15
The authors of the letter had facilitated the state’s early policy of deficit spending with a broad range of fiscal tricks, yet their warnings that it could not continue led only to the forced resignation of the bank’s president, Hjalmar Schacht, along with a number of its directors. Walther Funk, who had already taken charge of the Economics Ministry from the insufficiently compliant Schacht, assumed the top position at the Reichsbank, while Emil Puhl, a gentlemanly but politically inexperienced currency specialist, became its managing vice president. In that capacity he was responsible, together with hundreds of highly qualified experts, for running the daily activities of the bank, whose scope soon encompassed all of occupied Europe. Puhl quickly became known for his occasional sarcasm about the competence of the Nazi government, but he served its interests well until 1945. To Puhl, a consummate economics professional, protecting the German currency was an end that justified any and all means.
In 1939, the regime needed an estimated 16.3 billion reichsmarks to cover civilian expenditures, while military outlays claimed 20.5 billion. An additional 3.3 billion marks of the total regular state revenues of between 17 and 18 billion marks went toward interest payments on past debts.
16
Carl Friedrich Goerdeler, later a leader of the anti-Hitler resistance, characterized the expenditures as “financial insanity.” In a memorandum written on July 1, 1940, as Nazi Germany was celebration ths military triumph over France, he remarked dryly: “The Reich’s finances are in shambles,” adding that, if the war dragged on to the end of 1941, “three-fifths of annual revenues . . . will go to pay off past debt. That means that the Reich’s indebtedness is already so great that our obligations can no longer be met by current revenues, and debt will now increase automatically on its own.”
17
Hitler bridged what he and his leadership knew to be a precarious financial situation with military adventures that had terrible consequences for millions of people. Dispossession, deportation, and mass murder became major sources of state income. In 1942, Deputy Finance Minister Reinhardt issued a blanket order: “The contributions that have been allocated to paying off the interest and principal on the national debt must henceforth be covered by
current
revenues earned from the economic exploitation of the eastern territories.”
18
The Nazi regime required the constant military destabilization of the periphery in order to maintain the illusion of financial stability at the center of the Reich. “Gigantic arms and construction projects are already being planned,” wrote Goerdeler in 1940. “The German people have been promised that they will receive comprehensive state care in their old age. With the increase in the territory under our control, we will get involved in even bigger construction and development plans.”
19
Aryanization for War
Another major source of stop-gap revenues to fund Hitler’s popular tax and rearmament policies was Germany’s—and later much of Europe’s—Jewish population. By late 1937, civil servants in the Finance Ministry had pushed the state’s credit limit as far as it could go. Forced to come up with ever more creative ways of refinancing the national debt, they turned their attention to property owned by German Jews, which was soon confiscated and added to the so-called
Volksvermögen
, or the collective assets of the German people. The ideologically charged concept of collective assets, which was by no means restricted to German society, implied the possibility of dispossessing those considered “alien”
(Volksfremden)
or “hostile”
(Volksfeinden)
to the ethnic mainstream.
Prior to 1937, Jewish civil servants, businesspeople, doctors, and white-collar employees had been the targets of discriminatory legislation. Many people lost their jobs, careers were ruined, flourishing businesses were forced into emergency liquidation, and Jewish participation in commercial life became subject to constant harassment in a variety of locally specific forms. All these measures were intended to convince Jews to leave Germany. Wherever finance and customs authorities could, they exploited the state-created plight of German Jews with punitive emigration levies and ever tighter restrictions on taking currency, stocks, stamps, jewelry, gold, silver, precious stones, artworks, and antiques out of the country. Meanwhile, private citizens were busy “Aryanizing” Jewish-owned businesses and real estate, buying them up in deals that were partially voluntary and partially forced by state-encouraged and societal terror. But up until late 1937 it would be incorrect to speak of a systematic dispossession of Germany’s Jewish citizens. Jews retained control over their life insurance policies and stock portfolios, and they were still allowed to choose how to invest their money. What they faced was an increasingly well-organized though piecemeal state confiscation of assets, made wse by the willingness of tens of thousands of ordinary Germans to exploit the suffering of a disadvantaged minority.
Following the
Anschluss
of Austria in March 1938, the confiscation of Jewish property progressed with furious rapidity. On March 19, Hitler’s personal economic adviser, Wilhelm Keppler, was appointed Reich commissioner for Austrian affairs. That same day, Göring presented Keppler with three key tasks: exploiting Austrian natural resources, bringing wage and price levels under control, and Aryanizing Jewish-owned businesses. “The Aryanization of economic enterprises in Austria,” Göring wrote, “will likely be required on an even larger scale than in the old Reich.” Carrying out this process “quickly and professionally,” Göring emphasized, would be crucial to the success of Germany’s arms buildup.
20
A glance at the general state of the Reich’s finances in early 1938 shows that German armament programs were underwritten to a significant extent by 12 billion marks’ worth of promissory notes. The notes were signed not by the government but by a fictional private enterprise, the Metallurgic Research Association, to conceal the extent of the debts the state was running up.
21
The trick was the brainchild of Hjalmar Schacht in his dual capacity as economics minister and Reichsbank president. The notes were scheduled to come due in 1939, and funds thus had to be allocated from the budget or borrowed to pay off the short-term obligations. At the same time, the Wehrmacht was demanding 11 billion reichsmarks from the 1939 budget for military expenditures. That overtaxed the capital market. To cover the Third Reich’s running costs, the finance minister hastily began to issue treasury bonds, which, in turn, came due six months later.
22
These sorts of tricks couldn’t go on indefinitely. As a first step in getting the state out of its self-created financial jam, the government issued the edict of April 26, 1938, requiring Jews to declare all personal assets in excess of 5,000 reichsmarks to local tax authorities. This was to happen within six weeks, and at the very latest by June 30, although the date had to be moved back to July 31 because the government had difficulty delivering the necessary forms. The declarations allowed the state to monitor the investment and flow of Jewish-owned assets. A short time later, the chief legal adviser for the Ministry of Economics, Alf Krüger, characterized the edict as the “forerunner to a complete and definitive removal of Jews from the German economy.”
23
Krüger divided the reported assets into different categories. The holdings of foreign Jews in Germany, as well as those of gentile spouses of German or stateless Jews, were declared “unassailable.” But more than 7.1 billion reichsmarks in “seizable” assets remained. In the summer of 1938, Krüger reported that “according to official surveys” German and Austrian Jews “possessed wealth worth around 8 billion marks.”
24
Apparently, that figure included either some of the “untouchable” assets or assets that fell under the 5,000 reichsmark limit.
Despite the size of these sums, German Jews in general were not particularly wealthy. In Hamburg, for example, only 16 percent of German Jews possessed assets that exceeded the limit. But even less-affluent Jews, like many other German citizens, contributed to pension plans and health, life, and disability insurance funds. If we assume that half the 700,00 Jews living in Germany and Austria in 1938 had claims to personal entitlements averaging 1,500 reichsmarks, more than a half billion marks in “Jewish entitlements” fell to the Aryanized social welfare state after forced emigration and deportation. The state could then use this money to reduce subsidies to social benefits programs or raise benefit levels for the German population.
Only two of the many paragraphs in the 1938 edict dealt with issues beyond the formalities of how Jews were to declare their assets. One empowered Göring to direct a four-year plan to “coordinate the integration of reportable assets with the needs of the German economy.” The next paragraph laid out possible sanctions—expropriation of personal wealth and up to ten years’ incarceration—that could be imposed if Jews tried to conceal their holdings. The edict required Jews to “voluntarily” submit to the Aryanization of their assets by tax authorities.
25
Simultaneously, in May 1938, the Economics Ministry issued the following policy statement: “The development of legislation concerning Jews will lead to increased efforts to emigrate.” Subordinate authorities were instructed to “take prompt preemptive measures” with respect to Jewish wealth when they had reason to believe Jews were preparing to leave the country.
26
As the Dutch historian A. J. van der Leeuw has pointed out, this instruction “laid the groundwork so that the largest possible proportion of Jewish-owned assets would flow into the state’s coffers.”
27
Three days after the edict was issued, on April 29,1938, Göring called a conference of government ministers. The topic under discussion was how to achieve “the definitive removal of Jews from economic life,” with the goal of “transforming Jewish wealth in Germany into assets that will deny [the Jews] any economic influence.” In practice, this somewhat cryptic formulation meant that Jews would be forced to exchange most of their assets for government stocks and bonds. The conference participants hoped that this initiative would play well abroad since German Jews would be, at least on paper, compensated for lost assets—“in the form best suited to the purpose, the issuing of government bonds.”
28
Those responsible for the finances of the Third Reich saw a number of advantages in the compulsory exchange of Jewish-owned personal assets for government securities. In mid-June 1938, the government was forced to redeem 465 million reichsmarks of its own bonds to prevent the currency from plummeting. With such emergency interventions, which entailed nothing more than the central bank’s printing more money to cover the state’s exorbitant debts, the Finance Ministry hoped to conceal Germany’s precarious financial situation from global markets. Officials also hoped the buyback would allow them to issue new bonds in the future, “which would otherwise be difficult and perhaps completely impossible.” On September 1,1938, Schwerin von Krosigk informed the Führer that within the month state coffers would run dry. Issuing more bonds, von Krosigk insisted, was not an option, since potential investors favored tangible assets. “We are heading for a grave financial crisis,” von Krosigk warned. “The initial signs of it have already attracted attention abroad to the weakness of our economy and have led to a worrisome loss of confidence at home.”
29
With Germany’s financial situation worsening by the day, the Nazi leadership in Berlin was keen to forge ahead with its annexation of Czechoslovakia and its domestic pogroms against Jews. The state treasury needed money. Despite various accounting tricks, the government was just barely avoiding bankruptcy; if nothing was done, Germany’s financial problems would quickly be laid bare. The only hope was to go on the offensive.
Looking back a few days after the anti-Jewish pogroms of November 9–10, 1938, Göring recalled the discussions of “removing the Jews from the economy, entering them into the ledger sheet, and letting them live on the interest.” Göring was referring to the interest on the government bonds for which Jews had been forced to exchange their property: “The Jew is being driven from the economy and is surrendering his economic assets to the state. In return he is being compensated. His compensation is noted in the ledger sheet and accrues a certain amount of interest. That is what he has to live on.”
30
The assets of Germany’s Jews, converted into government bonds, would provide the country’s war chest with a cushion of several billion reichsmarks. In contrast to the seizing of church property during the French Revolution, the Foreign Office noted in a communiquö to its embassy staff abroad entitled “The Jewish Question as a Factor in Foreign Relations for the Year 1938,” compensation was being provided for the confiscated wealth: “The Jew whose assets have been expropriated receives imperial bonds bearing interest, to which he then has access.”
31
In a speech to gauleiters on December 6, 1938, Göring emphasized the connection between Germany’s arms buildup and the nationalization of Jewish-owned property. Individual businesses, warehouse stocks, furnishings, and works of art, he told them, were to be sold off locally. An oil painting seized from a Jewish household in Stuttgart, for example, should preferably be offered for sale to a Stuttgart museum. The same procedure applied to cars, which were to be placed on the local market at the going price. But Göring hastened to add that the proceeds from the sale of businesses, paintings, or cars, whether “in Munich or Nuremberg, in Stuttgart, Karlsruhe, or Hamburg,” belonged not to the cities, local states, or districts but “exclusively to the Reich central government.”