wohlthat. The meeting was held in London on 9 May 1939.

Mooney became more and more convinced that hostilities between the British Empire and Germany could be subsided through the intercession of neutral third party moderation, with economic might behind it. He had numerous dealings with Wohlthat in his mission for peace. Mooney presented his views to President Roosevelt on 22 December 1939 and 24 January 1940 at two significant meetings. Roosevelt agreed to use Mooney’s influence to initiate what Mooney called “discussion on an informal basis through which Heads of both governments could better understand each other and what they really wanted to get at”. Mooney agreed to sail to Europe, and on 4 March 1940 met with Hitler, and then Göering on the 7th. Mooney presented to the Fuehrer Roosevelt’s “informal and unofficial attitudes”. Hitler’s response centred on “unfortunate rumours” distorting German and U.S. relations, the extent of Germany’s war aims, the unity of the German people behind the Reich, the economic security of Germany, and other meaningless topics. The Göering-Mooney meeting included a presentation of Roosevelt’s views, a discussion of U.S.-German relations, U.S. public opinion regarding Finland, and various economic issues, concentrating on most-favoured nation practices. Mooney then travelled to Rome after these meetings, and sent 5 telegrams to Roosevelt advising him of the discussions.

It was in August 1940 that PM Magazine in Chicago published a number of inflammatory articles about Mooney’s association with the Nazi Government, and accusing him of publishing pro-German propaganda. The articles centred around the award by Hitler of the “Order of Merit of the Eagle” in 1938, and a speech delivered by Mooney in June 1940 “War or Peace in America?” Which was published in the Saturday Evening Post.


The last U.S. Ambassador in Berlin was Hugh Wilson, who was recalled to Washington in November 1938 as a protest against the Jewish pogrom that month. In retaliation, the German Government recalled the last German Ambassador in Washington, Dr. Heinrich Dieckhoff, though he remained officially German Ambassador to the United States until well into 1940 at least, remaining in [Berlin] Germany. Dieckhoff’s wife’s brother was married to Foreign Minister Joachim “von” Ribbentrop’s sister.[79]

Hitler addressed the Reichstag on 28 April 1939 and replied to President Roosevelt’s proposal of non-aggression pacts with a number of European nations along Germany’s border in sarcastic terms, one of several public utterances that were derogatory to the President. He later stated that his remarks that when Roosevelt was elected again for a second term, his re-election was a mistake were misquoted. “I was furious when I heard this lie, because, on the contrary, I have always been of the opinion that none other than President Roosevelt would be able to undertake the important tasks which he had begun”. [80]

Ministerialdirektor Dr. Helmuth E.H. Wohlthat, departmental chief on Göering’s special staff for the functioning of the “Four-Year Plan”, set out in his discussion with James Mooney on 28 February 1940 that with regard to Central Europe, the German view that the location, size and industrial development of Germany entitled her to prior economic rights in the Central European area. In this connection, he mentioned that included not only Hungary and Rumania but Bulgaria and Yugoslavia as well. He stated that Germany did not want political hegemony in any of these countries, but will not tolerate any outside political interference in them. He said that Germany regarded Greece and Turkey as Mediterranean states in which Germany was not concerned. However, he pointed out that in the area between the Black Sea and the Baltic Sea, smaller than the area of the United States, there were 250 million people. German trade was the largest economic factor in this area and Germany should be entitled to the opportunity to develop this trade. He stated further that Germany was even then subsidising the wheat growers in these countries by paying them more than the world price, which practice was directly comparable with similar American agricultural subsidies.[81]

At the beginning of 1940, Dr. Schacht offered Hitler his services for negotiations with the United States of America in regard to the discontinuance of aid to England and he informed Göering of his offer.[82] The previous October, James D. Mooney on his first leg of his peace mission had tried to see Schacht, but the banker was “in the doghouse” and living on his farm.

After hostilities broke out in September 1939, Germany’s trading partners began to refuse to accept the Reichsmark, and so Germany had to turn increasingly to making payments in gold in exchange for hard currency and for materials and goods vital to the war effort. Between January 1939 and 30 June 1945, Germany transferred gold worth around $400 million, equivalent to $3.9 billion at present values, to the Swiss National Bank in Bern. The Swiss National Bank purchased about ¾ of this gold, worth around $276 million, and the remainder went directly to the accounts of other countries in payment for goods and raw materials.[83]

The U.S. Government formally froze German assets in the U.S. in April 1940, after Under-Secretary of State Sumner Welles’s “official” and James D. Mooney’s “unofficial” peace overtures had been made to Hitler. Welles cabled Roosevelt on his trip to London: “LONDON, March l2 l940. At one o’clock I lunched with Sir John Simon at 11 Downing Street. The other guests were Lord Hankey, Lord Chatfield the Minister of Co-ordination, Sir Kingsley Wood the Minister for Air, Sir Andrew Duncan the President of the Board of Trade, Sir Horace Wilson and Sir Robert Vansittart. Sir John Simon discussed with me nothing beyond his own success in floating the first War Loan, which had been oversubscribed that same day. He expressed the opinion that his policy of issuing repeated War Loans in relatively small amounts, was the only sane financial policy to pursue, inasmuch as it would avoid in the future the need to refinance, or to pay off, staggering sums at any one given moment. Unlike his French colleague, M. Paul Reynaud, he made no reference to the relations existing between his own Department and the American Treasury Department…. Sir Andrew Duncan, whose career up to recently had been removed from politics, as a large industrialist, spoke of the attitude of British labour. He expressed great satisfaction with the loyal support given by labour in the prosecution of the war. He said that this support was far more sincere and enthusiastic than in 1914-1918. He expressed great concern, however, with regard to the economic situation, which would confront the United Kingdom if the war lasted for any considerable period. He hoped that some way might be found to achieve security and peace before the whole economy of Europe smashed. He expressed enthusiastic support for the liberal trade policies sponsored by Secretary Hull”.[84]

The U.S. supposedly carried out little trade with Germany thereafter. However, this latter statement is subject to qualification and scepticism. Chase National Bank, now Chase Manhattan, operated branches in Paris even after the occupation. The bank operated accounts for the German embassy as well as for German businesses operating in France. As late as six months before the outbreak of war in Europe, Chase National Bank worked with the Nazis to raise money for Hitler from Nazi sympathisers in the U.S. The German Government, through Chase National Bank, offered Nazis in America the opportunity to buy Reichsmarks with dollars at a discount. The arrangement was only open to those who wished to return to Germany and would use the marks in the interest of the Nazis. Americans who were interested had to prove to the German embassy [in Washington] that they supported Hitler and his policies[85].

Co-operation with the Nazis continued even after the U.S. entered the war. Chase National in Paris remained open long after other U.S. banks had closed and even provided assistance to the Nazis. Chase Paris’ branch was the focus of financing the German embassy’s activities throughout the rest of the war with the full knowledge of Chase National’s head office in New York. In order to assure the Germans of its loyalty to the Nazi cause, the Vichy branch of Chase National at Chateau-sur-Neuf were strenuous in enforcing restrictions against Jewish property, even going so far as to refuse to release funds belonging to Jews because they anticipated a Nazi decree with retroactive provisions prohibiting such a release. [86]

Professor Henry Turner at Yale comments: “The last (very guarded) reports G.M. received on what was happening within Opel prior to Hitler’s declaration of war came from G.M.’s attorney in Berlin and arrived, with great delay, by seamail and U.S. diplomatic pouch, in October 1941. This increasingly limited flow of information was strictly one-way; I have found no G.M. input into Opel after February 1941, when the last departing G.M. official [Elis Sterner “Pete” Hoglund] essentially turned oversight over to the Berlin attorney mentioned above. In the spring of 1942, to be sure, a lowly accountant at Opel, Rüsselsheim, turned up in New York City, having secured passage on the ship bringing home the U.S. diplomatic personnel sequestered since the declaration of war. He was a U.S. citizen but had been born in Germany and had apparently been simply overlooked by the Nazi authorities. He provided some general information, but nothing that could be regarded as ‘intelligence’. The claim that G.M. was somehow controlling Opel is simply groundless.”[87]

However, the situation with Ford-Werke. A.G. as it had become in 1939 was substantially different to that of G.M. and Opel. The Cologne factory continued to draw materials and machine tools from the U.S. in 1939 and 1940. In late 1940 Ford in Dearborn approved the proposal to raise equity from 20 million RM to 32 million RM. Despite Ford-Werke’s high profits they needed additional capital to supply Wehrmacht demand and even in 1941 Dearborn sent vital machinery from the U.S. to Cologne and thus helped expand the facility for war production.[88] According to Billstein’s figures, the 1940 Export Turnover was RM 17,406,000! [89]


Funk was cross-examined at length before the Military Tribunal[90]. Funk claimed that he [and witnesses would confirm this in questionnaires still outstanding or in person he suggested] made the greatest efforts to protect the occupied territories from “exploitation”. He testified that he fought a virtually desperate struggle throughout the years for the maintenance of a stable currency in those territories, because again and again it was suggested to him that he should reduce the exchange rate in the occupied territories so that Germany could buy more easily and more cheaply in those countries; he did everything that could be thought of to maintain economic order in those territories. In one case, in Denmark, he even succeeded, in the face of opposition from all other departments, in raising the value of the Danish krone, because the Danish National Bank and the Danish Government requested it for justifiable reasons.

Funk stated that he opposed the increase of occupation costs in France in 1942 as well as in 1944. The American Chief Prosecutor quoted the memorandum of the Reichsbank, which Funk authorised. The occupation costs were determined not by the Minister of Economics and the President of the Reichsbank but by the Minister of Finance and the Quartermaster-General, in other words, by the highest Wehrmacht commands, and in the case of France, Denmark, and other countries, also by the Minister for Foreign Affairs [von Ribbentrop]. Therefore, he did whatever he could possibly do, i.e. whatever was within his power, to keep the economy of the occupied territories in good order. He was successful finally in persuading Reichs Marshal Göering to issue a decree, which prohibited all German personnel from buying on the black market; but that happened only after many abuses in this respect had already occurred. He wanted to emphasise also that he considered it necessary for the maintenance of order in the occupied territories that social life there should not be disturbed, and that, therefore, as a matter of principle he was always against the forced or excessive deportation of foreign workers from the occupied territories to Germany.

Funk retorted that if any accusation was made against him that [Germany] spoliated occupied territories and foreign countries with the aid of the “clearing arrangements”, he could only say that the clearing arrangement was not originally introduced by them in their dealings with the occupied territories or during the war, but that it was the normal method of trade between Germany and her business partners. It was a system that had been forced upon Germany as had been pointed out by Schacht, when other nations resorted to using the proceeds of German exports for the payment and amortisation of German debts. Schacht had indeed explained in his testimony how the clearing arrangement arose: see above. At all times, however, he had emphasised that the clearing debts were real debts for merchandise, and that was important. He had said again and again that this clearing debt was a genuine debt of the Reich and would be repaid at the rate, the purchase value that was in force at the time when they entered into those obligations. He especially stated this he claimed in his last speeches in Vienna on 10 March 1944 and in Konigsberg on 7 July 1944. Beyond that, in July, [1944] he made the suggestion that after the war the clearing debt should be transformed into a European loan, so that it should not remain on the narrow plain of a bilateral exchange of goods but be effectively commercialised; from this could be seen distinctly that he always considered that the clearing debt was a genuine debt, so that the nations in the “occupied territories” [Counsel pointed out that Funk had referred in reality to the satellite states of Germany] who had such claims on Germany could and would be satisfied with the war and, as he constantly emphasised, at the same rates that existed at the time when the debt was incurred. If, however, the countries would have had to pay reparations on the basis of peace treaties, then those reparations of course, quite reasonably, could only have been paid in goods; and then, equally reasonably, it would have been possible to create a balance between German debts and German claims. But he never left any doubt about the fact that the clearing debt was to be considered a true debt. Therefore, he had to reject the accusation that with the aid of the clearing system Germany exploited the occupied territories. Funk said that he also had to reject even more strongly the accusation that he share responsibility for the burden of unbearable expenses, particularly occupation costs and other outlays of money, which were imposed on the occupied territories. It could be proved that he always objected to excessive financial burdening of the occupied territories. The witnesses would later testify and confirm this. Counsel advised the Tribunal that the defendant had referred to two speeches, which he made in Vienna and in Konigsberg. These were two addresses, which dealt in part with the subject of clearing debts, and in part also with the defendant’s favourite subject of a European economic union between Germany and her neighbour nations, that is to say, an economic union on the basis of full equality. This years before the establishment of the European Economic Community of which the Federal Republic of Germany was a member.

In 1944 Funk had statistics compiled to show just how much the occupied countries had produced for the war effort in the 3 years of 1941, 1942, and 1943, and the assessments before him reached the figure of 90,000 million Reichsmark. Funk agreed that this was an extraordinarily high figure, but this was explainable as the currencies of the various countries were converted into Reichsmarks. That is, the reduced purchasing power of the various currencies is not expressed in those figures. In truth, therefore, the production is lower than those Reichsmark figures might show. At the same time Germany utilised at least two-thirds of her entire production, that is, about 260,000 million marks worth, for the European war effort, in other words, almost three times as much as the occupied countries. Almost up to the time of the invasion he succeeded, in the case of France, in regulating the financial and monetary system and thus also the economic and social order to such an extent that, at the end of the German occupation, French finances were actually much healthier than German finances, and if it had not been for the circumstances resulting from the elementary impact of the war, France would have been able to construct a healthy monetary system on this basis.

Funk had referred to the so-called “Central Planning Board” a body about which the Tribunal had heard a great deal. Funk stated that as Minister of Economics he had no interest in the fact that foreign workers were transported to Germany, no matter whether for armament or other purposes, at the time when he became a member of the Central Planning Board. Funk had been called into the Central Planning Board in the autumn of 1943, when he turned over all production matters to Albert Speer and when, for the first time, on 22 November 1943 he attended a session of the Board. At that time he not only had no interest in having foreign workers brought to Germany but actually, from the economic aspect, he wanted to have the workers remain abroad, for the production of consumer goods had, to a large extent, been shifted from Germany to the occupied countries so that in other words this production, that is, French production or Belgian production, could work unhindered for the German populace; he did not want the workers taken away, and particularly he did not want them to be taken away by force, for in that way the entire order and the whole social life would be disturbed. Before that time, as Minister of Economics, he was naturally interested in seeing that the German economy had workers. However, those questions were not dealt with in the Ministry of Economics, but either in the Four-Year Plan, where a Plenipotentiary General for Labour had been active from the beginning, or [another department]. Funk had written a letter to Field Marshal Milch and which was submitted by the French Prosecution as Exhibit RF-675, (Document Number RF-675). In this letter Funk apologised for participating so very infrequently in the meetings of the Central Planning Board and at that time sent two experts from his ministry to the session, that is, two experts in the field of administrating civilian supplies and of the export trade. As deputy of Funk’s State Secretary, Dr. Hayler, who was to be called later as a witness, a certain Ohlendorf participated at this meeting of the Central Planning Board. As far as the negotiations of the Central Planning Board were concerned, Funk was essentially interested only in the fact that in that meeting the necessary raw materials were allocated for the administration of consumer goods and the export trade. For that reason Ohlendorf and two other experts for the administration of consumer goods and the export trade were sent to the meeting. State Secretary Hayler brought Ohlendorf into his Ministry. Before that he had only known Ohlendorf vaguely from one or two meetings and he had had an extraordinarily favourable impression of him, for he had an extremely lucid mind and could always express his thoughts in a most impressive way. Before that time he did not even know that Ohlendorf had another position in the Reich Security Main Office, for he was introduced to Funk as a manager of the Main Organisation for German Trade. Hayler was the chief of this organisation, of the Reichsgruppe Handel, and Ohlendorf was his manager and was introduced to me as such. Therefore he had no objections to Ohlendorf being brought into the ministry and taking over that field which corresponded to his private business activities up to now-the province of administration of consumer goods. Then through Hayler Funk discovered that Ohlendorf was active also in the R.S.H.A. as an office chief in the SD. However, he took no exception to this activity, for he was not fully acquainted with those assignments and in any case he was not convinced that anything was taking place which was unacceptable for the Ministry. Ohlendorf was active chiefly as manager of the Reichsgruppe Handel. As far as he know, he only had an auxiliary occupation in the R.S.H.A. Naturally he was very much affected and painfully surprised when he heard here about assignments which Ohlendorf with his “Einsatsstab” had had in previous years in Russia. He had never heard one word about this activity of Ohlendorf. He himself never mentioned those things to me and until this time he did not know the type of assignments such as Einsatsstabe had. Ohlendorf never talked about his activity in the SD. Hayler, who knew him, much better and more intimately than he did is better qualified to give information. In any event he knew nothing of this activity of Ohlendorf, which after all he had carried on in years prior to this date, and he was very much affected to find that this man had done such things.

When questioned, Funk stated that when Funk took over from Schacht, the gold reserve amounted to about 500 million Reichsmarks. It was allegedly only increased in any substantial manner by the [acquisition of] Belgian gold, as far as he knew. New gold reserves, Funk claimed, were acquired only by changing foreign currency into gold, and then, after he took over the post, we got in addition the gold reserve of the Czech National Bank though they mainly increased the reserve through the Belgian gold. Counsel commented that gold became very important to Funk as a matter of payment in foreign exchange: they had to pay off in gold, i.e. use gold as foreign exchange in 1942 and 1943 though Funk replied that it was very difficult to pay in gold. As the countries with which Germany still had business relations introduced gold embargoes. Sweden refused to accept gold at all. Only in Switzerland could Germany still do business through changing gold into foreign currency.[91]

The International Military Tribunal found that Funk was not guilty on Count One but guilty under Counts Two, Three and Four. It was decided that Funk either knew or deliberately shut his eyes to the deposit of stolen gold from Jews and other Holocaust victims by the SS and others. He was sentenced to Life Imprisonment.


It seems clear that the Nazi conspirators directed the whole of the German economy toward preparation for aggressive war. To paraphrase the words of Göering, the conspirators gave the German people “guns instead of butter.” They also gave history its most striking example of a nation gearing itself in time of peace to the single purpose of aggressive war. Their economic preparations formulated and applied with the energy of Göering the financial wizardry of Schacht, and the willing complicity of Funk, among others, were the indispensable prerequisites for their subsequent campaign of aggression.

The relevance of the MEFO bills in the final assessment is that they were introduced as a cunning measure in order to repay a gold loan from other countries’ banks, he Reich government backed them recklessly without thought of the requirement to repay them after five years. By the time that the bills were payable, there was yet another financial crisis, the government being unable to pay wages even after 1 January 1939. The MEFO bills were unable to be paid and so re-armament continued apparently sanctioned by the Reichsbank simply to put off the requirement to repay the bills. Further, the 1938 government loan appeal failed, though Hitler’s plan for a “Volkswagen” was a blessing since the populace were encouraged into saving cash by stamps in cards in order to buy cars which were some time off being produced if then. Whereas the loan appeal failed, the opportunity to buy an automobile which was suddenly within reach at last resulted in the ordinary wage-earners paying up front and into a “black hole”. The KdF-Wagen fund raised a not insubstantial 268 million marks for the Government, and no cars were ever issued to the savers! Although much criticised by Schacht, and then Funk, Göering as Delegate of the Four-Year Plan was responsible for exports and foreign currency earnings by 1939. Lammers managed to resolve the cash crisis at the beginning of the year, though presumably Göering was either too remote from the problem or delegated the resolution to his Minister. On the basis that the bankers and economists could have seen that foreign financing could have resolved the MEFO crisis, this could have been attractive to various interested parties.

The first scenario is if James D. Mooney had been able to bring together the London, and U.S. bankers through the Swiss National Bank in Bern, to facilitate a Gold Loan in exchange for cancelling the restrictive trade practices introduced by Schacht. Mooney discussed in London with Wohlthat the possibility of a Gold Loan of $500,000,000 to $1,000,000,000 which at RM12.17 to the Pound Sterling, approximates at between RM1,364,000,000 to RM2,729,000,000 at “official” average rates, via the Bank of International Settlements in Basle to provide a gold reserve so that orthodox money and price practices could be set up. Göering’s functionaries and the Reichsbank directors would have quickly worked out that they might be able to repay the MEFO bills, or a percentage, out of such an international loan just as the MEFO bills had repaid the 1933 gold loan. If the international bankers had not rejected the idea out of hand, for obvious reasons, then Funk and those in the Reichsbank who claimed that they were against re-armament would have argued that the MEFO bills could and should be repaid, and thus their aim was achieved. Göering and the Office of the Four-Year Plan would have officially maintained that re-armament could have continued without restriction, and the MEFO bill repayments could just be ignored. Those in the Reich with lavish tastes and requirements for cash to satisfy them, especially Göering, would no doubt have thought that it was Christmas. Conversely, the benefits to German trade would have been considerable as the exchange and trade controls would have been removed.

If the repeal of all of the exchange and trading restrictions was achieved in return for the payment, the prospect of more foreign exchange would have appealed to the same parties for the same reasons as before. Further, U.S. and other countries with investments in Germany would have been able to recover their dividends much more easily in theory, and increase trade though even such a massive Gold Loan as was mooted was surely only a temporary measure and would just have put off for a time the inevitable return to controls again because of the permanent installation of those in positions of authority that caused the 1933 crisis to be repeated and made worse. That is, unless one major step occurred.

Schacht and other testified before the Nuremberg Tribunal that they were interested in seeing Hitler deposed. However, it seemed that they would rather see a disaffected General do the honours of assassination. It appears that if Hitler was to be removed from the equation, those of his inner circle would have been as well. Wohlthat maintained to Mooney even as late as the Autumn of 1939 that if the conditions were right, peace was possible and Hitler and those around him would be deposed. Göering seems to have had full knowledge of the discussions, presumably because Britain and France were claiming that [only] Hitler had to be removed as Head of State before peace negotiations could begin. With the Führer gone, his designated successor in the event of death would have become Head of State: he who was also the Delegate of the Four-Year Plan! It obviously did not occur to the Reichs Marshall that he would not be acceptable necessarily; though the nature of the government that had to replace Hitler was discussed in Mooney’s peace missions it was not absolutely settled as to those with whom the British and French could deal with. As time went on, the question of elimination of Hitler became more difficult to envisage on the German side, certainly by February 1940, and then after the invasion of Norway, it was totally discounted so far as Mooney’s missions were concerned. Separate from these discussions were the ongoing German Resistance efforts of course with their own aims and agendas. The U.S. froze all German assets in the spring of 1940 after Under Secretary of State Sumner Welles’s mission failed.

In addition to these scenarios, it occurs that Funk had already started to transfer as much of the Reichsbank assets as possible into gold and had started exporting them to Switzerland and other neutral countries. If the Gold Loan had gone through, would Funk have still carried on with this practice? It is tempting to suggest that he would have argued that there would have been no necessity to do so, and yet his testimony before the Military tribunal states that during the war gold was used to pay for imports from neutrals, until Sweden stopped accepting gold. He does not mention the South American countries and Spain and Portugal that Germany also dealt with, but did say that Switzerland exchanged gold for foreign currency. It is therefore open to doubt as to whether Funk would have changed strategy, and yet if the MEFO bills were paid off with the Gold Loan, there would have been inn theory no other monies left out of the credit. On the balance of probabilities, it is suggested that the Reichsbank would have continued its practice, and Funk could have excused this by saying that he was taking the money away that otherwise would have been spent on armaments.

The International Gold Loan never materialised. The next scenario therefore was what if Mooney’s or Welles’s or any of the other missions had succeeded in any event and there was a peaceful settlement after the invasion of Poland? Göering as Delegate of the Four-Year Plan was immediately before the war calling for foreign exchange earned through exports. The Devisen system, namely Blocked Marks, would have remained in force and therefore the various schemes that had been used pre-1940 to get around the system would have been used and after investment from those foreign companies and corporations with a financial interest in Germany would have resulted in increased trade, though only if quotas, countervailing duties, and protectionism were not employed by countries.

The evidence from Funk suggests that if peace had been achieved after the invasion of France and the Low Countries had succeeded, then the occupied countries would have remained under the financial control as he outlined, and trade would presumably have been much the same as that in practice. Separate evidence before the Tribunal confirmed that the costs for Belgium and France were extreme. However, the economic cost to the occupied countries would have been considerable, with the aggravation and the burden of the exchange rate mechanism established by the Germans. If the United Kingdom had reached a settlement by November 1940, there has been speculation over the years as to what form of government would have been installed, if the National Government fell or was removed. If the evidence from Norway is relevant, then Vidkun Quisling [who had been paid by large sums by the Germans in goldmarks and then in Sterling before the invasion] there would have been sympathisers ready to fill any vacancies. Members of organisations that proclaimed friendship with Germany pre-war were also protagonists of Imperial trade. The Reich government from Hitler down maintained consistently even in April 1940 that Germany was not interested in the British Empire, and that the British could keep their Empire intact. Germany enjoyed considerable trade with the Empire and other countries in Africa for instance, i.e. under Belgian, French, Italian Portuguese and Spanish control though Germany called for the return of those colonies taken from them after the Great War. There were Afrikaners in southern Africa who were Nazi sympathisers, and no doubt those of German descent in the former colonies. German trade would have continued and expanded with the Empire, but through Britain as a “clearing house” for exchange.

The extent to which trade would have continued with the U.S. is difficult to assess, though given the evidence of the peace missions, the U.S. was offering trade in return for peace and therefore any settlement would encompass this.

David Hayward, January 2002

References other than to books are extracted from Internet website: The Nizkor project: Nazi Conspiracy & Aggression: Volume I, Chapter VIII: The Economic Aspects of the Conspiracy; 12 September 1996.These then refer to:

Charter of the International Military Tribunal, Article 6, especially 6(a). Vol. I Pg. 5

International Military Tribunal, Indictment Number 1, Section IV(E). Vol. I Pg. 21

The USA series number, given in parentheses following the description of the document, is the official exhibit number assigned by the court.

References to “Mooney” refer to James D. Mooney, Unpublished Autobiography, Ed. Louis P. Lochner, State Historical Society of Wisconsin, Madison, 1948

[1] EC-28; Lecture of Major-General Thomas delivered, 24 May 1939, at the Foreign Office. (USA 760). Vol. VII Pg.250

[2] Arnold A. Offner “American Appeasement: United States Foreign Policy and Germany 1933-38” Belnap Press of Harvard University Press Cambridge, Massachusetts 1969, P.2.

[3] Judgement of Military Tribunal, Nuremberg.

[4] General Motors World, June 1934, P.1.

[5] Offner, Pp.37 and 38, ibid.

[6] Offner, Pp. 61-63, ibid.

[7] Offner, Pp. 65-67, ibid.

[8] Offner, Pp.73 and 74, ibid.

[9] Offner, P.77, ibid.

[10] Offner, Pp.77-80, ibid.

[11] 3 November 1934: The Economist, P.824.

[12] Offner, Pp.77-80, ibid.

[13] Offner, Pp.93 & 94, ibid.

[14] Offner, Pp.94-96, ibid.

[15] Offner, P.102, ibid.

[16] Offner,P.96, ibid.

[17] Military Tribunal, ibid.

[18]EC- 461: Extracts from Ambassador Dodd’s Diary, 133-38. (USA 58) Vol. VII Pg.515

[19] Offner, Pp.98 & 99. Ibid.

[20] Evidence before the International Military Tribunal, Nuremberg, 3 May 1946.

[21] Vansittart, P.537, ibid.

[22] (EC-497)

[23] Vansittart, ibid.

[24] Vansittart, Pp.475-476, ibid.

[25] Offner, P.99, ibid.

[26] Offner, P.102, ibid.

[27] James D. Mooney, unpublished biography, State Historical Society of Wisconsin, Madison, USA, Papers of Louis P. Lochner

[28] Mooney, P.19.

[29] Offner, Pp.100-102, ibid.

[30] Mooney, P.19, ibid.

[31] Offner, Pp.100-102, ibid.

[32] EC-128; Report on state of preparation for war economic mobilisation a of 30 September 1934. (USA 623) Vol. VII Pg.306

[33] Offner, Pp.102 & 103; referring to Edward Tenenbaum, “National Socialism vs. International Capitalism (New Haven 1942), 105-106.

[34] See “Holden Car Project” by the Author.

[35] This must have been in 1933? Rumbold was replaced by Sir Eric Phipps in 1933. “Mist Procession”, P.476, ibid.

[36] EC-404; Minutes of conference of Sixth Session of Working Committee of Reichs Defence Council, held on 23 January 1934 and 24 January 1934. (USA 764) Vol. VII Pg.443

[37] 3 November 1934: The Economist, P.824.

[38] 2261-PS; Directive from Blomberg to Supreme Commanders of Army, Navy and Air Forces, 24 June 1935; accompanied by copy of Reich Defence Law of 21 May 1935 and copy of Decision of Reich Cabinet of 12 May 1935 on the Council for defence of the Reich. (USA 24) Vol. IV Pg. 934.

[39] Military Tribunal Judgement, ibid.

[40] 2261-PS; Directive from Blomberg to Supreme Commanders of Army, Navy and Air Forces, 24 June 1935; accompanied by copy of Reich Defence Law of 21 May 1935 and copy of Decision of Reich Cabinet of 12 May 1935 on the Council for defence of the Reich. (USA 24) Vol. IV Pg. 934

[41] EC-416; Minutes of Cabinet Meeting, 4 September 1936. (USA 635) Vol. VII Pg.471

[42] EC-08, also Judgement of the Military tribunal, ibid.

[43] EC-408: Memorandum report about the Four-Year Plan and preparation of the war economy, 30 December 1936. (USA 579) Vol. VII Pg. 465

[44] EC-408: Memorandum report about the Four-Year Plan and preparation of the war economy, 30 December 1936. (USA 579) Vol. VII Pg. 465

[45] (EC-128)

[46] (EC-128)

[47] Mooney, P.22, ibid.

[48] General Motors World, July 1937, P.5.

[49] Ken Silverstein, “New Documents Reveal the Close Ties Between Dearborn and the Fuhrer”, Investigative Fund of the Nation Institute, 24 January 2000, per Internet.

[50] Reinhold Billstein, “How the Americans took over Cologne”, “Working for the Enemy”, P.111, Berghahn Books, 2000.

[51] Research Findings About Ford-Werke Under The Nazi Regime, Pp. 50-51, Ford Motor Company, 2001.

[52] EC-405; Minutes of Tenth Meeting of Working Committee of Reichs Defence Council, 26 June 1935. (GB 160) Vol. VII Pg.450

[53] EC-14; Speech before the Wehrmacht War College 1 November 1937, by Major-General Thomas. (USA 758) Vol. VII Pg.246

[54] Judgement of Military tribunal, ibid.

[55] EC-437, US-624.

[56] 1301-PS; File relating to financing of armament including minutes of conference with Göering at the Air Ministry, 14 October 1938, concerning acceleration of rearmament. (USA 123) Vol. III pg. 868

[57] (1301-PS).

[58] Billstein, P.111, ibid.

[59] (EC-497)

[60] Offner,Pp.146-153 ibid.

[61] An interesting point arises here as to whether taxes imposed on those employed by and/or benefiting from the armaments industries had any effect on the shortfall. Part of the investment in armaments must have been retrieved in theory through direct and indirect means. That is, unless those liable to pay the most taxes were able to avoid paying them!

[62] EC-436, ibid.

[63] Military Tribunal Judgement, ibid.

[64] (EC-534, US-646. Dissenting Judgement of Soviet Judge, Military Tribunal, Nuremberg.

[65] Exhibit Number 33 (Document Number Schacht-33), 3 May 1946, International Military Tribunal, Nuremberg.

[66] 699-PS: Letter from Funk to Hitler, 25 August 1939, reporting on economic affairs. (GB 49) Vol. III pg. 509

[67] Military Tribunal Judgement, ibid.

[68] (2194-PS).

[69] (3324- PS)

[70] 30 November, 1938 – London: R. S. Hudson, Secretary of the British Office for Overseas Trade: "The question is the much larger problem of how to counter the new form of German competition throughout the world."

[71] Re-legalisation: Documented Evidence of a Secret Business and Political Alliance Between the U.S. “Establishment” and the Nazis, Before, During and After World War II, up to the Present. (The Elkhorn Manifesto) By R. William Davis, Director, The Elkhorn Project Ed.R. William Davis July 4, 1996 Louisville, Kentucky. Internet Site.

[72] Morton Mintz and Jerry S. Cohen, “Power, Inc.”, pp. 497-499

[73] Charles Higham, “Trading with the Enemy: An Expose of the Nazi-American Money Plot 1933-1949,” pp. 162-165

[74] Alfred P. Sloan Junr. Ed. John McDonald and Catherine Stevens “My Time With General Motors”, Pp.224-226, Doubleday, New York 1963

[75] Mark Aarons and John Loftus, “The Secret War Against The Jews”, Pp.55-60

[76] James D. Mooney autobiography, P.9

[77] Transcripts are held in the James D. Mooney papers, Georgetown University, Washington D.C.

[78] Mooney papers, Georgetown University, Washington D.C.

[79] Mooney, P.100, ibid.

[80] Mooney, P.127-128, ibid.

[81] Mooney, P.112, ibid.

[82] (PS-3700, US-780.)

[83] See below.

[84] FDR Papers, Maris University, USA, on Website.

[85] See below.

[86] “U.S. and Allied Efforts to recover and Restore Gold and Other Assets Stolen or Hidden by Germany during World War II”; Forward and Executive Summary to the Preliminary Study, U.S. Department of State, 7 May 1997, Internet,

[87] 5 March 2000: e-mail: H.A.Turner to Author.

[88] Billstein, P.112, ibid.

[89] Billstein, P.113, ibid.

[90] International Military Tribunal Judgement, and Nuremberg Trial Proceedings Volume 13, 122nd day, 6 May 1946

[91]6 May 1946, ibid.