Chasing Gold: The Incredible Story of How the Nazis Stole Europe's Bullion (14 page)

Despite all that, the central bankers meeting each month in Basel never lost their attachment to the traditional money system. The troubles were considered only a passing phenomenon, and they were certain that the world would eventually get back on the right track. Their unspoken motto: “In Gold We Trust.” The BIS historian Gianni Toniolo later wrote, “The gold standard was still embedded in the very DNA of the BIS.”
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In April 1935, and with the international money system in tatters, the BIS published its fifth annual report. It was both an autopsy on the economic crisis and an overview of the world’s financial future. The author was chief economist Per Jacobsson. While national governments might be temporarily off gold, the central banker’s club was convinced more than ever that it should be the centerpiece of the world economy in order to foster growth and global financial stability. He wrote, “It is slowly beginning to be realized in ever-wider circles than an enduring economic progress presupposes more possibilities for international trade and for sound financial relationships, which, in turn, require stability of exchange rates. In the sphere of practical politics, this means stabilization on the basis of gold.”
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The Bank for International Settlements quickly got into the business of holding gold reserves for its member countries. While the general public might have thought that the metal was being physically moved around the world from country to country to settle trade balances, that rarely happened in these dealings because bullion is extremely heavy and transportation was risky. Transportation might sometimes occur, but more often ownership labels in the vaults of the Federal Reserve of New York or the Bank of England were simply changed. Within the general BIS account in London, the organization’s members had their own sub-accounts that were identified only by numbers. Acting on orders from a particular national central bank, BIS officials in Basel would wire instructions to London to transfer bullion from one account to another, and the transaction immediately took place. The Bank of England considered the transfers only bookkeeping operations. Small countries, in particular, liked the gold-earmarking service, which saved them from having to pay for a physical exchange or the expense of the requisite security. Bank of England officials claimed that they did not even know who owned the sub-accounts, although that was not true.

Just nine years after it was first founded, the outbreak of World War II in 1939 put the Bank for International Settlements right in the middle of the Nazi battle for gold, and the Reichsbank sold bullion to BIS up until a few weeks before the end of the war in 1945. American investigators after the conflict concluded that the bank eventually acquired 13.5 tons of stolen gold in the war years. Germany’s Schacht had been one of the founders of the organization, and officials at the Reichsbank knew exactly how it operated and how to manipulate BIS rules and policies to achieve their objectives. The top German staffer at the organization was Paul Hechler, who arrived in 1935 and became the general director and head of the banking department. He was a card-carrying Nazi and signed his letters
“Heil Hitler!”
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On November 10, 1937, Hitler met with top military and diplomatic officials in his study at Berlin’s Reich Chancellery at 77 Wilhelmstraβe. The rococo building had been the traditional office of the German Chancellor since the time of Otto von Bismarck in the late nineteenth century. He had unified a number of independent and often-quarrelsome Teutonic states under the leadership of Prussia. Hitler, the wannabe architect, considered the majestic building “fit for a soap company” and had his architect Albert Speer redesign and expand it. Attending the meeting were Hermann Göring, the head of the Four Year Plan and the new Luftwaffe; General Werner von Blomberg, the war minister; General Werner von Fritsch, commander-in-chief of the army; Admiral Erich Raeder, commander-in-chief of the navy; Freiherr Konstantin von Neurath, the foreign minister; and Colonel Friedrich Hossbach, Hitler’s military adjutant and official note taker.
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When Hitler spoke before a large crowd, he became an actor strutting on the world stage. He pounded the podium; he screamed; he threatened. When he spoke before a small group such as this, he totally dominated discussions, rarely, if ever, letting anyone voice an opinion or challenge him. The wife of Joseph Goebbels once complained to the wife of Italian foreign minister Ciano about this, saying, “It is always Hitler who talks! He may be Führer, but he repeats himself and bores his guests.”
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The gathering on that November day took place against a troubling economic background. The country was again having balance-of-payments problems, and there was talk about the need to reduce private consumption and cut back on rearmament. The Nazis had made major increases in military spending in the past few years, but internal squabbling continued over where to spend the country’s resources. Admiral Raeder argued that the navy was not getting enough steel and munitions allocations. Schacht and Göring were still fighting over control of the economy, although Göring had essentially won. There was also public rumbling about the severe shortage of vital imports, especially food.

Hitler, though, had other things on his mind. He wanted to talk about his next political and military moves. The meeting lasted from 4:15 P.M. to 8:30 P.M. The colonel’s notes, which historians have labeled the Hossbach Memorandum, were typed up five days later. They provide the best outline of Hitler’s thinking and strategy during the first period of Nazi aggression.
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Hitler began by explaining that the topic for discussion was too important to be discussed with the full cabinet. He quickly explained that his overall political goal was “to make secure and preserve the [country’s] racial community and to enlarge it.” That meant expanding Germany’s population beyond the current eighty-five million and enlarging the country’s borders by bringing into the Reich territories where ethnic Germans lived, such as Austria and Czechoslovakia.

The chancellor explained that Germany had to become economically self-sufficient, especially in war materiel. It was possible to achieve that immediately in coal, but it would be more difficult with petroleum, iron, copper, and tin. Agricultural self-sufficiency was impossible in the short run, which was why it would be necessary to expand Germany’s territory to the east and gain sufficient farmland. Hitler also said that the country had to regain the colonies lost after World War I, notably the area known as German East Africa and German Southwest Africa, which could become a new source of raw materials and foodstuffs.

Hitler spelled out three different political scenarios or what he called cases. The first covered the period from 1943 to 1945, after which he said the German military situation would deteriorate because Britain, France, and the Soviet Union would have rearmed with new weaponry. Therefore action had to be taken before 1943. “Nobody knows today what the situation would be in the years 1943-45,” he said. “It was while the rest of the world is still preparing its defense that we are obliged to take the offensive . . . Only one thing is certain: we can not wait longer.”

Hitler’s second premise was that France would continue to be weak because of the country’s ongoing economic and political problems. Hitler believed that would preoccupy its political and military leaders, and as a result France would not react to German military moves despite Prague’s mutual defense treaty with France.

The Führer’s conclusion was that Germany should take over Austria and Czechoslovakia as soon as possible in order to protect its southern flank. Hitler believed that Britain and France had already written off Czechoslovakia, and Italy would not offer any objections as long as Mussolini was in power; he still considered Austria part of his sphere of influence. Hitler confidently proclaimed that neither Poland nor the Soviet Union would go to war to protect either Austria or Czechoslovakia.

Hitler concluded the presentation by saying that Germany should undertake a diplomatic and military offensive against the two countries early in the following year. The German military move against Czechoslovakia, he said, should be conducted with “lightning speed” to forestall Britain or France from mounting a counterattack. The Führer’s overriding strategy was to avoid the protracted conflicts that led to his country’s defeat in World War I. His objective was to win a series of small wars with
Blitzkrieg
attacks. His immediate goal: “For the improvement of our military political position, it must be our first aim . . . to conquer Czechoslovakia and Austria simultaneously.” The annexation of the two small countries would improve Germany’s strategic position in eventual, and expected, conflicts with Britain and France. Securing his southern border would also increase the country’s military might during the ultimate, and inevitable, attacks on Western Europe.

Hitler, as always, dominated the meeting by the force of his personality. Not everyone in the room, however, agreed with him, and Hossbach devoted two long paragraphs to objections from Blomberg, Fritsch, and Neurath. They argued that France and Britain “must not appear in the role of our enemies.” War Minister Blomberg said that the Czech defenses were now stronger because the country had built a kind of Eastern Maginot Line that would make a German attack both difficult and dangerous. Foreign Minister Neurath argued that conflict with France, Britain, and Italy was more likely than Hitler assumed. Hitler replied that he wasn’t thinking of an immediate conflict with the small countries, but perhaps one in the summer of 1938. He also repeated his belief that neither Britain nor France would mobilize its forces to defend Austria or Czechoslovakia.

Göring offered his strong support for the plan and added that in view of Hitler’s presentation, Germany should immediately halt its military involvement in the Spanish Civil War. The support for General Francisco Franco’s rebels consisted of supplying military equipment as well as providing air cover and undertaking selected aerial bombings. Hitler agreed, but added that he wanted to wait for the appropriate time to make that move. Displaying behaviour he was to exhibit repeatedly throughout the war, he wanted to do everything at the same time and refused to sacrifice one objective in order to achieve another. Militarily, Hitler always desired to push his armies to do more and rebuffed anyone who tried to set limits.

Hossbach’s notes ended with a terse one-sentence statement that the second part of the meeting dealt with a detailed discussion of armaments.
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Four days later, General Fritsch met with Hitler and objected even more strongly to the plan put forth at the meeting. Foreign Minister Neurath tried to get an appointment with the Führer to voice his opposition, but Hitler slipped out of Berlin and went to his Berghof retreat in order to avoid another confrontation. Three months after the Reich Chancellery meeting, Blomberg, Fritsch, and Neurath had all been relieved of duty. The two military leaders were removed because of sexual charges. Blomberg was accused of having recently married a prostitute, and Fritsch was labeled a homosexual, which was untrue. Joachim von Ribbentrop, a wine salesman before becoming Hitler’s diplomatic troubleshooter, replaced Neurath as foreign minister. General Walther von Brauchitsch, another Prussian nobleman, but one who followed Hitler’s orders, replaced Fritsch.

By early in 1938, Hitler had effectively silenced all diplomatic and military opposition. On February 4, he held a cabinet meeting to explain the government shuffle. It was to be the last cabinet meeting Hitler ever held. The same night he went on German radio and declared, “From now on, I personally take over the command of the armed forces.”
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No one should have been surprised that Hitler had his eyes on Austria. In the second paragraph of his opus
Mein Kampf
he wrote, “German-Austria must return to the great German motherland . . . One blood demands one Reich.”
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The Führer had already sent agents into Austria to stir up unrest and prepare for military action, and now he sped up his plans to incorporate the country of his birth into his Reich. Immediately after World War I, a majority of Austrians probably wanted to unify their country with Germany, but by the mid-1930s only a minority still desired to take that step. The move in German was called
Anschluss
or annexation. Austria was economically and politically unstable, and thus an easy target. Paramilitary units operated on both the right and the left, and high-level political assassinations had taken place, including the murder of Austrian Chancellor Engelbert Dollfuss in February 1934 during a failed Nazi-led coup attempt. Hitler sent Franz von Papen, the centrist politician who had helped bring him to power, to Vienna as ambassador. The same day that Hitler met with his cabinet in Berlin, he recalled Papen and fired him. Hitler didn’t need good relations with the country he was planning to annex.

On February 12, 1938, Hitler demanded that Kurt Schuschnigg, the Austrian chancellor and a strong opponent of
Anschluss
, meet him at Berchtesgaden. Dressed in the Nazi brown-shirt of a Storm Trooper and flanked by three generals, Hitler immediately launched into a two-hour tirade against Austria. Schuschnigg offered no response and did not ask what Austria should do about the complaints. Hitler and Schuschnigg then adjourned for a convivial lunch that totally belied the earlier diatribe. After eating, though, Schuschnigg had to wait for hours before Hitler presented the Austrian leader with a detailed ultimatum that included putting Nazis in key Austrian cabinet posts, integrating the country’s economy into that of Germany, and releasing all Nazi political prisoners. Hitler said there could be no discussion about his demands. “You will either sign as it is and fulfill my demands within three days, or I will order the march into Austria.”
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