The Thousand Conspiracy - Secret Germany Behind the Mask
Paul Winkler
Charles Scribner’s Sons©1943
New York
381 pps. – First Edition – Out-of-print
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CHAPTER V
THE PRUSSO-TEUTONICS APPROACH THEIR GOAL
ON THE FIRST OF OCTOBER, 1927, two extremely dignified gentlemen in frock
coats and striped trousers called on Marshal Hindenburg President of the
German Republic. They were the "secret adviser" (Geheimrat) Duisberg, head of
the famous chemical firm I. G. Farben and one of the leaders of German big
industry; and the royal chamberlain, Elard von Oldenburg-Januschau,
mouthpiece of the Junkers and
official representative of the Reichs-Landbund, the Junker agricultural
organization. They came to present to Hindenburg a "gift from the German
economy"—title to the Neudeck estate, castle and grounds.
Neudeck had belonged to the Hindenburgs from the time of Frederick the Great,
though the Marshal himself had never owned landed property. Tomorrow the
whole country would be celebrating his eightieth birthday and on this
occasion the Junkers and big industry had decided to restore the estate of
his ancestors to him.
A Stroke of Genius
The idea had been conceived by the designing OldenburgJanuschau, who was a
close friend of Hindenburg. This "king's chamberlain" was a kind of liaison
officer to the Marshal, permanently delegated by the Junker organization to
safeguard their interests in the Presidential office. Oldenburg had worked
effectively. The contribution of the Junkers to the cost of the gift was
trifling. The greater part of the funds came from big manufacturers, whose
purse-strings were looser than those of the Prussian landlords, always in
debt. Nevertheless the moral benefit of this princely gift to the
Marshal-President would revert equally to both groups. In this there was a
certain justice: the industrialists had supplied the money, the Junkers the
idea.
Industrialists and Junkers were hoping by this gesture to obtain a stronger
hold on Hindenburg. But the Junkers hoped to secure an additional advantage
of their own. By being transformed from an army officer without property into
a landowner, Hindenburg would become a genuine Junker like his forebears. He
would have the same day-to-day economic anxieties as they, and would be
better qualified to understand their ideas and aspirations.
Bismarck himself had been a great landlord, owner of three domains:
Schoenhausen, Friedrichsruh, and Varzin. His entire economic policy conformed
to the special interests of the Junkers. Under his regime import duties on
agricultural products were steadily increased, to the disadvantage of other
classes of the population. Under his successor, however, things had gone less
smoothly.
A Junker Who Forgot to Be a Junker
When the young and impetuous William II decided that Bismarck should retire,
he replaced him by Count von Caprivi, a general, member of a Junker family,
who at first had the confidence of Prusso-Teutonic groups. But Caprivi
possessed no fortune of his own; he was simply a soldier. Moreover, he
pursued economic policies directly opposed to what the Junkers believed to be
their interest. Between 1892 and 1894 he concluded commercial treaties which
represented evolution toward free trade with Austria-Hungary, Italy, Belgium,
Switzerland, Roumania, Serbia, and Russia. They provided for a decrease in
duties on imported agricultural products, in exchange for similar concessions
granted by the various countries for admitting manufactured goods which
Germany wished to export.
Young German industry was happy, and the public gladly experienced a general
reduction in the cost of living. But the Junkers were furious. Because of
their unprogressive methods of exploiting their soil they could make profits
only if they could sell their products at exorbitant prices, artificially
bolstered by high import duties. So they decided on the fall of von Caprivi
who had become increasingly persona non grata to them.
A campaign of unusual violence was launched against the chancellor. Finally
in October, 1894, the Emperor, while visiting on the estate of Count von
Eulenberg, one of the most influential Junkers of the time, decided without
apparent reason to recall Caprivi. The "powers behind the throne" had
received full satisfaction.
Hindenburg became President of the German Republic in 1925. Descendant of an
old Junker family, he was elected with the support of the Junker class, but
once in power he seemed at times to forget that his sole duty in his new
office was to serve the special interests of some 13,000 Prussian lords.
True it was that Hindenburg, like Caprivi, owned no land. His fidelity to
Junket principles, therefore, originated simply in the traditional alliance
between the corps of Prussian officers and the Junker class, and not in any
direct personal interest. For an officer younger than Hindenburg, the
entangled interests of the Reichswehr and Junker organizations might have
been an argument strong enough to warrant total submission to orders from the
manor lords. But Hindenburg was a hero of the Great War as well as President
of the Republic, elected for a term of seven years at the age of 78. He could
therefore consider himself sufficiently independent to act merely as one who
wished to leave posterity the recollection of a man devoted to the public
interest.
At the beginning of his term as President, Hindenburg seemed unwilling to
accept orders from anyone, and, in spite of his antecedents, was ready to
serve the Republic faithfully. The Republican parties were agreeably
surprised, but this independence was unbearable to the Junker class. It had
to be stopped at all costs. Neudeck was the bait held out to him. By one
operation Hindenburg was made a debtor of the Junker class and heavy
industry. In addition to this, as owner of a great estate in East Prussia he
was henceforth to have the same worries and interests as other Junkers. The
case of Caprivi had been a lesson, and the remedy found was an excellent one.
A Fruitful Alliance
The alliance between Junkers and big industry in this overture to Hindenburg
was not an innovation. It was -the same fruitful cooperation which we have
seen at work behind the Felime murders. At first glance the interests of the
two economic classes do not appear identical. The Junkers favored high
tariffs on agricultural products to prevent competition, while it was to the
advantage of industrialists to conclude commercial treaties facilitating
exportation and allowing in exchange importation of agricultural products. In
signing his series of commercial treaties Caprivi had yielded to
considerations of the latter sort.
But German industrialists of 1927 were no longer like those of 1892. The
latter saw their future in natural expansion of their export markets, in
healthy competition with manufacturers of other countries. The industrialists
of 1927 had already been brought into line by the Junkers They had been made
to understand that as German manufacturers they need not think along the
lines of Anglo-Saxon economy. In free competition with foreign industries
they could hope at best to secure one of the three first ranks in world
markets. But Germany, according to Prusso-Teutonic schemes, should not be
content with one of the first places, but ought to obtain complete domination
of all markets.
The plan for achieving this purpose was simple. Instead of facilitating trade
with other parts of the world by concluding commercial treaties which
successively lowered tariffs, they must, on the contrary, increase duties on
imports and set themselves apart from the rest of the world. (Later this
isolation was to be effected much more thoroughly with the aid of exchange
control introduced under Bruening's regime by Dr. Luther and perfected under
Hitler by Dr. Schacht: control of exchange which subjects all importing to
the control of the State.) The plan anticipated the following stages:
economic isolation; considerable rise in cost of living; misery and
discontent of the people; blame traced back to parliamentary institutions and
the Allied nations; then a twofold result: discredit of parliamentary
institutions and rearmament.
At this point industrialists were promised these advantages: huge arms orders
as an ample compensation for lost export business; high tariffs on imported
products of heavy industry; successive subsidies by the State to German
industry to allow a certain amount of exporting as a method of dumping (in
exchange the State obtained foreign currencies which it needed even with
control of exchange); and finally, because of discontent of the people and as
a result of rearmament, war; then conquest by blood and fire of new
territories, each becoming an economic outlet totally submissive to German
control.
The Right Kind of Competition
In this line of reasoning the point of view of the Hanseatic League no longer
prevailed. That ancient trading association of free German cities had
struggled to gain control of world markets by every legitimate means of free
commerce. The Hansa's contests with English merchants had been sharp but
honorable for centuries, and had been carried on according to rules identical
on both sides. The League, if its traditions had prevailed in the economic
life of Germany, might indeed have become a real threat to other countries in
the markets of the world, because German merchants were ingenious and
industrious. But that threat would have been perfectly legitimate, conforming
to the rules of the game of economic competition, and would have stimulated
the competitors of the Hansa merely to show greater ingenuity in their turn.
The new economic plan had been conceived in order to produce a threat to
Germany's competitors of an entirely different sort. It was no longer a
matter of playing the game fairly to win as much as one could from one's
opponent, but of overpowering him and taking everything away from him. The
Junkers had succeeded in getting German industrialists to accept their
robber-barons' tactics and discard traditional Hanseatic methods from the
German economic scheme.
There is a time-honored conflict between the two prin-ciples. In the
middle of the fifteenth century the bloody war of the German Hanseatic cities
against the Order had had its origin in the same conflict. In 1466 the
Hanseatic cities had been victorious over the Teutonic Knights. In the
twentieth century the descendants of those Knights, the Junker class,
succeeded in driving the Hanseatic economic concept out of Germany.
World Dominion or Ruin
The Junkers were anxious to have a good presentation for their "new economic
theories." Prusso-Teutonic theorists of the nineteenth century had supplied
the necessary presentation and at the same time an exact outline for applying
their plan. (We have seen the advantage they managed to derive from the
economic theories of List, put into practice by Dr. Schacht.)
But if that "presentation" had been useful in getting their plan accepted by
the rest of Germany, including the industrialists, the Junkers were concerned
with something simpler: their own immediate interests. These immediate
interests demanded higher tariffs on the import of agricultural products to
allow them to raise their prices and make greater profits. Their concern was
to perpetuate the comfort in which they had lived as long as they were able
to profit by the virtual famine that reigned in Germany during the postwar
years. Here is what a German writer, Rudolf Olden (Hindenburg, Paris, 1935)
says on the subject:
"The famine which continued in greater and lesser degree until 1924 had been
the big opportunity for German agriculture, a period of easy success and
luxury for everybody who produced comestibles. Hardly had this time passed
when the great landowners immediately asked for protective tariffs. On this
point also Germany stood at the crossroads. On the one side fulfillment of
the Treaty of Versailles, peace, disarmament, flourishing of commerce and
industry, cultural progress, satisfied labor; on the other side, high tariffs
for grain and wine, isolation from the world market, refusal to make
reparations payments, rearmament, class struggle from above, provocation of a
war of revenge."
One may clearly discern the precise plan of Prusso-Teutonic organizations,
the secret Junker societies, behind the "unilinear operations" of the Great
Elector, of Fredenick the Great, of Bismarck, of William the Second and of
those who, under the Weimar Republic, conducted the Fehme and prepared in secr
et for rearmament. The extraordinary homogeneity of these operations would of
itself suffice as indication of their common origin. But one need not imagine
that 13,000 Prussian manorial lords—i.e., all the Junkers—had been initiated
into the full scope of the plan. That is not the way. secret societies work.
The Junker class as a whole, assembled in the "professional organization"
known as the Reichs-Landbund, and in the social and political society known
as the Herrenklub, envisaged only their immediate interests. But those
interests had been presented to them in such a way that they coincided with
the combination of goals pursued. The procedure was simple enough. The
Junkers wished to isolate themselves from the rest of the world in the matter
of importing products of the soil, in order to sell their own at higher
prices. To attain their purpose, they needed the political support of heavy
industry; and to obtain that support they had to make promises to industry as
to the rearmament program. Moreover, they had to introduce into every German
economic circle a complete plan that would encompass the realization of their
own immediate ends.
This complete plan lay ready for use. It was an elaboration of the precise
plan that had directed every phase of Prussian growth, the plan which had
inspired the fantastic dreams of the Prusso-Teutonic writers of the
nineteenth century and the early twentieth. This plan evidently satisfied the
imagination of the Junker class as a whole, but to them it was fundamentally
only a fortunate way of presenting their most immediate and much more limited
purposes. The Junkers had to make every influential group in Germany accept
the idea that for their country it was a matter of life or death to embark on
a course of world conquest. The theory, "world dominion or ruin," came anew
to the surface, and they attempted to make people believe that the fate of
all Germany was at stake in this breath-taking dilemma. Actually if anyone
was threatened with ruin it would be only the 13,000 Junkers—ruin which the
Junkers could have avoided by other means: by modernizing their farm
operations and restricting expenditures. But such modernization and
restrictions were inconceivable to these feudal lords. To avoid them all
Germany had to be drawn into an interminable period of "cannon versus
butter," and strife with the rest of the world.
The "Osthilfe" Scandal
The "gift from the German economy" given Hindenburg in 1927 in the form of
the domain of Neudeck was to provide the Junker class with a hold over the
octogenarian Hindenburg profitable in many respects. Several irregularities
came about in connection with the gift. First of all, it was arranged to save
on the transfer taxes. Taxes on gifts as valuable as Neudeck were extremely
high, amounting to 44 per cent of the assessed value. The revenue authorities
allowed themselves to be persuaded to make an exception and formally waive
these taxes on the ground that Neudeck was a kind of "national gift."
This exemption could have been vaguely justified if it had actually been
a matter of transferring property to the name of the Marshal-President.
However, the deed to the property was not recorded in the name of Marshal
Paul von Hinden-burg! but in that of his son and aide-de-camp, Colonel Oscar
von Hindenburg. Indubitably it was a matter of avoiding the inheritance tax
in the eventuality, probably close, of the aged Marshal's death. Neudeck was
worth a million marks; the inheritance taxes saved in addition to the gift
taxes mentioned above amounted to 100,000 marks. Incidentally, by
register-ing the property in Colonel Hindenburg's name the Marshal's other
children were deprived of their rights.
The Marshal, entirely under his son's influence, offered no resistance. He
did not realize that each of these irregularities opened a door through which
pressure could later be brought to bear on him. Henceforth he could no longer
allow himself the luxury of being a President caring only about the national
interest. If he had ever dreamed (ingenuous thought!) of being able to free
himself of his antecedents, and of acting simply as a soldier and German
statesman, not as a Junker, he must now dispel that dream. He sank to the
level of the other Junkers. He became their partner of destiny in a
"combine," disclosure of which might well embarrass him because of his
position much more than it could embarrass the instigators of the transaction.
Oscar von Hindenburg had a fatal influence on his father. Eager to take
advantage of his exceptional position, he was part of every political
combination between 1925 and 1933. It was an open secret in Berlin that one
could easily get what one wanted from the Marshal by being on good terms with
the Colonel. Member of the Herrenklub, the "social front" of the Junker
class, where details of political deals were debated day in and day out,
Oscar in the end was completely dominated by the Prusso-Teutonics.
On his eightieth birthday the Marshal, now a landowner, was exultant. He was
enjoying Neudeck as a child enjoys a new toy. His dream at last had come
true. He would no longer be a poor officer without soil or root. This was
what had troubled him so during his youth when he used to compare himself
with his more fortunate army comrades. If he wished to relax from his
wearying duties he could now rest in his own castle, hunt on his own grounds;
and when he died he could leave this lovely estate to his son. The latter
would have the advantage of it at an age when the father had had to be
content with being a poor guest on the property of friends.
At Neudeck Hindenburg was the neighbor of Oldenburg-Januschau. The two saw
more and more of each other and the Marshal had an even more attentive ear
than before for the suggestions of the man whom he considered his benefactor.
Oldenburg in his conversations emphasized the "difficulties of agriculture."
Indeed, the golden age which had reigned for the Junker class, due to the
famine in Germany, had come to an end. The Junkers could no longer sell their
products at exorbitant prices and profit by the misery of others. Their
yields on the agricultural market at current prices were no longer enough to
allow them to continue the extravagant living and drunken carousing to which
they were accustomed.
A good share of Junker money was also going to finance illegal detachments of
the Black Reichswehr concealed on their properties. All this was no longer
possible with the reduced finances which the Prussian lords now had at their
disposal. Besides, they were running further and further into debt.
Hindenburg, who was touched by Oldenburg's recital of the "misfortunes of
agriculture," consented to intervene with the government to find a possible
remedy. This was how the famous Ostbilfe (Eastern Aid) was created, a fund
amounting to 250 million marks. The avowed purpose of the Osthilfe was to
"come to the aid of small farmers and peasants who had been ruined in the
period of inflation." But in the few years of its existence Osthilfe money
brought about the "refinancing 17 of some 10,500 big Junker manor lords (of
the entire 13,000), by payment of their debts and by according them new
credits on practically unlimited terms. On the other hand, Rudolf Olden shows
that of two million average farmers, only one out of forty-five received
loans, and of three million small farmers in Germany, not one obtained a
thing. Accordingly, tremendous bitterness arose among the peasant class on
the subject of the Osthilfe.
Von Oldenburg-Januschau himself received over 600,000 marks from the
Osthilfe. When certain people hinted later that he had gotten so much because
of his initiative in the matter of the Neudeck gift, others pointed out that
when a person bears the name von Oldenburg-Januschau he needs no further
argument to get a heavy slice of the cake.
The distribution of funds was in the hands of Junker officials. Investment of
the money was carried out by a so-called "guarantee procedure" (Sicherungsverf
abren) directed by trustees appointed for this purpose. All the trustees were
Junkers who in their turn were profiting by the refinancing of their own
properties. Thus neighbors superintended each other, and made mutual grants
of large sums.
One of the duties of the trustees was supposed to be to verify that the money
granted under the title "debt repayment" actually went to creditors. However,
creditors found themselves generally deprived of the greater part of their
equity, with very small hope of ever seeing their money.
Some big Junker landowners were refinanced as many as four times, each time
declaring their estates bankrupt in order to rid themselves of all
indebtedness. Frequently this did not prevent their having money on the side,
invested in prosperous businesses. Others continued their reckless spending
in accordance with the old Junker custom. When refinancing was no longer
possible in their own names they transferred their estates to the names of
members of their families, frequently minors, and the same game went on ad
infinitum.
The development of semi-military organizations gained new intensity with the
aid of this manna from Heaven distributed by the Osthilfe. A deputy speaking
of these abuses before the Prussian Parliament said:
"The concealment and feeding of SA groups, of Stahlhelm troops and similar
organizations, showy festivities on the occasion of Nazi and Deutsch-national
electoral successes, excessive personal expenditures and other similar things
could continue on a wide scale everywhere because of the good offices of the
'guarantee procedure."'
Throughout Germany people began to whisper at first, then to talk more openly
of the "Osthilfe scandal." The names of Hindenburg and his son were
frequently mentioned in this connection, and it was said that being on
friendly terms with the Colonel was sufficient to obtain ample sums from the
Osthilfe. Olden, Hindenburg's biographer, says:
"A great number of Hindenburg's neighbors or people from the same social
group as he-friends, or friends of friends-directly contacted the President
or his son. All old Prussia came to new life. What counted was whether you
belonged to the same Regiment, to the same student fraternity, from what
period your family had lived in a certain neighborhood, whose cousin or
in-law one was. . . . Friend-ships and cliques looked for and found their way
into the Palace of the President of the Reich. Junkers managed to be
recommended to the source whence the flow came. The land- lords from east of
the Elbe [i.e., the Junkers] had always—at all periods of their history—been
insatiable. They hurled themselves gluttonously upon the overflowing
abundance."
The Osthilfe scandal, and later that of Neudeck, hovered in the background of
the history of the governments preceding the Hitler regime. The Catholic
Centrum party and the Socialists stirred up the scandal, cautiously at first,
then with more courage. This created great uneasiness among the Junker class.
But even the Nazis, directly or indirectly, made revelations concerning these
matters in order to keep attention focused on them. It was because of the
continual pressure thus exerted on the Junker class and Hindenburg that the
Nazis were finally able to seize power and maintain their position with
Junker support.
A Paralyzed Parliament
>From March, 1930, until May, 1932, Dr. Heinrich Bruerang was Chancellor of
the Reich. He came from the movement of Christian labor syndicates, was a
devout Catholic and member of the Centruin party. In principle he was opposed
to the Junker class, as was his party. Actually, he could stay in power only
so long as he tolerated their abuses and resigned himself to act, in spite of
his better feelings, in accordance with Junker schemes. He had to yield
office as soon as he tried to prove himself independent of them.
When Bruening took office the democratic parties of Germany had already lost
all initiative. The Felime, faithful tool of the Prusso-Teutonic class, had
suppressed the most enterprising democratic leaders and intimidated the rest.
This had brought about sterility in parliament. The democratic parties,
dispossessed- and without true leaders, could do no constructive work,
opposed as they were by an extremely active and Machiavellian Nazi minority.
This was all the Junkers could ask. They had succeeded in suppressing their
most dangerous opponents. If parliament (which they detested, though they had
been forced to tolerate it from Bismarck's time on) now wound up by making a
fool of itself and becoming paralyzed, nothing could give them greater
delight.
Bruening, not knowing how to govern with an impotent Reichstag, resigned
himself to using an expedient which he was able to devise in accordance with
provisions of the Weimar constitution. He decided to introduce a system of
decree-laws, i.e., decrees which had the force of law and depended merely on
the signature of the President of the Republic. True, he was obliged to
submit these decree-laws later for approval of the Reichstag, but if this
approval should be refused he could immediately dismiss the Reichstag by
using a decree of dissolution signed in advance by the President. Comparative
parliamentary stability lasted, therefore, only under permanent threat of
such dissolution.
President Hindenburg thus became the source of all power. He had already
become accustomed to giving orders to politicians who had access to him,
treating the Chancellor and members of the government the way a
commander-in-chief treats his staff officers in time of war. So great was the
respect which this military chief inspired in the Germans that no one found
anything amiss. From now on his power became still more absolute. But
Hindenburg in turn was under the influence of the Junkers, especially since
the deed of gift to Neudeck. Oscar von Hindenburg received daily orders from
the Reichs-Landbund and the Herrenklub and continually whispered them to his
father. So the Junkers' meddling with the government became quite direct.
Bruening at first tolerated the abuses of the Osthilfe. He had, moreover, a
still greater merit in the eyes of the PrussoTeutonics, for it was he who, in
July, 193 1, introduced "control" of the mark, which separated the destiny of
German currency and German economy from the rest of the world.
A Financial Wizard Enters the Game
Before 1923 the mark had passed through a period of acute inflation due to
the effects of defeat. In 1924 Dr. Schacht replaced the German unit of
currency, almost completely devaluated, by the "Reichsmark," based on gold.
The Reichsmark circulated freely and became a choice international coin. Dr.
Schacht had succeeded in making the world believe that henceforth Germany had
decided to participate in international exchange and become an integral part
of world commerce based on gold and free competition. The world's greatest
financial institutions then offered Germany credit and her empty coffers were
quickly filled. But the PrussoTeutonics had not given up the plans of List.
They figured that they could derive no advantage from the prosperity which
Germany would achieve as a result of intensified international trade. The
good fortune to which they aspired was of an entirely different sort. For
them it was essential to become isolated from the rest of the world and avail
themselves of the sufferings and prejudices excited by that isolation to get
the country started on the path to conquest.
In recalling to mind the theories of List we have already briefly indicated
the role played in their execution by Dr. Schacht. The remarkable rise of
Schacht is worth considering.
Hjalmar Schacht was born in 1877. His father had returned to Germany from
America only the year before Hjalmar's birth. The Schachts were a family from
the frontiers of Schleswig-Holstein and Denmark, who had, after annexation of
Schleswig-Holstein by Bismarck, received German citizenship. But the Schachts
had a leaning toward Denmark, and the occupation of their country by the
Prussians was, for several members of the family, a reason for emigrating to
America. Hjalmar's father was one of these. In the United States he acquired
American citizenship and steeped himself in American democratic ideas. But
reverses forced him to come back to Europe, and in 1876 he accepted a
position as accountant in Germany. For this reason his son was born on German
soil. He named him Hjalmar Horace Greeley Schacht. Hjalmar to recall his
Danish origin and Horace Greeley to show his admiration for the great
American journalist and for American ideals in general.
We have seen that List, creator of the economic doctrines of the Prussian
school, had been an American citizen. It is a curious fact that Schacht, who
was primarily responsible for putting these ideas into practice in modern
times, was also of American background. This background unfortunately tended
to inspire confidence in Dr. Schacht among American and English bankers, and
made easy the successful and conspicuous part he was to play in Anglo-Saxon
financial circles.
Schacht started his career as a financial journalist. He was next employed as
financial expert in one of the largest German banks, the Dresdner Bank.
During World War I he was assigned to the army to help organize the economic
occupation of Belgium. After two years he was recalled to Germany, because he
had been accused of having used his official authority to the advantage of
his own bank in transactions involving occupation currency. In the course of h
is career he was frequently taunted about this "Belgian affair" by political
adversaries.
After the war we find Schacht at the Dannstaedter Bank, another of the three
largest German banks. Jacob Goldschmidt, head of the Darmstaedter—who was at
that time in the vanguard of the speculation brought about by the wild
inflation of the mark-had recognized in Schacht a pliant and subservient
henchman.
Goldschmidt was the man responsible for the rise of Schacht, for it was on
his advice that the German government put Schacht in charge of the
Reichsbank. His mission there was to bring to an end that astronomical
inflation, after it had impoverished the entire middle class of Germany, to
the enrichment of a few big speculators.
The stabilization of the mark was accomplished by October 11, 1924. Dr.
Schacht received all the credit for the work, although various experts had
paved the way. In any case, he did have the knack of creating in Germany and
abroad the psychological atmosphere necessary for a successful stabilization.
He effectively spread the belief throughout the world that the mark was now
definitely on a gold basis and that Germany in the future would honorably
participate in world exchange based on free trade.
No one doubted that these intentions were sincere, for they felt that Germany
had everything to gain by taking such a course. Indeed, they thought that by
playing the game of free competition, German industrialists and merchants,
whose abilities were unquestionably first-class, would have every chance of
securing a high place on the world's economic roll.
A Most Unorthodox Financial Plan
Reasoning thus, international financial experts failed to recognize one
thing: that in the administration of Germany's affairs under the direction of
the Prussian clique, what one might call "the German national interest" had
but small influence. It was the special interest alone of a restricted group,
directing the affairs of Germany from behind the scenes, which decided what
course was to be taken. Or rather, what that group, because of its "robber
baron" spirit believed to be its interest. For that group, the job in mind
had to be done in several stages. This was accomplished as follows:
1. The purpose of the first period, inflation, was to permit the looting of
the entire German middle class. This was accomplished to the advantage of the
Junker class which was able to make money by the tremendous rise in prices,
due to scarcity of agricultural products;* and also to the advantage of
bankers and big industrialists speculating directly on inflation, like
Stinnes, Thyssen, and Krupp. These men succeeded, during this period, in
buying up tremendous quantities of industrial properties with borrowed money
which they were able to repay easily after the currency was devaluated.[ *
When inflation reached astronomical proportions and this advantage of the
Junkers became illusory, they then agreed that stabilization should take
place at once.]
2. After October 11, 1924, the next step was to encourage the inflow of
foreign money under the guise of long and short term credits. Without these
fresh funds there would indeed have been nothing left to pick from German
pockets. The small German merchants and manufacturers had lost all their
reserves during inflation. It was therefore essential, above all, to inspire
confidence throughout the world regarding the mark, so that foreign credits
would begin flowing in heavily. Sums amounting to from twenty to thirty
billion marks were thus lent to German business in the period between 1925 and
1930.
3. During the years 1929-1930 the direction of this operation was reversed.
There was more and more talk of the heavy burdens borne by Germany after
payment of reparations. In reality, these payments amounted to scarcely ten
billion marks. The peace treaty did not, on the country's balance sheet,
represent much of a burden, because of the re-entry of gold as foreign
investment worth twenty to thirty billions during the same period.
German financial and governmental circles, painting the country's situation
in darker and darker colors, artificially created a panic. This produced, in
German and foreign financial circles, a "flight from the mark."
>From the middle of 1930 to July 1931, about two or three billion marks poured
out of Germany. Finally, on July 13, 193 1, under Bruening's administration,
the financial authorities of Germany took advantage of the climax of the
panic they themselves had provoked, to have the government declare a
moratorium on internal and external debt payments, and they instituted
"control of exchange" on a permanent basis.
This control of exchange again took Germany off the gold standard. Its first
result was to make impossible repayment of credits which had been accorded to
German economy. All short term credits became automatically long term ones,
or rather, credits of "indefinite term," i.e., frozen credits. The same
performance which allowed the spoliation of the whole Gerinan middle class
during the period before 1924 now took place at the expense of financial
interests the world over.
4. The introduction of control of exchange on July 13, 1931, represented
complete seizure by the State-and by groups hiding behind the State-of all
export and import business. All foreign currencies accruing from export must
now be yielded to the State. All importing not deemed useful to the interests
of the State was forbidden. Officials whose decisions were not subject to
parliamentary control ran everything, and behind them was still the same
influential crowd. Import of products useful to the public at large was
considerably slowed up, with preference given to entry of raw materials
needed for making armaments.
Heavy industry grew increasingly prosperous. Private business suffered and
prices of commodities doubled. Misery sprang up again among the middle and
poorer classes of the population. The "masters of Germany" were satisfied
with the execution of their plan. Misery and discontent of the people were
excellent arguments for ultimately compromising the parliamentary system
which they so hated. In addition, the same arguments were invoked to excite
the German people against France and England. This promoted psychological
conditions favorable for the rearmament program, and prepared the way for the
foreign conquest long anticipated by the Prusso-Teutonics.
5. Properly speaking, conquest—and the attempt at economic domination of
world markets which it implies-may be considered the fifth phase of the same
program.
Dr. Schacht Prepares the Panic
Following the stabilization of the mark, Dr. Schacht was responsible, either
directly or by his action behind the scenes, for the execution of the entire
financial scheme described. When, in 1924, he had brought about stabilization
he was acting in full accord with the Prusso-Teutonic class and the financial
circles of Germany. The tactics corresponded perfectly with what they wished.
Only the Nazis, with their customary violence, criticized the stabilization.
At that time their interests were not yet identical with those of the
Prusso-Teutonics. They acted as free-lances, sitting in many anterooms. They
did have some connections with the Prussian clique, but had not yet placed
themselves totally at their service. The aim they pursued above all else was
to capitalize on the discontent of the people to raise themselves, by
demagogic means, to power. Therefore they were fierce opponents of a measure
such as stabilization which might eliminate one of the main causes of
discontent. The advantages which Prusso-Teutonic circles hoped to gain
-foreign loans destined to fill the empty cash boxes-did not interest them at
all, for they had nothing to gain thereby.
On June 22, 1925, the Nazi organ Voelkiscber Kurier attacked Dr. Schacht and
called stabilization "the greatest swindle ever committed at the public's
expense." Other Nazi newspapers said that Schacht was of Jewish origin and
that his real name was "Hajim Schachd." Alfred Rosenberg took up this attack
on Schacht in a work published in 1926 under the tide "Novemberkoepfe." These
attacks did not bother Schacht much, for at that time the Nazis were not very
powerful and he knew that he was under the protection of a much more
influential group.
During the period after the inflation Schacht tried to inspire the world with
confidence in Germany. In his frequent talks with directors of other
government banks he showed himself to be a conservative, cautious financier.
At that period he conformed in every detail to the classic ideal of a great
banker who could personally guarantee to the world the healthy condition of
Germany's financial affairs, as well as the sound basis of world-wide
investments in the mark.
In 1929, when the coffers were almost filled, Schacht became bolder. Phase
number two could give way to phase number three. On April 16, 1929, one of
the regular conventions of national bank heads of various countries was held
at the Hotel George V in Paris. As usual, the conference was to discuss the
question of reparations, examining different financial aspects of the
problem. Suddenly Dr. Schacht took the floor and began, to the surprise of
his colleagues, introducing political factors into the discussion. He stated
that Germany could not continue to make reparations payments unless she
received in exchange the Polish corridor of Danzig, Uppd Silesia, and "a
colonization spot somewhere in the world."
Such talk surprised and shocked Dr. Schacht's colleagues utterly. What-this
conservative financier who had made them believe all along that Germany was
on the road to financial recovery, and who had during previous conferences
argued only about financial difficulties of a technical naturewas he suddenly
subordinating the financial relationship between his country and the rest of
the world to political demands?
The international bankers were quite familiar with these demands. They had
been the favorite theme of a small group of German nationalists, including
the Nazis. But in the past bankers had been made to believe that these groups
had no influence, that the German Republic sincerely intended to respect its
obligations, and that Dr. Schacht especially, as high master of German
finance, cared only about stabilization of the international financial
situation and the development of thriving trade. But now didn't it look as if
he were borrowing the arguments of his country's extremists? Et tu mi fili Bru
te?
The disappointment of the financiers was great. Moreau, Governor of the Bank
of France, demanded that the conference be immediately closed. Finally it was
agreed to diminish the shock by inviting Dr. Schacht to submit a written
report. Political matters were not discussed further during the sessions
following, and the bankers left the conference with a semblance of agreement
on financial questions. But the warning had been a fierce one and had made
its impression.
Dr. Schacht now speeded up the steps to follow. Phase number three of the
program was ending. In frequent interviews with his great friend, Montagu
Norman, Governor of the Bank of England, Schacht brought out more and more
plainly the internal difficulties of Germany. It was no longer a matter of
inspiring confidence in the world, but of slowly and methodically preparing
the way for panic which would sometime soon justify suspension of reparations
payments and the freezing of foreign loans.
Late in February, 1930, Owen Young received a cable from Schacht informing
him of his intended resignation. Young felt it proper to forward this cable
to the German Embassy in Washington. That was how Germany and the world at
large learned the surprising news.
The roundabout way Schacht chose for revealing his intentions is astonishing.
Nevertheless, it was in line with Schacht's purpose. This direct
communication to the American delegate was expected to disclose the
disagreement supposedly existing between Schacht and the leaders of Germany.
Thus he gave the world clearly to understand that he could no longer
personally guarantee the stability of Germany's financial situation—which was
the best means of hastening panic. Besides, by communicating directly with
the American financial expert Schacht hoped to preserve for himself the
sympathies of American bankers (those of London were already insured by
reason of his friendship with Montagu Norman. Furthermore, it is not known
whether he simultaneously sent a similar message to Norman which the latter
had not felt obliged to divulge.) The impression Schacht gave was as if he
had said, "I have done my best, prepare for the worst. After me, the deluge."
On March 7, 1930, Schacht's resignation became official. The painful surgical
intervention which had been planned as the end of phase three of the
program-panic, moratorium and exchange control-approached. By retiring to
private life in time, Schacht avoided all blame for the operation, in Germany
as well as abroad. He knew that he could always come back later, washing his
hands like Pontius Pilate.
All this appears clear today in the light of subsequent events. At the time,
everyone found the reasons for Schacht's departure somewhat mysterious.
Writing on March 9, 1930, in the Vossische Zeitung of Berlin, the great
publicist, Georg Bernhard, said: "No one knows the real reason for this
resignation." Today we know it only too well.
The departure of Schacht contributed greatly to the German capitalists'
"flight from the mark." Large sums of money were invested abroad. Dr. Hans
Luther, named by Bruening to replace Schacht at the head of the Reichsbank,
did little to repair the damage. The die was cast and it was now simply
a matter of regulating the rhythm and speed of the program. Finally, taking
advantage of a heavy run on private banks, among which the Darmstaedter Bank
(the bank Schacht came from) was the first, Bruening's government, on July
13, 193 1, decreed a bank moratorium and "control of exchange" which was to
become permanent. Phase three of the program was finished and Germany now
became financially isolated from the world.
The Plight of "Poor Germany"
The operation had so far been successful and the plan approached phase four
without a hitch because nearly all the international financial interests had
allowed themselves to be taken in by the touching "plight" of "poor Germany."
Nevertheless, the Financial Chronicle of New York in its issue of July 18,
193 1, revealed clearly the German government's responsibility in this course
of events.
"The flight from the Mark that resulted in the present situation of Germany
is due both to the demand for foreign currencies by fear-stricken Germans who
recalled vividly their worthless holdings of German securities and currency
eight years ago, and the withdrawals of their short term credits by foreign
investors. The signal for the withdrawals was given, it must be remarked, by
the German government itself. Chancellor Bruening and Foreign Minister
Curtius advertised rather too well, during their visit to London in June, the
precarious state of affairs produced in the Reich by the worldwide economic
depression and the heavy reparations burden. Pleas then made, together with
the German government decree imposing heavier taxes, started a unanimous
export of capital which finally exceeded the capacities of the financial
institutions of the Reich."
In these events Bruening's responsibility is indisputable, but how far it
went is not clear. The former Chancellor of the Reich, now living in the
United States, has not seen fit, up to the present time, to give his version
of the story of his years in power. Possibly he was not fully conscious of
the role he was made to play by the Prusso-Teutonic clique, who remained
masters of the situation under his regime also. But the extent of Bruening's
personal responsibility is only relatively important. Certain it is that in
tolerating, over a period of two years, the practices which prevailed in the
distribution of Osthilfe funds, and in creating the financial isolation of
Germany, he did render conspicuous service to the PrussoTeutonic class.
Moreover, if it were not for this weakness, or blindness, or temporary
compliance-whatever one chooses to call it—Bruening could not have kept
himself in power for two years.
--[cont]--
Aloha, He'Ping,
Om, Shalom, Salaam.
Em Hotep, Peace Be,
All My Relations.
Omnia Bona Bonis,
Adieu, Adios, Aloha.
Amen.
Roads End
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