Secret Run-Up to World War II: the Responsibility of the West

The agenda of our editions is inevitably circulating around the theme of wars. Until now we were covering the current one in Afghanistan and emerging in Iran as the focuses of international attention. But as the 65th anniversary of the Victory over Nazism is approaching, the lessons of history start to be more and more sounding. Who created and nurtured the phenomenon of Hitler? Why the League of Nations was impotent to stop aggressor? Is there any difference between Munich Agreement 1938 and Molotov-Ribbentrop Pact 1939? Why the WWII eventually broke up September 1, 1939 while nobody called the military actions in Spain, Czechoslovakia, Austria and Far East this way? We will try to find answers at ‘Unknown WWII’ edition of our blog. Today we suggest a glimpse into the ‘Secret Run-Up to World War II: the Responsibility of the West’ by the Russian historian OLGA CHETVERIKOVA.

Diverting intellectual energies to wasteful discussions in which Russians have to adopt a defensive stance and disprove groundless allegations is the technique traditionally employed by the West in its information war against Russia. The purpose of the resolution passed recently by the OCSE Parliamentary Assembly, which equated the roles of the Soviet Union and Nazi Germany in unleashing World War II, was not limited to an attempt to sponge money off Russia to keep a few bankrupt economies afloat. The key objective is to demonize Russia as the historic successor to the USSR and to create a legal framework for delegitimizing its opposition to the overhaul of the global arrangement which resulted from World War II (not surprisingly, the Japanese parliament’s claim to the South Kuril Islands was synchronized with the above resolution). On the eve of the anniversary of the beginning of the war the West launched a broad campaign aimed at formulating “a common concept of the European history”, the agenda behind it being to legally hold the communist regime responsible for crimes against humanity on pars with the Nazi one.

Speaking of the historical responsibility, it is Russia as the country which suffered more than any other from the pan-European military disaster in the XX century that should take the leading role in identifying and condemning the actual perpetrators of the massacre. The number one question in the context is: what forces made it possible for German fascists to ascend to power and guided them as mankind was sliding towards the worst catastrophe of the XX century? An examination of Germany’s pre-war history shows clearly that its politics was controlled with the help of arranged financial crises akin to the one the world is currently facing.

In that distant epoch and at present the crises were organized by Anglo-American financial clans comprising the global banking elite. Therefore, when the quite reasonable suggestions are made to declare September 30 – the date of the signing of the Munich Agreement – the day of commemorating the victims of liberalism and Nazism, it should be remembered that the notorious deal was just one in a chain of events planned by the Anglo-American financial elite whose strategy was centered on organizing an armed conflict between the USSR and Germany. The West’s pre-war history abounds with dates that could become days of commemorating the victims of the alliance between bankers and the Nazis. For example, one of such tragic dates was when Vatican and Germany signed a concordat which left the Roman Catholics totally subdued by the Nazi regime.

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The key role in defining the strategy of the West’s post-war development strategy was played by the main financial institutions of Great Britain and the US – the Bank of England and the Federal Reserve System – and the financial and industrial organizations which stood close related to them. They sought absolute control over the German financial system in order to dominate the Central European politics. The phases of the implementation of the strategy were:

1919-1924 – the creation of the conditions for massive US financial infusions into the German economy.

1924-1929 – the establishment of control over the German financial system and the financial support for the national socialist movement.

1929-1933 – the time when a deep economic crisis in Germany was provoked and the Nazis were given the opportunity to seize power.

1933-1939 – the financial cooperation with the Nazi regime and the support for its expansionist international politics which was meant to prepare and unleash the new World War.

During the first phase, the US financial expansion over Europe was made possible mostly by the war-time indebtedness and the closely related problem of German reparations. Upon formally getting involved in World War I, the US provided $8.8bn in loans to its allies. Most of the money went to Great Britain and France. As for the overall war-time indebtedness including the loans provided by the US in 1919-1921, it totaled above $11 bn1. In their turn, the countries which absorbed the credits attempted to resolve their problems at the expense of Germany on which they imposed enormous reparations to be paid under extremely burdensome terms. The financial outflow from and tax evasion within Germany inevitable under the conditions left it with a budget deficit of such proportions that could only be offset by reckless money-printing which triggered a collapse of the German currency. In 1923 the inflation in Germany reached 578,512% and $1 was worth 4.2 trillion marks. German industrialists started to openly ignore the reparation requirements, the result being the January, 1923 crisis during which Ruhr was occupied by France and Belgium.

This was exactly the situation the Anglo-American ruling circles were waiting for, as – when France got involved and demonstrated total inaptness – it presented to them the opportunity to take charge. US Secretary of State C.E. Hughes said the US was to wait for Europe to become ready to accept the US offer2.

The contours of the new project were charted in J.P. Morgan and Co. at the request of Governor of the Bank of England Montagu Norman. It was based on the ideas of Dresdner Bank representative Hjalmar Schacht which he formulated in March, 1922 for John Foster Dulles who was a legal adviser to US President W. Wilson at the Paris Peace Conference and subsequently – the US Secretary of State under D. Eisenhower. Dulles passed Schacht’s paper to the main envoy of J.P. Morgan and Co. and after that J.P. Morgan recommended J. Schacht to M. Norman, and he – to the leaders of the Weimar Republic. In December, 1923 J. Schacht was appointed as President of Reichsbank and was instrumental in bringing together the Anglo-American and the German financial circles3.

In the summer of 1924 the project which became known as the Dawes Plan (after the chairman of the group of experts which wrote it, a US banker who headed one of the Morgan group’s banks) was adopted at the London Conference. It envisioned halving the reparations and specified from what sources the money to pay them would be drawn. From a broader perspective, the priority was to create an environment hospitable to US investments, the stabilization of the German mark being a prerequisite. A large credit – $200 mln (800 mln marks) – was to be extended to Germany, half of the amount from J.P. Morgan. In the process, Anglo-American banks gained control not only over the transfer of Germany’s payments but also over the country’s budget, monetary circulation, and to a large extent over its banking system. By August, 1924 Germany issued a new currency, its financial situation became relatively stable, and, as G. Preparata wrote, the Weimar Republic was ready for the most spectacular economic assistance in history which was to be followed by the world’s worst tragedy – the US blood flowed into the financial veins of Germany4.

Consequences followed immediately.

First, the so-called absurd Weimar circle emerged because the annual reparations were spent by the US allies to repay their debts. The gold which Germany gave away as reparations was sold and landed in the US, from where it returned as aid to Germany in accord with the plan. Then Germany again passed it to Great Britain and France, and they used it to repay their war-time debts to the US. The US earned interest on the gold and sent it back to Germany. As a result, everybody in Germany survived on credit and it was clear that should the Wall Street withdraw credits the country’s complete bankruptcy would follow. Under the scenario the US banks would have suffered no damage since they sold the bonds they got in return for credits to US citizens.

Secondly, though formally the credits were extended to facilitate payments, in reality Germany was rebuilding its military-industrial potential. It was paying for credits with shares of German companies and on the whole the process translated into active integration of the US capital into the German economy. A total of nearly 63 bn gold marks were injected into the German economy in 1924-1929 (30 bn of the amount in the form of loans), while reparations summed up to just 10 bn marks5. Some 70% of the financial resources came from US banks, mostly J.P. Morgan’s. Already in 1929 Germany’s industry evolved into the world’s second largest, while being to agreat extent controlled by the leading US groups.

For example, IG Farben which was the German army’s number one supplier – and also covered 45% of the cost of A. Hitler’s electoral campaign in 1930 – was under the control of Rockefeller’s Standard Oil. Morgans controlled the grands of the German radio- and electro-technical industries – AEG and Siemens – via General Electric (GE owned a 30% stake in AEG by 1933) and 40% of Germany’s telephone network – via ITT Corporation, as well as owned 30% of the aircraft-making Focke-Wulf company. General Motors which belonged to the du Pont family gained control over Opel. Henry Ford owned 100% of the stock in Volkswagen. Germany’s second-largest industrial monopoly Vereinigte Stahlwerke owned by Thyssen, Flick, Wolff, Vogler and others was created in 1926 with the help of Rockefeller’s Dillon, Read & Co. in 1926.6

The US cooperation with the German military-industrial complex was so broad and intense that by 1933 US banks controlled the major sectors of Germany’s industry and such banks as Deutsche Bank, Dresdner Bank, etc. The US handed out over 150 long-term loans during 7 years to achieve the objective, and the Dawes Plan is often referred to as the first five-year plan of the pre-war Germany.

As a parallel process the same actors fostered the political force which was to play the key role in the realization of the Anglo-American plans. The Nazi party and personally A. Hitler were given lavish financial support.

Formed in 1919, the Nazi party entered the phase of growth only in the spring of 1922 when its leader began to receive serious funding. Former German Chancellor H. Bruning wrote that starting in 1923 Hitler received large sums of money from abroad. Their source was obscure but they were known to arrive via Swiss and Swedish banks. It is also known that in 1922 Hitler had a meeting with US military attaché in Germany captain Truman Smith who submitted a detailed account of it with a positive assessment of Hitler to Washington. It was Smith who introduced to Hitler’s circle Harvard graduate Ernst Franz Sedgwick Hanfstaengl (Putzi), an individual who had serious influence over Hitler in the formative years of his political career, provided to him substantial financial support, and connected him to high-ranking British politicians7. Hanfstaengl left Germany in 1937 and served as F. Roosevelt’s adviser during World War II.

Hitler was conditioned to play in the political top league, but his party was bound to remain peripheral as long as Germany’s prosperity continued. The outlook for it changed momentarily when the crisis erupted.

The third phase of the strategy of the Anglo-American financial circles began to materialize by the fall of 1929, following the crash of the US stock market provoked by the Federal Reserve. It is indicative of the far-reaching plans that already in 1928 Wall Street started to revoke credits to Germany. After the financial collapse in the US, the Bank of England, the Federal Reserve, and J.P. Morgan decided to cut off credits to Germany and thus triggered a banking crisis and an economic depression in Central Europe. In September, 1931 Great Britain abandoned the gold standard thus deliberately destroying the system of international settlements and, among other things, financially suffocating the Weimar Republic. Even a minimal prolongation of moderately proportioned credits could ward off the crisis8 but Hjalmar Schacht unexpectedly chose to resign, and Reichsbank’s new president Hans Luther appointed at M. Norman’s and Federal Reserve chief executive officer G. Harrison’s request obediently abstained from any attempts to prevent the collapse of major German banks.

At the same time the National Socialist German Workers’ Party experienced a kind of a financial miracle. Having received massive donations from Thyssen, IG Farben, and Kirdorf it garnered 6.4 million votes in September, 1930 and became the number two party in the Reichstag. After the success it started to draw generous financial infusions from abroad. Hjalmar Schacht acted as the link between German industrialists and foreign financial centers.

In October, 1931 A. Rosenberg visited London and met with major British bankers and businessmen including M. Norman, Royal Dutch-Shell chairman H. Deterding who gave Hitler 10 mln marks before 1933, and Frank Tyarks CEO of Schroder Bank affiliated with J. Henry Schroder Bank AG of New York and the Cologne-based Stein Bank owned by baron Kurt von Schroder. Schroder Bank occupied an extremely influential position in the global banking network and was a member of the small inner circle of London banks which had recognized influence over the board of the Bank of England Tyarks was Schroder’s confidant in the Bank of England in 1918-1945). Schroder also maintained close ties with Morgan and Rockefeller, and his interests were officially represented at Wall Street by Sullivan and Cromwell, a law firm which employed John Foster and Allen Dulles (the latter sat on the board of directors of Schroder’s bank).

The connections were of crucial importance to the Nazis since when – after 1931 – baron von Schroder and Schacht asked Germany’s industrial and financial tycoons to support the Nazis the first question they were asked was how the international financial community and Norman in particular saw the outlook for a German government led by A. Hitler and whether they would be ready to extend credits? The answer was positive and on January 4, 1932 Hitler met with Papen at Kurt von Schroder’s villa and struck a secret deal for the support for the National Socialist German Workers’ Party which by the time was burdened with enormous debts. The Dulles brothers were also present, which is a fact their biographers prefer not to mention9. Another meeting between Hitler and Schroder, Papen, and Kepler during which Hitler’s program was fully approved took place on January 14, 1933. The decision to transfer power to the Nazis was made during this meeting, and on January 30 Hitler became the Reich Chancellor. The developments opened the fourth phase of the implementation of the strategy.

The Anglo-American ruling circles viewed the new German government quite favorably. When Hitler refused to pay reparations, thus jeopardizing Great Britain’s and France’s scheme of repaying their war-time debts, neither of the two countries countered a move with any claims. Moreover, the US extended a total of $1 bn in new credits to Germany following the May, 1933 visit of Schacht who was reinstated as Reichsbank President to the US and his meetings with the US President and major Wall Street bankers. Schacht also visited London in June, met with Norman, and managed to obtain a $2 bn loan from Great Britain as well as a waiver of old debts. Thus the Nazis achieved what previous German governments could not even dream of.

When a group of major bankers met with Norman to discuss the poitical situation in Europe in the early 1934, Germany was assessed as the stabilizing force. Norman visited Berlin in May the same year to reach an agreement on the secret financial support for the new regime. In the summer of 1934 Great Britain signed the British-German transfer agreement which became one of the foundations of the British politics in dealing with the Third Reich, and by the late 1930ies Germany turned into Great Britain’s main trade partner. At the same time, Great Britain restored the 1931 moratorium on the repayment of debts related to the Dawes Plan and all Germany’s debts to British banks. Moreover, M. Norman advanced a new 4 million pounds loan to the Nazis to inject additional liquidity into the German economy. Private German companies such as IG Farben were also able to borrow money from Great Britain while the Bank of England warned its employees that the theme was strictly confidential10. Schroder Bank served as Gemany’s main agent in Great Britain, and in 1936 its New York division merged with the Rockefeller empire to form the Schroder, Rockefeller and Co investment bank which The Times described as the economic propagandist of the Berlin-Rome axis.

Eventually by 1939 Germany repaid only 10% of its indebtedness as of 1932, but the international financial circles continued to be gentle with the Nazis. Hitler told that his four-year plan was based on foreign credits and he never had any concerns that problems with it would arise.

Under the Nazi regime, the foreign money in Germany grew mostly on the basis of direct investments. In August, 1934 Standard Oil bought 730,000 acres of land in Germany to construct refineries which supplied the Nazis with fuel. Rougly at the same time, advanced equipment worth $1 bn was secretly delivered from the US to German aircraft factories. Pratt and Whitney, Douglas, and Bendix Aviation supplied to Germany a large number of military patents, and Germany’s Junkers 87 was made using the technologies imported from the US. By 1941 the US investments in Germany reached $475 mln. Standard oil invested $120 mln, General Motors – $35 mln, ITT – $30 mln, and Ford – $17.5 mln11.

The Bank for International Settlements created in 1930 in the framework of the Young Plan to regulate the extraction and distribution of the German reparations played a particular role in maintaining the ties between the financial circles of the US and Germany. Initially established to control the transfer of foreign currency from Germany abroad it assumed a mission of the opposite kind and started acting as the channel for pouring money from the US and Great Britain into Nazi reserves. By the beginning of World War II the Bank for International Settlements was fully under Hitler’s control despite being headed by Thomas McKittrick, an American. The whole arrangement was invented by the same Hjalmar Schacht who harbored the aspiration to create an institution that would be able to keep the world’s major bankers connected in the case of a global military conflict. To this end, the Charter of the Bank for International Settlements guaranteed that it would remain untouched – not subject to confiscation, liquidation, or control – under any circumstances.

The close financial and economic cooperation between the Anglo-American and the Nazi business circles was the background of the 1930ies appeasement politics and the Munich Agreement. These days, when the global financial elite is implementing its Great Depression-2 plan as a prologue to the institution of “the new world order”, it is an urgent task to reveal the key role it played in organizing the past crimes against humanity.
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1. A.A. Gromyko. Foreign Expansion of Capital. History and Modernity. Moscow, Mysl Publishers, 1982. P. 84
2 See: History of Diplomacy. Moscow. Political Literature Publishers, 1965. V. 3, P. 357
3 G. Preparata, “Conjuring Hitler: How Britain and America Made the Third Reich”
4 Ibid. P. 34
5 History of Diplomacy, P. 502.
6 See: C.Sutton A. Wall Street and the Rise of Hitler. Arlington House Publishers, New Rochelle, New York. 1976//www.reformation.org/wall-st-hitler.html. R. Epperson. The Invisible Hand. Viewing History as Conspiracy. Kyiv, 2003
7 See; Sutton, Opt. Cit. Starikov. Who Made Hitler Attack Stalin. St. Petersburg, Piter Publishers, 2008. P. 78-80
8 F. Engdal. Century of War -Anglo-American Oil Politics and the New World Order. Pluto Press, 2004
9 Mullins E. Secrets of the Federal Reserve. Published by the Federal Reserve Bank of Boston in its seventh printing, 1982/ http://www.apfn.org/apfn/reserve.htm
10 Preparata, Ibid. No evidence concerning the matter can be found in the bank’s archives
11 Ch. Higham’s Trading With the Enemy: An Expose of the Nazi-American Money Plot, 1933-1949 written on the basis of the materials declassified in 1978-1980 provides the fullest picture of the financial, economic, and political cooperation between the US and the German business in the pre-war epoch and during the war.

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