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The Myth of "Schachtian Austerity"

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More at Hjalmar Schacht

myth: austerity leads to fascism/ war efforts

"Schacht's efforts to "bootstrap" Nazi Germany out of the depression brought the economy to the brink of monetary collapse again at about the mid-1930' s. Lacking the foreign sources of primitive accumulation available to the U.S.A. and other World War I victors, Germany was impelled by the nature and situation of its "independent" capitalist economy to embark on successive conquests of its neighbors, in pursuit of the loot with which to meet payments overdue on the account of an inflated mass of Nazi capital. "
"Schacht's role was to impose an even more brutal austerity on a German population whose standard of living had already been destroyed by the hyperinflation which resulted from the savage reparations imposed on the nation after World War I."
From "Brutish Empire Calls for A New Hjalmar Schacht" by John Hoefle - November 28, 2008 issue of Executive Intelligence Review.

Reality: fascism/ war efforts lead to austerity

Hjalmar Schacht (1877–1970), president of the Reichsbank from 1923 until 1929, when he resigned in protest AGAINST what he regarded as the excessively compliant attitude of the government toward reparations! (i.e. austerity!)

On 11 October 1931 right-wing forces under the leadership of the industrialist andmedia tycoon Alfred Hugenberg (1865–1951) assembled in Bad Harzburg, a town inc entral Germany, to form a common front against the government of HeinrichBrüning (1885–1970) and the Weimar parliamentary system. Appointed Chancellor in March 1930 at the onset of the Great Depression, but unable to put together amajority coalition, Brüning called a special election in September 1930. The Nazis made huge gains and became the second-largest party in the Reichstag. Thereafter Brüning was forced to rely on the emergency powers granted to the President (Hindenburg) under Article 48 of the constitution (Doc. 2.5) in order to enact his program of unpopular austerity measures. Brüning provoked the wrath of nationalists and Nazis by refusing to work with them to establish a nationalist dictatorship, relying instead on the goodwill of the Social Democrats (SPD) to override no-confidence motions in the Reichstag. Although Brüning worked hard to lower Germany’s reparations obligations and claimed to have favored an eventual restoration of the monarchy, nationalists viewed him as too loyal to the Weimar constitution and too weak to stand up to the West.

His market-oriented policies,however,eventually brought him into conflict with the Nazis’ “Four-YearPlan”to prepare Germany for war and led to his resignation from both posts(see Doc. 4.3).
From ( The Nazi Germany Sourcebook p 99

The Führer’s speech to the Commanders-in-Chief of the Wehrmacht,22 August 1939:
On 22 August 1939, on the eve of the signing of the Nazi–Soviet Pact(Doc.4.21),Hitler summoned his leading generals to his mountain retreat in Berchtesgaden to inform them of the imminent start of the war against Poland.

"We have nothing to lose; we can only gain. Our economic situation is such, because of our austerity measures, that we can only hold out for afew more years. Goering can confirm this. We have no other choice, we must act. [...] The English Empire did not emerge from the last war strengthened. [...] A beginning has been made for the destruction of England’s hegemony. The way is open for the soldiers, after I have made the political preparations. Today’s announcement of the non-aggression pact with Russia struck like a bombshell."
( p 242
Source: Office of the US Counsel for Prosecution of Axis Criminality, Nazi Conspiracy and Aggression, Vol. III(Washington DC: US Government Printing Office, 1946), pp. 581–6 [Doc. 798-PS]

War Debt Issue



In February 1922, Congress established the World War Foreign Debt Commission to negotiate repayment plans with the debtor nations. The Commission eventually concluded 15 agreements that contained terms based upon the debtors’ abilities to pay. In aggregate, a final principal amount of $11.5 billion was accepted, to be paid off over 62 years with interest rates averaging slightly above two percent. If paid in full, this would have yielded more than $22 billion.
Germany had been saddled with an unrealistically high postwar obligation of $33 billion, but was actually able to make payments for a number of months. This crushing obligation, however, could not be discharged and the Germans defaulted in less than a year. It quickly became apparent that the Allied recipients of the reparations payments were unable to pay the U.S. after the German default.

So the problem was the war reparations imposed on Germany by the Allied, especially France (not "Manhattan")!

What Actually Is Fascism?
"In 1932, faced with the onset of a rapid collapse in Hitler's support, the lag in Nazi party support, and the resurgence of the Strasser influence within the Nazi strata, Schacht begged his London and Manhattan associates to aid him in putting Hitler immediately into power. Schacht's Jewish associates in Manhattan and London were assured that the Nazi's Jewish policies would never exceed a temporary annoyance, soothing the conscience of the New York Times, among others of that category. In short, Hitler was put into power by Schacht's London and Manhattan backers not because Hitler's influence was ascending, but because it was showing signs of collapse. "

and "The Hitler regime and World War II were the lawful final outcome of the war reparations."


In 1930 the parliamentary coalition that governed Germany fell apart, and new elections were held. The biggest winner in these elections was Adolf Hitler's National Socialist Party. From twelve seats in parliament they increased their seats to 107, becoming Germany's second largest political party. The largest party was still the Social Democrats, and this party won 143 seats and 24.5 percent of the vote. Communist Party candidates won 13.1 percent of the vote, and together the Social Democrats and the Communists were large enough to claim the right to make a government.

German presidential election, 1932:

In the presidential election held on March 13, 1932, there were four candidates: the incumbent, Field Marshall Paul von Hindenburg, Hitler, and two minor candidates, Ernst Thaelmann and Theodore Duesterberg. Joseph Goebbels waged a furious propaganda campaign on behalf of Hitler, outdoing the previous election effort of 1930. Nazi posters were plastered everywhere. The results were:

Hindenburg 49.6 percent
Hitler 30.1 percent
Thaelmann 13.2 percent
Duesterberg 6.8 percent

Since Hindenberg had not received a majority of the vote, however, a runoff election had to be held among the top three vote-getters. On April 19, 1932, the runoff results were:

Hindenburg 53.0 percent
Hitler 36.8 percent (an increase of two million votes)
Thaelmann 10.2 percent

The July 31, 1932, election produced a major victory for Hitler’s National Socialist Party. The party won 230 seats in the Reichstag, making it Germany’s largest political party, but it still fell short of a majority in the 608-member body.

On the basis of that victory, Hitler demanded that President Hindenburg appoint him chancellor and place him in complete control of the state. Hindenburg refused.

Attempting to remedy the chaos and the deadlocks, Hindenburg fired Papen and appointed an army general named Kurt von Schleicher as the new German chancellor. Unable to secure a majority coalition in the Reichstag, however, Schleicher finally tendered his resignation to Hindenburg, 57 days after he had been appointed.

German federal election, November 1932

They saw a significant drop for the Nazi Party and increases for the Communists and the national conservative DNVP. The results were a great disappointment for the Nazis, who once more emerged as the largest party by far but failed to form a government coalition in the Reichstag parliament.

National Socialist German Workers Party 11,737,021 33.09% 196 Seats (-34)

On January 30, 1933, President Hindenburg appointed Adolf Hitler chancellor of Germany. Faced with hyperinflation in 1923 and soaring unemployment, people sought refuge in a movement that promoted national pride, and signed up to Hitler's Nazi party - which used the reparations as a propaganda tool.
Once in power, although the country had only paid about one eighth of what it owed, Hitler refused to pay any more. Hitler was committed to not just not paying, but to overturning the whole treaty.
So much for the "Manhattan bankers" conspiracy!

Larouche: fascism is imposed by bankers to get their money back through austerity... hence Larouche's latest campaign agaisnt Obama as "Hitler"!

FACT: Hitler was elected on the basis he was AGAINST the Versailles Treaty and the reparation/ guilt clause!
Note: Fascism was Italian (Mussolini) and took power in 1922. Italy was an Allied country during WW1 (along with the US, France and Britain!) Mussolini's "march on Rome" inspired Hitler's Munich failed putsch of 1923.

Article 231, the "war guilt clause" Creation of an international reparations commission to determine the amount of damages.
The bill was tallied in April 1921, when the commission determined that damages caused by Germany amounted to $33 billion or 133 billion gold marks.
An initial payment of $250 million was made in September 1921. However, an economic crisis had gripped Germany, which caused runaway inflation and an end to additional installments. In May 1922, Allied governments granted Germany a temporary moratorium on reparations payments in the hope that their economy would recover during that period and enable the resumption of regular installment payments. France bitterly opposed the moratorium, having suffered severely from German aggression, but eventually agreed.

At the end of the prescribed period, Germany was in no position to resume payments and defaulted. In January 1923, an impatient France, accompanied by a token Belgian force, marched into the Ruhr Valley and set up a military occupation, figuring that control of the valuable industrial area could help force the resumption of payments.

The United States, of course, had not signed the peace treaty with Germany and had no claim to any reparations. However, hoping to avert a deepening of the international crisis, the Coolidge and Hoover administrations sponsored international plans to deal with the reparations issue:(

The Reparations Commission bickered throughout 1920 over the total sum to be demanded of Germany and its distribution among the Allies. At the Spa Conference (July 1920), France won 52 percent of German payments, Britain 22 percent, Italy 10, and Belgium 8. At the conferences of Hythe, Boulogne, and Brussels, France presented a total bill of 230,000,000,000 gold marks although the British warned that this was far beyond Germany’s capacity to pay. But when German foreign minister Walter Simons offered a mere 30,000,000,000 (Paris Conference, February 1921), French Premier Aristide Briand and Lloyd George made a show of force, seizing in March the Ruhr river ports of Düsseldorf, Duisburg, and Ruhrort, taking over the Rhenish customs offices, and declaring a 50 percent levy on German exports. [...] Nevertheless, Chancellor Konstantin Fehrenbach resigned rather than accept this new Diktat, and his successor, Joseph Wirth, acquiesced only under threat of occupation of the Ruhr.
The “fulfillment” tactic adopted by Wirth and his foreign minister, Walther Rathenau, was to make a show of good faith to demonstrate that the reparations bill was truly beyond Germany’s capacity. They were aided in this by the continuing deterioration of the paper mark. The prewar value of the mark was about 4.2 to the dollar. By the end of 1919 it reached 63, and after the first payment of 1,000,000,000 marks under the London plan, the mark fell to 262 to the dollar. The French argued that the inflation was purposeful, designed to feign bankruptcy while allowing Berlin to liquidate its internal debt and German industrialists like Hugo Stinnes and Fritz Thyssen to borrow, expand, and dump exports on the world market. [...]
(French president) Poincaré concluded that only force would break the deadlock. As he told the Belgians in July, “I will propose a short moratorium subject to guarantees. If England refuses I will act alone. The German industrialists conspire to destroy the mark. They hope to ruin France.
[...] Hjalmar Schacht, recently appointed president of the Reichsbank, halted the inflation with a temporary currency called the Rentenmark, and on New Year’s Day 1924 the president of the Bank of England, Montagu Norman, extended a 500,000,000 gold mark credit to back a new German mark. [...]
Finally, the French franc also succumbed to the pressure it had been under since the war. Poincaré tried austerity measures, but a new collapse in March forced him to borrow $89,000,000 from J.P. Morgan, Jr., of New York to stabilize the exchange rate. All these blows to France’s position told in the report of the committee of experts under American Charles G. Dawes, released in April 1924. It called for a grand loan to Germany and the resumption of reparations payments, but made the latter contingent on French withdrawal from the Ruhr and restoration of German economic unity. [...] The United States would lend $200,000,000 to Germany to “prime the pump,” and Germany would pay from 1,000,000,000 to 2,500,000,000 marks in reparations for five years. The French government, by contrast, issued bonds worth 44,000,000,000 francs from 1919 to 1925 to finance reconstruction of its devastated regions. In the end, Germany received more money in loans than it ever paid in reparations, so that the cost of repairing war damage was borne ultimately by the taxpayers, investors, and consumers of the Allied nations and the United States.
The influx of American capital through the Dawes Plan nevertheless broke the postwar spiral of inflation, default, and hostility and made possible a return to the gold standard. Germany stabilized its currency in 1924, Britain followed in 1925, and France did so in 1926 (officially in 1928). The smaller countries of Europe and Latin America, in turn, pegged their currencies against either the dollar, the pound, or the franc. Finally, the French government agreed in the Mellon–Berenger Accords (April 20, 1926) to fund its war debts at the favourable rates offered by the United States. The new gold standard and the cycle of international transfers, however, depended on a continuous flow of American capital.


Hitler repudiates the versailles treaty and reparations - Loans and Debt Resolution (in a speech to the Reichstag on 17 May 1933) ... so much for a "bankers asset"!

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Page last modified on December 17, 2012, at 03:58 PM