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Biography: Dr. Hjalmar Schacht

Born as Horace Greely Hjalmar Schacht on 22 January 1877 in the town of Tingleff, then Germany. Nowadays the town is known as Tinglev and is part of Denmark.

Hjalmar Schacht

After his studies he earned a doctorate in philosophy at the university of Kiel in 1900 with a thesis about mercantilism: "Der theoretische Gehalt des englischen Merkantilismus".

Rise to Reichstagpresident

In 1903 he started working at the Dresdner Bank, where he worked himself up to become the deputy director in 1908. He would stay here until 1915. During a business trip to New York in 1905 he met with JP Morgan. It was on the same trip, that he also briefly met with President Theodore Roosevelt, as he was invited to accompany Hans Schuster, member of the board of the Dresdner Bank.
During the First World War he was assigned to General von Lumm (1864–1930), the Banking Commissioner for Occupied Belgium. It was Von Lumm who dismissed Schacht when he found out that Schacht was using the Dresdner Bank to channel national bonds worth 500 million Belgium francs that were used to pay for requisitions. Von Lumm believed that Schacht’s previous association with Dresdner Bank left him open to questions being asked about his professionalism. While this could have hindered any potential advance in the banking world, it turned out to be no more than a blemish.

After his period with the Dresdner Bank, Schacht started working as board member of the Nationalbank für Deutschland. This bank merged in 1922 with Darmstädter Bank für Handel und Industrie to become the Darmstädter und Nationalbank (Danatbank).

As a senior German banker, Schacht had to deal with the hyperinflation of 1923 which wiped out the savings of very many people in Weimar Germany. He was officially the Currency Commissioner for Weimar Germany. It was Schacht who took the credit for the introduction of the ‘Rentenmark’ that helped to stabilise Weimar’s currency.[1] By creating this new money in limited amounts, he managed to bring the inflation under control. The first notes were printed on 15 November 1923.
Later in the year, after the death of Reichsbank president Rudolf Havenstein, Schacht was promoted to become his successor, and officially installed on 18 December 1923.

During 1924 he works together with the Allies to ease the financial issues Germany is facing. The solution came in the form of aid from the Allies, the Dawes Plan, to relief and help the German Economy.

In 1929 he worked together again with Owen D. Young on the next plan to further ease German reparations, which would become the Young plan. Schacht was the chief German delegate and did his utmost to get a proper deal for Germany.
During these negotiations he also met with JP Morgan Jr. who was member of the American delegation. The last meeting between the two of them is in 1930 during the Hague conference. Schacht described him as 'the great son of the even greater Pierpont Morgan'.

On 7 March 1930 he resigns as president of the Reichsbank. He gave as main reason the Hague protocol. Under the Young plan Germany promises to pay on her own responsibility, whereas the Hague protocol adds sanctions to what will happen to Germany if they don’t pay.

The Second Hague conference has sabotaged the very foundations of the Young Plan as laid down by the Paris experts in that it condones moral discrimination against Germany.
What I will not accept are the decisions embodied in the Hague protocol. ... The Hague protocol differs from the Young plan in a number of most important respects. First, while the Young plan talks of 'settling differences in a spirit of mutual concession,' under the Hague protocol only Germany makes any concessions. I refer particularly in our economic concessions to the Poles under the special agreement, to Phillip Snowden of Great Britain in the matter of sequestered German property and to the French and Moroccan mines. .... But decisive in my resignation is the fact whereas the Young plan Germany promises henceforth to pay on her own responsibility, the French managed to get sanctions added as to what will happen to us if we do not pay.[2]

A few months earlier, on 5 December 1929, Schacht already issued an protest:

It would be self-deception for the world to believe we are able to pay further millions or billions above the Young plan payments, or to renounce our justified claims.

Following his official departure as President from the Reichsbank on 2 April 1930 he accepted several invitations from abroad in Europe and the USA. During the trip to the US in September 1930 he read Mein Kampf and the NSDAP party program. It seems that, according to his autobiography, he was not really impressed with Mein Kampf, although it also included some ideas he liked.

Hitler and Schacht

Hitler's Banker

At the end of the same year he met with Hermann Göring for the first time during a dinner party. And it was at Göring's house a few weeks later in January 1931 that he met with Hitler. He was taken with the view that Hitler presented and decided to actively support Hitler's accession to power. On 19 November 1932 he joined other industrialists in signing a letter that urged Paul von Hindenburg to appoint Hitler as chancellor, the so-called Industrielleneingabe (Industrial petition).

In 1932 and 1933 he continued to raise funds for Hitler's political campaign. As kind of reward, after the NSDAP win in the 1933 elections, Hitler recalled him as Reichsbank President on 17 March 1933. As President he played an important role in the vigorous rearmament program which was adopted, using the facilities of the Reichsbank to the fullest extent in the German rearmament effort. He devised a system under which 5-year notes, known as MEFO bills, guaranteed by the Reichsbank and backed, in effect, by nothing more than its position as a bank of issue, were used to obtain large sums for rearmament from the short-term money market.

On 3 August 1934 he was appointed Reichs Minister of Economics and as Plenipotentiary General for War Economy in May 1935. He was active in organizing the German economy for war. He made detailed plans for industrial mobilization and the coordination of the army with industry in the event of war. He was particularly concerned with shortages of raw materials and started a scheme of stock-piling, and a system of exchange control designed to prevent Germany's weak foreign exchange position from hindering the acquisition abroad of ram materials needed for rearmament.

Göring mas appointed Plenipotentiary for the 4-year plan with the task of putting "the entire economy in a state of readiness for war" within 4 years. Schacht had opposed the announcement of this plan and the appointment of Göring to head it, and it is clear that Hitler's action represented a decision that Schacht's economic policies were too conservative for the drastic rearmament policy which Hitler wanted to put into effect.
After Göring's appointment, he and Göring promptly became embroiled in a series of disputes. As a result of this dispute and of a bitter argument in which Hitler accused Schacht of upsetting his plans by his financial methods, Schacht went on leave of absence from the Ministry on 5 September 1937, and resigned as Minister of Economics and as Plenipotentiary General for War Economy on 16 November 1937.

As president of the Reichsbank, he was still involved in disputes. Throughout 1938, the Reichsbank continued to function as the financial agent for the German Government in floating long-term loans to finance armaments. But on 31 March he discontinued the practice of floating short-term notes guaranteed by the Reichsbank for armament expenditures. At the end of 1938, in an attempt to regain control of fiscal policy through the Reichsbank, he refused an urgent request of the Reichsminister of Finance for a special credit to pay the salaries of civil servants which were not covered by existing funds. On 2 January 1939 he held a conference with Hitler at which he urged him to reduce expenditures for armaments. On 7 January he submitted to Hitler a report signed by the directors of the Reichsbank which urged a drastic curtailment of armament expenditures and a balanced budget as the only method of preventing inflation. On 19 January Hitler dismissed him as of the Reichsbank. In connection therewith, Hitler expressed his deep gratitude for Schacht's past services and his gratification that Schacht would remain to serve him as Minister Without Portfolio.[3]

Plot Against Hitler

Somewhere between september 1943 and February 1944 Hitler met with Göring during a lunch at the Fuhrer HQ. Hitler read him a letter he had received from Schacht. In which Schacht wrote that the situation on the Eastern Front was seen as a great danger to Germany by various industrialists and that seeking peace in the west would be wise. Schacht mentioned also that he had contacts who could bring about negotiations. Hitler was outraged and threatened to send Schacht to a concentration camp.[4]

Around the same time General Lindemann met with Schacht. The meeting, enabled by Colonel Gronau, was in regards of the upcoming assassination attempt on Hitler on 20 July 1944. Schacht was tasked to take up political relations with foreign countries, following a successful attempt. Schacht promised Lindemann his full cooperation. Schacht was not told any details of the plan itself, but did approve of it.[5]

On 23 July he was arrested by the Gestapo and sent to Ravensbrück Concentration Camp in Mecklenburg. For the next four years he would be imprisoned in various camps. [6]

Hjalmar Schacht started out as banker, being influencial in the Weimar Republic to become the President of the Reichsbank, driving economics and negotiating the reparations down.
During his tenure for Hitler, it seems that at first he genuinely believe Hitler could save Germany and reestablish its position in Europe and the world. But the further in time he got, slowly he seems to realize that Hitler wants much more than he could allow himself to participate. Eventually resigning and being dismissed from the Hitler government.

Whether or not this was all planned, I do not know yet. As banker and being influenced by JP Morgan, through the Dawes and Young plans and the loans provided by the US banks, he could have had some knowledge of the road ahead. It was Schacht who suggested to create the Bank of Central Banks. He assisted with financing the rearmerment of Germany, and it could be so that he jumped ship just before it would start to sink.

If World War II was indeed started by the bankers, Hjalmar Schacht did do his part brilliantly.
January 1937 awarded Golden Swatiska

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[1] https://grovesavt101.weebly.com/hjalmar-schacht.html
[2] Hague Pact, Not Young Plan, Given As Reason Schacht Quit
[3] Nuremberg Trials - Nazi Opinion and Judgment: page 141
[4] from The Hitler Book: The Secret Dossier Prepared for Stalin from the ... page 130, chapter 10 Summer 1943-Feb1944, have to find notes 9 and 10. By Henrik Eberle, Matthias Uhl
[5] From Colonel Gronau’s affidavit
[6] http://docshare02.docshare.tips/files/12582/125825522.pdf