Enclosure 1to "memorandum on the supply situation in the field of fuels and its effect on the Wehrmacht" of 9 March 36.
Enclosure 1to "memorandum on the supply situation in the field of fuels and its effect on the Wehrmacht" of 9 March 36.
IIa Needed raw materials 4/28/1936 with consideration of the program for the supply of ammunition, amounting to 200 million marks [Mil. RM.] (for the months of April 1936 to March 1937=12 months)
SECRET
Raw materials needed by the armed forces during the years 1935 and 1936
Raw materials needed by the armed forces during the years 1935 and 1936
Note: 1. for cables 2100 t/months; starting on 1 Apr. 36 possibly only 6000 t/month, including 2100 t/ for cables;
Note: 2. for cables 4200 t/months; starting 1 Apr. 36 7800 t/months which means 5500 t/month for cables;
Note: 3. from this amount: sheet-zinc in the limits of the quota of the association of zinc-rolling-mills 340 t/month; starting 1 Apr. 36 possibly only 2700 t/month including sheet-zinc.
CopyBerlin, 15 May 1936Prime minister General GoeringRaw material and Foreign exchange staffTop SecretTo the Reichminister of war Generaldfeldmarschall von Blomberg
Enclosed, a record of the conference of the council of ministers of 12 May 1936 in the afternoon is forwarded.
Enclosed, a record of the conference of the council of ministers of 12 May 1936 in the afternoon is forwarded.
By order
/s/ LoebLt. Col. in the General Staff
Top SecretRecord of the council of ministers on 12 May 1936 1700 hours
Chairman: Prime minister General Goering.Reichminister of War Generalfeldmarschall von Blomberg.Reichsbank President and acting Reich and Prussian minister for Economy Dr. SchachtReichminister of Finance Graf Schwerin von KrosigkPrussian minister of Finance Prof. Dr. Popitz as the recording secretary Lt. Col. in the General Staff Loeb
Chairman: Prime minister General Goering.
Reichminister of War Generalfeldmarschall von Blomberg.
Reichsbank President and acting Reich and Prussian minister for Economy Dr. Schacht
Reichminister of Finance Graf Schwerin von Krosigk
Prussian minister of Finance Prof. Dr. Popitz as the recording secretary Lt. Col. in the General Staff Loeb
Minister Schacht: shows the development up to now when two years ago, the decision for rearmament was made, it was decided to carry out the financing mainly outside the means of the Reichministry of Finance. This meant the commitment of the last reserve from the very beginning. A decision which did not seem without hazards. The memorandum of 3 May 1936 says the same thing.
In the course of the last two years, the program was increased more and more in its extent and speed. Thus the requirements to the Reichsbank were increased steadily.
It would be necessary to create, as basis for financing, a steady, prosperous economy, and therefore renounce the execution of other, partially irrational ideas and aims of the party. The psychological prerequisite was not disturbed by the party as such, but by many individual groups of the party, again and again; personal attacks against Dr. Schacht and thus against the economy followed. Dr. Schacht has emphasized again and again, that one must follow a cultural and legal policy, which will leave economy alone. However one must not describe it as greedy and selfish from the beginning.
Also money theories of the most variable kind have been published repeatedly, thus causing anxiety for the economy; to counteract this was practically impossible, as the propaganda machine of the party did not permit this.
Despite all this, Dr. Schacht continued to work, because he stands with unswerving loyalty to the Fuehrer, because he fully recognizes the basic idea of national socialism and because at the end, the disturbances, compared to the great task, can be considered irrelevant. Previously, approximately 11 billion marks besides the budget have been raised for rearmament and re-employment without shaking the rates of exchange and currency; the rate of interest could be lowered.
The Fuehrer has repeatedly emphasized in personal talks and cabinet meetings, that the speed of rearmament must be kept up until the spring of 1936. This was agreed to and carried out.
Prime Minister Goering: has never heard about this time limitation.
Minister Schacht: The main question for the further execution of the program is, how much money can be gotten out of business. Some 2 billion can be consolidated annually by long term loans, 8 to 9 billion cannot be asked for; the possibility of making available depends on the development of the money market. Full concentration of the money market through the Reichsbank is necessary.
If the Reichsbank should have to issue more notes than could be born by the currency, one must reach back to other factors.
Dr. Schacht will never be part to an inflation; the Fuehrer also has decided in this sense. The danger of such a development is imminent. If a road is to be taken, which contains this danger, Dr. Schacht would like to drop out on time, so that he does not disturb the new course.
Dr. Schacht considers it impossible, that prices can be fixed by the state, if the same money policy is continued.
Prime Minister Goering: What is the basis of currency with the Reichsbank?
Minister Schacht: This question has nothing to do with the gold standard. It is a question of something imponderable, to recognize the time of which must be left up to fine sensitivity. If by a surplus of money, the danger of devaluation of the mark exists, the state can and must take action from the financial side by taxes, etc. Considering the material factor, it must be determined, that we are dependent for numerous goods on foreign countries. Even small percentages as a whole have considerable effect. In many cases, the necessity for import is caused by trade political relations; therefore the raw-material situation may not only be viewed and attacked from the production within Germany. The foreign relations must be decreased all of a sudden. For instance the negotiations with Standard and Shell were carried out on this basis.
Prime Minister Goering: When substitutes [ersatzstoffe] are sufficient in quantity, we shall no longer need the import, which presents us such difficulties.
Minister Schacht: In a series of cases, to be able to carry out the import, work from within Germany was utilized for compensation, for instance tankers for oil import corporations.
However it is especially required that nothing be said about intentions and measures of this field in public, so as not to aggravate the importers.
Prime Minister Goering: If the Fuehrer has expressed himself in this direction, he did it to counteract the increasing pessimism in the country in respect to this field.
Minister Schacht: In any case, all anxiety must be prevented. Foreign exporters have already shown less readiness to deliver against certificate of foreign exchange, since they apparently have no confidence in the cashing of these certificates.
Prime Minister Goering: Our raw material situation is generally known to the world. The article published in the papers on 28 April 1936 did not contain anything secret. Actually the confidence abroad should have been increased by this publication, because generally the opinion was held abroad that Dr. Schacht was protected by the Prime Minister against the party.
Minister Schacht: The situation at present is thus:
Some 64 million marks are already claimed by reimbursement.
We must buy especially crude rubber and textiles; we have practically no crude rubber. Cellulose wool is not an adequate substitute, especially not for export goods.
The necessity for the closing down of manufacturing plants will soon result from this accordingly.
It must be decided whether the available gold should be all spent at the present speed or whether it should already be slowed down.
Swedish ores are still available for about 3 months. The export to Sweden becomes more difficult, and thus the import possibilities decrease.
Prime Minister Goering: is of the opinion that our export to Sweden continues, so that one can further count on import.
Minister Schacht: The raw material supply of Germany amounted at the beginning of the war to a value of about 7 to 8 billions; now it is less than 1 billion.
Prime Minister Goering: has heard repeatedly, that export business was refused by the Reichminister for Economy. In the future, the departments will be caused by him to re-examine such occurrences; perhaps then it will work differently than until now.
Minister Schacht: Increase of our export appears improbable in the near future. Further obligations arise through the Foreign Office, the Reichsbank, Post Office, Party and other agencies; soon the consular service cannot be paid any more.
The time will come, when we will have no longer any reserves of either raw materials or foreign exchange at our disposal.
Prime Minister Goering: If we have war to-morrow, we must help ourselves by substitutes. Then money will not play any role at all. If that is the case, then we must be ready to create the prerequisites for that in peace. The account just described could have also been presented, in his opinion, in the meeting this morning.
Minister Schacht: Publication is recommended for only the smallest circle.
Prime Minister Goering: It is necessary to inform the people required for the execution.
Minister Schacht: In his opinion only the ministers, not the state secretaries. In addition, each department must be called in individually.
Prime Minister Goering: The psychological prerequisites for the correct approach to the work must be created everywhere. The actual work is done by the state-secretaries and the experts. In the future one must go much more into detail; confidence in the persons employed in this is absolute necessity.
Prime Minister Goering: summarizes the explanation by Minister Schacht: In short, demands on the Reichsbank can no longer be covered; only 64 million marks are still available.
Minister Schacht: declares that besides these 64 million Reichsmarks in the private banks, there are another 72 million gold with the Reichsbank.
Prime Minister Goering: continues with the summary: The shortage of raw material is known in its extent. A considerable increase is no longer possible, in the opinion of Minister Schacht.
Minister Schacht: The production of raw materials within Germany finds its limitation there, when an increase of prices of export goods is created by it.
Prime Minister Goering: One can separate requirements within Germany and export. Even the smallest details are important. The following appears necessary.
1. Increase of export despite all difficulties.
2. The raw material coverage within Germany.
3. The possibly necessary resettlement of workers and food-fundamentals for the execution of all measures.
These problems all affect each other, so that the participation of all departments is necessary.
Appropriate example: Position of the farmer, who does not utilize the available possibility of intensifying of fertilizing, because the capital lost is not bearable for him in case of bad harvests. In such a case, the risk lying with the weather must be partially taken from the farmer by a special organization.
The Reichministry of Finance must also be consulted greatly in reference to the regular budget. Re-awakening of thriftiness in all fields belongs to this program.
Minister Popitz: The final conclusions made by Dr. Schacht are clear and convincing, under the condition that the bases for these conclusions are correct. That must be examined. It must be determined again, whether the principles, according to which the present raw material and foreign currency policy has been carried out with such a big success, are unalterable and correct.
The time when perhaps an inflation is feared is unclear; actually it is already here, even if it has a bearable extent.
An increase of export cannot be expected with the present system. However it is to be examined, whether there is not a better system. The basis of the present economic policy is deflationary. However it appears impossible to integrate the deflation into an actually existing inflation. It must be discussed, whether forced economy of export is to be continued.
It is to be examined further, whether the money for rearmament can be drawn out from the remaining economy. In no case may the condition arise, that the Reichminister for Finance and the Reichminister for Economy push the responsibility for the providing of funds to each other.
The difference between 2 billion Reichsmarks, which the Reichsbank believes to be able to raise on a long term basis, and the 8 to 9 billion Reichsmarks required for armament, cannot be covered by taxes. Therefore the following suggestion:
1. The raw material question, which can be solved comparatively simply, must be attended to at once by a special committee.
2. Illuminate critically the export question, so to say, in a scientific manner.
Minister von Krosigk: Economy of foreign exchange in detail is necessary. In that, small things also play a part. Equal saving is necessary in spending money within Germany. In contrast to Minister Popitz, he is of the opinion that expenses for armament must be taken over more and more by the regular budget. Expenses above this budget are to be covered
a. by long term consolidation of annually some 2 billion marks.
b. by short term bills of exchange and similarly.
The financing has succeeded up to now by these two means.
However the danger exists, the short-term bills of exchange can no longer be negotiated, so that flooding of the Reichsbank with MEFO bills would have an increased printing of banknotes as consequence.
Minister Popitz: In this case, printing of bank notes is only necessary if the money is absolutely necessary for payment of wages among other unavoidable things.
Minister von Krosigk: The decisive question for that is, whether inflation would actually happen by printing of banknotes to this extent. He does not believe so. The increase of prices observed so far was not caused by monetary reasons, but can be derived from increase of prices for raw materials and agricultural products. Thus one cannot speak of an inflation.
Prime Minister Goering: does not believe that an inflation would happen from the monetary angle.
Measures which in a state with a parliamentary government would probably bring about inflation, do not have to have the same results in a totalitarian state.
Important for this is the application of an appropriate propaganda, so that the co-operation of the propaganda ministry, promised by the Fuehrer, is of great importance.
Minister Schacht: gives a summary of the holdings of bills of exchange in the Reichsbank at present:
4,353,000,000.—RM bills of exchange3,731,000,000.—RM of which are in MEFO bills of exchange2,200,000.—MEFO bills of exchange are deposited in clearing accounts.
4,353,000,000.—RM bills of exchange
3,731,000,000.—RM of which are in MEFO bills of exchange
2,200,000.—MEFO bills of exchange are deposited in clearing accounts.
More than 5 billions in bills of exchange are deposited thus, that they can be presented immediately in case of disturbances of the money market, caused by any measure. Therefore any disturbance must be prevented under all conditions.
Prime Minister Goering: agrees to be the "shield" for the measure of financial nature, so that no disturbances would happen.
The regular budget is to take over the current upkeep of the armed forces, but not the costs of the reconstruction.
Minister Popitz: It is to be examined whether the regular budget cannot be relieved from interests and amortization quotas of advance drawings. Even the observing of the international bank law cannot prevent the using of these recognized necessary measures in this direction.
If the economy is started by increased export, naturally the circulation of money will increase and with that the possibility of further financing.
If the money, which had to be put into circulation, is only used for payment of wages, no inflation can take place.
Prime Minister Goering: orders:
1. Determination as rapidly as possible of the basis of payment.
2. Beginning of the execution work in the realm of raw material production within Germany.
3. Examination of the question of the export system.
In the next conference, contemplated for Friday afternoon, the examination of the export system is to take place.
First under his chairmanship (Goering's) the ministers Dr. Schacht, Graf Schwerin von Krosigk and Prof. Dr. Popitz will consult each other. Then, immediately thereafter, the suggestions voiced there are to be discussed by a board of experts. The following were named for this board:
By Minister Schacht:Reichsbank Director BrinkmanReichsbank Director BlessingMinisterialdirektor Dr. SarnowBy Minister von Blomberg:Dr. TrendelenburgBy Minister Popitz:Dr. SpringorumDr. SogemeierFurtherReg. Burgermeister KroogmannProf. Wayemannand others, who will be appointed by the Prime Minister.
Prime Minister Goering: states that he can expect and demand discipline from the party, so that the protection of the individual auditor, called, is guaranteed.
Close of the conference; 1910.
Summary of the raw material situation 2 May 1936
Berlin, 30 May 1936Behrenstrasse 68-70Telephone A 2 0048Prime Minister General GoeringRaw Material and Foreign Exchange StaffJournal No. * * * /36[initial] BG th 2/6[initial]Rubber Stamp Top Secret
To the Reichminister of War Generalfeldmarschall von Blomberg
To the Reichminister of War Generalfeldmarschall von Blomberg
Berlin
Enclosed, a report of the conference of the council of ministers of 27 May 1936, is forwarded.
By Order
LoebLt. Col. in the General Staff1 Inclosure:
Top Secret
Copy of meeting of Minister on 27 May 36, at 1130 o'clock.
Chairman: Ministerpraesident Generaloberst GoeringReichskriegsminister Generalfeldmarschall von BlombergReischsbankpraesident und kommissarischer Reichs- und Preussischer Wirtschaftsminister Dr. SchachtReichsfinanzminister Graf Schwerin von KrosigkPreussischer Finanzminister Prof. Dr. PopitzRecording Secretary: Lt. Col in the General Staff Loeb
Chairman: Ministerpraesident Generaloberst Goering
Reichskriegsminister Generalfeldmarschall von Blomberg
Reischsbankpraesident und kommissarischer Reichs- und Preussischer Wirtschaftsminister Dr. Schacht
Reichsfinanzminister Graf Schwerin von Krosigk
Preussischer Finanzminister Prof. Dr. Popitz
Recording Secretary: Lt. Col in the General Staff Loeb
Prime Minister Goering: The two sessions of the board of experts held so far have brought forth interesting discussions. Naturally, opinions frequently disagree. The experts are invited to state their concepts in writing.
Today, discussion concerning the question of substitute-material. What objections are made to the production of war-raw materials within the Reich?
Minister Schacht: Principly there is nothing to object; a solution of the raw material problem by self-producing is absolutely necessary and agreed with, theoretically.
Difficulties are encountered with regard to:
1. serious monetary strain because of investments. Providing money by taxing capital is impossible. Circulation of money can not be increased beyond a certain amount. Previous measures executed correctly and without danger to monetary value. Further increase seems precarious; matter of confidence. This point of view alone, however, not determining; possible that funds could be drawn from industrial profits.
2. special scruples, regarding the cases where prices for substitute [Ersatz] material are far beyond world-market prices, and therefore the products cannot compete (for example: tires made from Buna). Adjustment would further increase the excise tax on exports. Inflation cannot be chosen, as this would immediately upset the state's budget.
It must be attempted to produce those raw materials within Germany which are economically favorable;for other raw materials ready reserves for the case of mobilization[Mobfall]. Especially clear is the situation of flax; the complete covering of the requirement is possible; however not with hemp.
Certain raw materials for war must be stocked.
These viewpoints are recognized and followed by the Reich ministry for Economy. The execution is mainly dependent on the question of funds. Therefore, necessity to save in all fields, to make saved funds available for investment.
Prime Minister Goering: All measures are to be considered from the standpoint of an assured waging of war.
Ready reserves must ordinarily be accumulated already in peace in certain amounts.
It is to be attempted to use cheap imported raw materials for export purposes, expensive raw materials from within Germany. In cases where the price differences are small, probably creation of a settlement is preferred.
Minister Schacht: This settlement can be carried out either by compulsory mixing or by a price settlement by the state of the expensive raw materials.
In any case, price supervision must be introduced again.
Minister Popitz: Placing of the burden of increased prices on the consumer is possible when the difference is only small.
The other possible method is sales monopoly or wholesale monopoly of certain goods.
Minister Schacht: It is recommendable not to influence individual, large fields, for instance textiles, by prices; but to concentrate funds for the monetary subsidation of other fields of raw materials.
Minister von Krosigk: The question cannot generally be judged theoretically, but only practically with the use of individual examples.
Prime Minister Goering: At first, the specially urgent petroleum question is to be treated.
General agreement to that.
Minister von Krosigk: Present experience is that the beginning of new methods of sale or price guarantee by the Reich results thus, that soon new and cheaper production methods are found. This recommends a not too sudden expansion of production.
Prime Minister Goering: Waiting for new methods is no longer appropriate. Plan of the Reich forestry office for the utilization of wood is ready. Import of timber must be cut down in any case; strongest demands on German forests to be preferred at present and can be advocated.
It is to be decided, whether at the beginning, a risk bonus over 6% profit is to be granted.
Minister Schacht: turns against higher profits than 6%. Guarantee of interest-bearing is to be preferred, and must be sufficient.
Minister von Krosigk: discusses the advantages of the amortization program.
Minister von Popitz: In contracts many times rapid cancellation is contemplated.
Minister Schacht: At the beginning more consideration is recommended, later stronger concentration, with profit sharing by the Reich.
Minister Popitz: requests that the cancellation periods be re-examined by a special committee.
Prime Minister Goering: The summary is to be prepared for the next committee meeting about:
1. Inventory of German Raw Material possibilities.
2. Form of the present decrease.
3. Mobilization requirement.
4. How shall raw materials be handled? Especially clarifications whether production within Germany is to start already in peace or whether the stocking or reserves is more important.
Subject of petroleum also can be considered concluded, therefore is to be handled immediately.
In the next council of Ministers, discussion of the agricultural question, then Minister Darré and State secretary Backe present.
Minister von Blomberg: In the fuel industry it is to be decided whether conversion to solid fuels should already be carried out in peace, or whether, as in France, it is to be prepared for the mobilization case. If possible and recommendable, increased use of tar coke [Schwelkok], no diesel oil for railroads.
Prime Minister Goering: Economy also absolutely necessary and to be insisted on in other fields of raw materials.
Minister von Blomberg: Examine as an example substitution of heavy metal by light metal (for instance cans of aluminum): general increase of the use of glass, especially for aerial bombs, maybe also for grenades; use of plastics for wide fields, even as far as transmissions. Certain hopes can be set on China. Therefore prevent political estrangement. Careful advances in the approaching of Japan necessary, at present the recognition of Manchukuo would be disastrous for Mr. Klein's current plans in China.
Prime Minister Goering: Common front of China with Japan against Soviet Russia can probably be produced.
[in green pencil] I didnotexpress myself so specifically BL/
[in green pencil] I didnotexpress myself so specifically BL/
Minister von Blomberg: Japan is doubtful as a factor of military power.
Prime Minister Goering: Furthermore, the danger of Japan's turnabout always exists.
Results of the China affair cannot be viewed clearly because of the unclear inner political situation.
Minister Schacht: always has supported the attempts of Mr. Klein, because he especially hopes for food, raw materials from China.
Minister von Blomberg: recommends further collaboration with the Kaiser Wilhelm Gesellschaft, with whom the Reichministry of War had very good experiences. At its head is the scientific authority; other imminent changes for solution proposed by the party unbearable.
Minister Popitz: Nomination of Geheimrat Bosch is possible for this post, when his resignation from the IG is possible.
Minister Schacht: General complaints about the deterioration of German science; this is also harmful for export, since the missing replacement limits the execution of German engineering missions abroad and thus German orders from abroad.
Minister Popitz: Seconds these complaints. Actions by the party which remove the most important people is unbearable. Explanation by examples.
In the liberal arts, the consequences are not being felt immediately, all the more so in the natural sciences. If service etc., should be limited to the first two semesters of study, then full time and freedom for scientific activity.
Prime Minister Goering: In Prussia then, difficulties are partially removed. Influence of the liaison staff not always fortunate. Role of Professor Wagner.
Puts to discussion a taking over of a Spanish tin source, which is being offered from the Swedish side.
Minister Schacht: Basically in agreement, particularly when in a partnership enterprise German achievements will result by deliveries of machines.
Prime Minister Goering: asks Minister Schacht to conduct negotiations in this spirit during his visit in Belgrade relative to Jugoslavia in the near future.
Minister Schacht: The copper mining in Jugoslavia must take place by excluding the French, who sell copper for foreign exchange only.
Prime Minister Goering: During the next ministerial session, the investigation of the problems in the agricultural sector has to be conducted in such a way that direct statements of Minister Schacht/Minister Darré should be made about the single problematic issues.
End of the session 13 o'clock.
Fuel-supply situation (1st draft of a plan for solution) 27 May 1936
Copy of draftTop Secret31 August 1936