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Conjuring Hitler


How Britain and America
Made the Third Reich


Guido Giacomo Preparata


Introductory: The Eurasian Embrace IS several bridgeheads that the Sea Powers needed to graft unto the heartland to draw out its armies in a deliberate sequence of separate clashes. To isolate each conflict, the targeted territorial portion had to be severed from its adjacent district, and bled white by prolonged strife waged in the name of political, religious, or ethnic diversity. Thus the Anglo-Americans have always acted: in Europe by spinning everybody against Germany (1904-45); in the Near East, by jamming Israel in the heart of the Arab world (1917- present); in the Far East, by planting thorns in the side of China: Korea, Vietnam, and Taiwan (1950-present); in Central Asia by destabilizing the entire region into tribal warfare with the help of Pakistan to prevent the Caspian seaboard from gravitating into the Russian sphere of influence (1979-present). Most importantly, in such trying games of conquest, results might never be expected to take shape quickly, but might take a matter of weeks, months or even decades. Imperial stratagems are protracted affairs. The captains of world aggression measure their achievements, or failures, on a timescale whose unit is the generation. It is within such a frame that the incubation of Nazism should be gauged: it was a long and elaborate plan to eliminate the possibility of German hegemony over the continent. And the stewards of the empire took their time.





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How Britain jikI Arueika
m;ule the I hird Reich




Conjuring Hitler

How Britain and America
Made the Third Reich


Guido Giacomo Preparata


Pluto Wf ^ Press



First published 2005 by Pluto Press

345 Archway Road, London N6 5AA

and 839 Greene Street, Ann Arbor, MI 4S106

Copyright © Guido Giacomo Preparata 2005

The right of Guido Giacomo Preparata to be identified as the author of this work has
been asserted by him m accordance with the Copyright, Designs and Patents Act 19S8.

British Library Cataloguing in Publication Data

A catalogue record for this book is available from the British Library

ISBN 0 7453 2182 8 hardback
ISBN 0 7453 2181 X paperback

Library of Congress Cataloging in Publication Data applied for


10 987654321
Designed and produced for Pluto Press by

Chase Publishing Services, Fortescue, Sidmouth, EX 10 9QG, England
Typeset from disk by Stanford DTP Services, Northampton, England
Printed and bound in Canada by Transcontinental Printing


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For Suzanne


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List of Figures ix

A Chronology of Germany's Undoing, 1900-45 xi

Preface xiv

1. Introductory: The Eurasian Embrace. Laying Siege to Germany
with World War I, 1900-18 1

The Second Reich: The Tragedy of an Imperial Upstart 1
The Heartland, the Crescent and the Nightmare of British

Geopolitics 8
The Blood of the Romanovs and the Encirclement of Germany 15

The 'Useful Idiots' of Sarajevo 20

Besieging Germany 22

Conjuring Lenin 27

The Last Days of America: from Republic to Truculent Empire 38

2. The Veblenian Prophecy. From the Councils to Versailles

by Way of Russian Fratricide, 1919-20 42

The Impossible Revolution 42

Inducting Hitler into the Mother Lodge 57

The Allied Betrayal of the Russian Whites 60

The Peace Treaty That Was Too Harsh 74

Dreaming of Hitler and Deciphering Versailles 80

3. The Meltdown and the Geopolitical Correctness of
Mein Kampf Between the Kapp and the Beerhall Putsch,
1920-23 89
Erzberger: One Man Alone against the Inflation 89
Hiring Trebitsch-Lincoln to Foil the Kapp Putsch 98
Rathenau, The Reluctant Victim of the Russo-German Pact 112
The Hyperinflationary Purge of 1923 121
The Maiden Storm of the Nazi Fundamentalists 130


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viii Conjuring Hitler


4. 'Death on the Installment Plan', Whereby Governor Norman


Came to Pace the Damnation of Europe, 1924-33 138

The Banking 'Grid' and the Rules of the Gold Game 138

Montagu Norman and the 'Nationalization' of the Bank 147

The Dawes Bailout and the Hierodule Schacht 159

I. G. Farben and Germany's First Five-Year Plan 165

Britain's Grand Charade to Crash the New Gold Standard 171
The Last Scheme of Kurt von Schleicher and the End of Weimar 181

5. The Reich on the Marble Cliffs. Fire, Legerdemain and
Mummery all the Way to Barbarossa, 1933-41 202

Nazi Coup d'Etat 203

Money Magic, Work Creation and Foreign Aid 211

A British Masquerade to Entrap the Germans Anew 228

A Soviet Tale of Madness and Sacrifice 244

Fake War in the West, True Push in the East 254

6. Conclusion 263

Notes 269

Select Bibliography 295

Index 305


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List of Figures


1. Eurasia and the Fault-Line 11

2. White Nests in the Russian Civil War 67

3. The London/New York Tandem Discount Policy, 1919-32 155

4. Sterling-Dollar Exchange, 1919-33 156

5. The Cycle of Work Creation 219

6. The Masquerade of His Majesty's Stewards and Diplomats 230

7. Alliances and Threats on the Eve of the Czechoslovak Crisis,

1938 240


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I wish to thank first of all my institution, the University of Washington,
Tacoma for the unwavering support it afforded me in conducting research
on this theme and developing it in the course of a five-year long series of
lectures. In particular my thanks go to Director and Professor Bill Richardson,
Professor Anthony D'Costa and Professor Michael Allen. I am also greatly
indebted to Professor Zarembka for the warm endorsement of my project,
and to Roger van Zwanenberg at Pluto Press for taking his chances with me,
shaping the script, and purging many a noxious metaphor. No less vital
have been the help and protection of a thick cohort of guardian angels led
by: Dr. Faride Motamedi and Professor John Elliott, who shielded me always
and Professor Monika Sudjian, who opened Deutschtum to me, and shared
the anguish of the exile. Family and friends in Italy, France and Tacoma are
in my thoughts - a special salute goes to my companion Andrea.


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A Chronology of Germany's Undoing,


1900 The construction of the German Imperial fleet proceeds apace.

1904 Strategic allegiance between Britain and France.

1907 Triple Entente of Britain, France and Russia, designed to encircle

1914 Outbreak of World War I.

1916 Russian attempts at a separate peace with Germany.
December, murder of Rasputin.

1917 March: deposition of the Czar.
April: the US joins the war.
October: Bolshevik takeover.

1918 March: peace between the Reich and the Bolsheviks.
November: capitulation of the Reich.

1919 January-May. civil tumult in Germany; beginnings of the Weimar

June: ratification of the Versailles Treaty.
September: Hitler becomes a politician.

1920 Allied sabotage of the Russian counter-revolutionaries.
March: Kapp putsch.

September: Veblen casts his prophecy.

1921 August: assassination of Erzberger.

1922 April: Russo-German pact.
June: assassination of Rathenau.

1923 Inflationary debacle in Germany.
January. French invasion of the Ruhr.
November: the Hitlerites' Beerhall putsch.

1924 April-September: Announcement and implementation of the Dawes

December: Hitler is amnestied.

1925 April: Britain goes back to gold.

1927 July, central bankers' conference at Long Island.

1928 May: the Nazis gather 2.6 percent of the vote in the national

1929 September: London precipitates the crash in New York. Extinction
of the steady financial transfer from America to Germany.


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xii Conjuring Hitler

1930 September, soaring unemployment; Nazi breakthrough at the
elections: 18.7 percent.

1931 March: aborted project for an Austro-German Union.
May. Collapse of the Creditanstalt in Austria.

July. German banking crisis.

July-September. Britain wrecks the Gold Standard.

October. Hitler encounters Hindenburg.

1932 May. Baronial Cabinet of Papen.
June: End of Reparations.

July: the Nazis garner 37.3 percent of the ballot.

November: the Nazis lose 2 million votes; Hindenburg refuses to

make Hitler chancellor.

December: Schleicher becomes Chancellor; unemployment in
Germany at 40 percent.

1933 January: meeting at Schroder's on the 4th; Hitler sworn in on the

February: Reichstag fire.

March-August: Nazi consolidation of power; promotion of work
creation under Schacht.

1934 June: Rohm purge.

July. Anglo-German financial agreement.

August: Hitler is acclaimed Reichsfiihrer; rearmament is launched
in earnest; heavy Anglo-American investment in Germany.

1935 June: Anglo-German Naval Pact.

1936 Peak of British appeasement.

March: Militarization of the Rhineland.

September: Lloyd George visits Hitler.

December: the 'pro-Nazi' King Edward VIII abdicates.

1937 October: the Windsors tour Germany.

November: Lord Halifax flies to Germany to give Hitler the green

1938 Culmination of Nazi boom: erasure of unemployment.
March: annexation of Austria.

September: emasculation of Czechoslovakia at Munich.

1939 March: Nazi seizure of Czechoslovakia; official split of the British
establishment in dealing with Germany; British unilateral guarantee
to Poland.

August: Russo-German pact for the partition of Poland.
September: the 'phoney war' begins.

1940 April-June: Nazi offensive in the West and capitulation of France.


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Chronology jciii


July, secret talks with Windsor in Spain.
August-September, failed aerial campaign versus Britain.
December: Preparation completed in Germany for the invasion of
Russia (Barbarossa).
1941 March-May. German success in the Mediterranean basin.
May. Hess vanishes.
June: the Nazis invade the USSR.

1943 January: German surrender in Stalingrad.
May: the Axis capitulates in North Africa.
July, the Allies land in Sicily.

1944 June: Allied debarkation in Normandy (D-Day).

1945 March: the Americans cross the Rhine.
May. Germany is finished.


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Nazism. For many this topic is a fixation, especially for the peoples that
suffered defeat and utter disfigurement because of it. Being Italian, I
remember clearly my paternal grandfather reminiscing interminably about
the days of Fascism, echoed by my grandmother; he never seemed able to
untangle within himself the knot of sentiments towards Mussolini, the
Germans, the war, and the horror of it all. At times he wished the Axis
had won the war, at others he fancied France had not fallen so fast as
to precipitate Italy in her catastrophic downfall - he would eventually
experience combat in the Balkans, survive and remain indissolubly tied
to the old world till his death, long after 1945. My father and I - the
'modern ones'- would listen to these tirades, rolling our eyes, and excusing
the impropriety of even alluding to a possible Nazi victory on account of
grandfather's earnest but essentially 'screwed-up' worldview. A worldview
that, as we moderns had come to learn, had spelled the damnation of
Europe and justified the Americanization of the vanquished.

But the Pax Americana that followed, deep down, was itself of dubious
value: it began with a nuclear holocaust, brought affluence to the West
perhaps, but gave very little by way of peace to the rest of the world. And
what was left to feel of the defeated West was dismal: Germans and Italians
had been reduced to a couple of emptied out, identityless tribes.

Presently, in the collective imagination of the West, there is nothing worse
than Nazism. No greater sacrilege, no greater manifestation of brutality,
inhumanity, and deception than the rule of this unique regime that held
sway over Central Europe for a dozen years. The Nazis violated life in ways
unseen, and the record of their atrocities during the war grew to be such
that after their defeat, Germany was prostrated by a moral lapidation on the
part of the victors, which still hasn't ceased. Ever since, a continuous torrent
of books, articles, instruction and films, crafted by the Anglo-Americans,
and diffused by their acquired minions in Europe, has flooded the venues
of debate, impeding any views other than the 'truth' of the establishment.
This truth being that Europe had been compromised by the belligerence of
the outcast in her fold: the accursed Germans, who plunged their European
brethren into war, and deservedly suffered thereby, all of them, the benign
domination of their 'American uncles.'



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Preface xv


I wanted to understand how all this came to pass. I wondered how
Europe could commit such a messy suicide as to give herself to a foreign
ruler possessed by a worldview different from the old one, yet equally
violent and barbarous. And to answer the question it was obvious that I
had to turn to the recent origin of the story and that is to the Nazi curse
itself. Why did it happen?

Being an economics graduate, I began by directing my interest to the
Nazi boom of the 1930s and the financial contrivances employed to fuel
the recovery which later formed the topic of my doctoral dissertation. The
research expanded around that core over the course of nearly a decade.

In this study there is no desire to reassess the record of the German
cruelties: these have been sufficiently scrutinized, although only with
anatomical (thus voyeuristic) fascination. Rather, it is my intent to push
back the point of attack of this story by a few years: for the official
'narratives,' which are for the most part biased either by excessive contrition
or apologia if written by Germans, 1 and more or less subtle execration if
written by Anglo-Americans, 2 generally course through the gestation of
Nazism only to dismiss it as a confused interlude marked by the raving
vengefulness of the old Germany, and by the alleged effects of 'great
historical forces' and 'irrationalism' - two half-baked and substantially
meaningless notions, in fact.

The poor treatment of the Nazi gestation is due to two factors: first,
the historical interval that covers the breeding of Hitlerism is notoriously
complex, and that does not make for 'good cinema': for instance, when
the Crisis hit the West in 1930, and the Nazis began to gather votes, Liberal
historians hand the narration over to their fellow economists, and the
economists, who understand famously nothing of the Crisis, throw it back
to the historians, who are thus saddled with the last and sadly disappointing
word in the current, miserable explication of the Nazis' rise to power.

Second, a detailed analysis of the emergence of Nazism is generally
shunned so it seems, for it might reveal too much; in truth, it might
disclose that the Nazis were never a creature of chance. The thesis of the
book suggests that for 1 5 years (1919-33), the Anglo-Saxon elites tampered

1. Ernst Nolte's Der eurcpaische Burgerkrieg, 19 1 7-1945: Nationalsozialismus und
Bolschevismus (The Eurcpean Civil War, 1917-1945: National-socialism and Bolshevism
(Berlin: Propylaen Verlag, 1987) is a fair instance of a mitigatory approach to the rise
of Nazism.

2. A literally stereotyped production stretching from, say, William Shirer's The Rise and
Fall of the Third Reich (New York: Simon & Schuster, 1960) to Michael Burleigh's The
Third Reich, A New History (New York: Hill and Wang, 2000), or Ian Kershaw's recent
biography of Hitler (in two volumes: Hubris, 1998, and Nemesis, 2000. New York: W.W.
Norton & Company).


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xvi Conjuring Hitler


with German politics with the conscious intent to obtain a reactionary
movement, which they could then set up as a pawn for their geopolitical
intrigues. When this movement emerged immediately after World War I in
the shape of a religious, anti-Semitic sect disguised as a political party (that
is, the NSDAP), the British clubs kept it under close observation, proceeded
to endorse it semi-officially in 1931 when the Weimar Republic was being
dismantled by the Crisis, and finally embraced it, with deceit, throughout
the 1930s. This is to say that although England did not conceive Hitlerism,
she nonetheless created the conditions under which such a phenomenon
could appear, and devoted herself to supporting financially the Nazis and
subsequently arming them to the teeth with the prospect of manipulating
them. Without such methodical and unsparing 'protection' on the part
of the Anglo-American elites, along with the complicit buttress of Soviet
Russia, there would have been no Fiihrer and no Nazism: the political
dynamism of the Nazi movement owed its success to a general state of
instability in Germany, which was wholly artificial, a wreckage engineered
by the Anglo-American clubs themselves.

By 'clubs' and 'elites' I mean the established and self-perpetuating
fraternities that ruled the Anglo-Saxon commonwealths: these were (and
still are) formed by an aggregation of dynasts issued from the banking
houses, the diplomatic corps, the officer caste, and the executive aristocracy,
which still remains solidly entrenched in the constitutional fabric of
the modern 'democracies.' These 'clubs' act, rule, breed and think like
a compact oligarchy, and co-opt the middle class to use it as a filter
between themselves and their cannon fodder: the commoners. In fact,
in the so-called 'democratic constituency,' which represents to date the
most sophisticated model of oligarchic rule, the electorate wields no clout
whatever, and political ability is but another expression for the powers of
persuasion needed to 'build consensus' around (momentous) decisions
already taken elsewhere. 3

3. So-called 'democracy' is a sham, the ballot a travesty. In modem bureau cratized
systems, whose birth dates from the mid-nineteenth century, the feudal organization
has been carried to the next level, so to speak. A chief objective of what Thucydides
referred to in his epoch as synomosiai (literally 'exchanges of oaths'), that is, the out-
of-sight fraternities acting behind the ruling clans, has been to make the process of the
exaction of rents from the population (a 'free income' in the form of rents, financial
charges and like thefts) as unfathomable and impenetrable as possible. The tremendous
sophistication, and the propagandists wall of artfully divulged misconceptions
surrounding the banking system (we will return to this theme in Chapter 4), which is
the chief instrument wherewith the hierarchs expropriate and control the wealth of
their supporting community, is the limpid testimony of this essential transformation
undergone by the feudal/oligarchic organization in the modem era. The West has
moved from alow-tech agrarian establishment built upon thebacks of disenfranchised


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Preface xvii


The story told in this book is the story of the British empire, which by
1900, fearing the rising power of the young German Reich, contrived in
secrecy a plan for a giant encirclement of the Eurasian landmass. The main
objective of this titanic siege was the prevention of an alliance between
Germany and Russia: if these two powers could have fused into an 'embrace,'
so reasoned the British stewards, they would have come to surround
themselves with a fortress of resources, men, knowledge and military might
such as to endanger the survival of the British empire in the new century.
From this early realization, Britain embarked upon an extraordinary
campaign to tear Eurasia asunder by hiring France and Russia, and subse-
quently America, to fight the Germans. The vicissitudes of the first half of
the twentieth century made up the epic of the great siege of Europe.

As will be shown in Chapter 1, World War I completed the first act of
the attack, which was crowned by the imperial ingress of the United States
on the grand chessboard. Germany had lost the war, but she had not been
defeated on her own territory; Germany's elites, her political and economic
structure had remained intact. Thus after 1918 began the second act of
the siege: that is, an astounding political maneuver willingly performed
by the Allies to resurrect in Germany a reactionary regime from the ranks
of her vanquished militarists. Britain orchestrated this incubation with a
view to conjuring a belligerent political entity which she encouraged to go
to war against Russia: the premeditated purpose was to ensnare the new,
reactionary German regime in a two-front war (World War II), and profit


serfs to a highly mechanized post-industrial hive that feeds off the strength of no less
disenfranchised blue- and white-collar slaves, whose lives are mortgaged to buy into the
vogue of modem consumption. The latter-day lords of the manor are no longer seen
demanding tribute sincethey have relied onthemechanics of banking accounts for the
purpose, whereas the sycophants of themedian class, as academics and publicists, have
consistently remained loyal to the synomosiai. The other concrete difference between
yesterday and today is the immensely increased throughput of industrial production
(whose potential level, however, has always been significantly higher than the actual
one, to keep prices high). As for the 'democratic participation' of the ordinary citizens,
these know in their hearts that they never decide anything of weight, and that politics
consists m the art of swaying the mobs in one direction or another according to the
wishes and anticipations of the few having the keys to information, intelligence and
finance. These few may at a point in time bemore or less divided into warring factions;
the deeper the division, the bloodier the social strife. The electoral record of the West
in the past century is a shining monument to the utter inconsequence of 'democracy':
in spite of two cataclysmic wars and a late system of proportional representation that
yielded a plethora of parties, Western Europe has seen no significant shift in her socio-
economic constitution, whereas America has become, as time progressed, evermore
identical to her late oligarchic self, having reduced the democratic pageantto a contest
between two rival wings of an ideologically compact monopartite structure, which is in
fact 'lobbied' by more or less hidden 'clubs': the degree of public participation in this
flagrant mockery is, as known, understandably lowest: a third of the franchise at best.


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xviii Conjuring Hitler


from the occasion to annihilate Germany once and for all. To carry out
these deep and painstaking directives for world control, two conditions
were necessary: (1) an imposing and anti-German regime secretly aligned
with Britain had to be set up in Russia, and (2) the seeds of chaos had to be
planted in Germany to predispose the institutional terrain for the growth
of this reactionary movement of 'national liberation'. The first objective
was realized by backstabbing the Czar in Russia in 1917 and installing the
Bolsheviks into power; the second by drafting the clauses of the Peace
Treaty so as to leave the dynastic clans of Germany unscathed: indeed,
it was from their fold that Britain expected the advent of this revanchist
movement (Chapter 2).

What unraveled in Germany after the Great War was the life of the
Weimar Republic, the puppet regime of the West, which incubated Nazism
in three stages: a period of chaos ending with the hyperinflation and the
appearance of Hitler (1918-23, dealt with in Chapter 3); a period of artificial
prosperity during which the Nazis were quiet and the future war machine of
Germany was in process of being assembled with American loans (1924-29);
and a period of disintegration (1930-32) paced by the financial mastermind
of the twentieth century: Montagu Norman, the Governor of the Bank of
England (Chapter 4).

After the incubation was completed and the Hitlerites obtained with the
aid of Anglo-American financial capital the chancellorship of the Reich
(January 1933), the formidable recovery of Germany began under the
Nazi wing, British loans, and the financial artistry of Germany's central
banker: Hjalmar Schacht, Montagu Norman's protege. There followed the
unbelievable 'dance' of Britain and Nazi Germany (1933-43), led by the
former to push the latter to go to war against Russia. And Russia, too, acting
in sync with London, appeased the Nazis in order to lure them into the
trap of the Eastern Front. England put out a mesmerizing show by feigning
before the world that her ruling class was divided between pro-Nazis and
anti-Nazis, and that such a scission accounted for the apparent lack of
commitment to fight Hitler on the Western Front after the invasion of
Poland had triggered World War II. The truth was quite different: a bargain
was being transacted behind the scenes; Britain calculatingly prevented
the Americans from opening a western front for three years so as to allow
the Nazis to penetrate and devastate Russia undisturbed in exchange for
the prompt evacuation of German forces from the Mediterranean basin,
which was one of Britain's zones of vital interest. In the end, after this
spectacular feat of dissimulation, Britain dropped the mask and closed in


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Preface xix


on the duped Nazis, who would be crushed on two fronts by the colluded
Soviet and Anglo-American forces (Chapter 5).

To annihilate the German threat, the British ruling elites had gambled
for high stakes; for over 30 years (1914-45) they had woven a web of
financial machinations, international complicities, intelligence conspiracies,
diplomatic devilry, military savvy, and inhuman mendacity, and they finally
succeeded. This game for Anglo-American supremacy came at the cost of
approximately 70 million lives (two world wars): a holocaust whose nature
is beyond words. Both conflicts were willed and set off by Britain. In the
first one, it was political incapacity that lost Germany, in the second there
was no longer a Germany worth speaking of: all we see is a benumbed
population harnessed to a native automaton fitted, armed and wound up
by the British (and the Soviets). 4

So the West has to think again - to think, in fact, that there is something
far worse than Nazism, and that is the hubris of the Anglo-American
fraternities, whose routine is to incite indigenous monsters to war, and
steer the pandemonium to further their imperial aims.

4. The leitmotiv of this book is the conscious nature of the effort expended by the British
clubs to preserve the empire, it being understood that such an effort was worthwhile
even if it meant surrendering leadership to the American brethren, whom the London
clubs cultivated as their spiritual heirs. The message conveyed here is that Britain's
imperial way was possibly the most atrocious manifestation of machiavellism m modem
history for she stopped at nothing to defend her dominant position; she knew of
no means that could not justify the end. To achieve world hegemony, Britain did
not retract from planning m Germany an interminable season of pain and chaos to
incubate an eerie, native force, which she thought of manipulating in a second world
conflict - that too a British idea. All of this was, from the beginning in 1919 till the
end in 1945, a cool-headed, calculated plot. Needless to say, I am well aware that such
a thesis might too easily lend itself to being booed by the patriotic 'experts' of Western
academia as yet another grotesque conspiracy theory; but m fact this thesis provides
no more than a thread with which one may finally string together a collection of clues
and solid evidence, which have been available for years, and have formed ever since
a platform for dissenters, that is, for those students of history and economics that
have had the candor to acknowledge that the central tenet of international relations
was, then as now, secrecy. One need only think of the multibillion-dollar budgets
devoted in our time to so-called 'intelligence', managed by non-elected 'officials' and
earmarked forundisclosed acts of sabotage and disinformation perpetrated athome and
abroad, nebulous 'surveys', mercenary commissions, and god-only-knows what else, of
which the taxpayers themselves have naturally no knowledge whatsoever. Again, the
democratic public is to have no say, yet is enjoined to pay for alio wing the absentees to
conspire behind closed doors. True, not all conspiracies succeed -some are riper 'for the
times', as they say, than others - but all great historical developments, good or ill, are
unfailingly animated, fought and countered by the initiates of the several antagonistic
'societies'; and the herds, despite themselves, always follow. In the twentieth and early
twenty-first centuries, it is the Anglo-American clubs that have carried the day, and
their tenure has little to do with human rights, free markets and democracy, regardless
of what they may shamelessly profess. What follows is the story of themost important
battle they victoriously fought so far: the horrifying campaign against Germany.


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1 Introductory: The Eurasian Embrace

Laying Siege to Germany with World War I,


'A petty Navy Royallof three score tall ships or more, but in case fewer...
seemeth to be almost a mathematical demonstration, next under the
merciful and mighty protection of God, for a feasible policy to bring
and preserve this victorious British monarchy in a marvellous security.
Whereupon the revenue of the Crown of England and wealth public
will wonderfully increase and flourish; and then. ..sea forces anew to be
increased proportionately. And so Fame, Renown, Estimation and Love,
and Fear of this Brytish Mkrocosmus all the whole of the great world over
will be speedily and surely be settled.'

John Dee The Brytish Monarchy [1577] 1

The Second Reich: the tragedy of an imperial upstart

The sudden growth of the German Reich during the second half of the
nineteenth century compelled the British Commonwealth to launch a
sweeping maneuver against the world's continental landmass. The chief
objective was the prevention of a durable alliance between Russia and
Germany. Britain proceeded to deter the union by signing a triple alliance
with France and Russia designed to encircle the German Reich (1907).
After the outbreak of war, the operation was deepened by enlisting the
aid of the United States in a phase during which the Russian link of the
alliance seemed to be giving (1917). As a perilous gap opened in the East,
Britain hastened to fix it by encouraging a Liberal experiment under a
straw man, a barrister by the name of Kerensky, which dissolved in a
few months. Meantime, as a possible alternative, revolutionary nihilists
- the so-called Bolsheviks commanded by the intellectual radical Lenin
-were transferred to Russia through a labyrinthine network of organized
subversion by obscure 'agents' such as the Russian Parvus Helphand, with
the expectation that out of such inflow would emerge a despotic regime,
whose polarity (materialist, anti-clerical, and anti-feudal) was the inverse
of that of the German Reich. The involvement of the United States became



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2 Conjuring Hitler


part of a broader deployment ranging from a military reinforcement on the
Western Front to Zionist propaganda for the joint (with Britain) occupation
of Palestine, which loomed as a vital geopolitical zone on the East-West
divide. The Reich's surrender at the end of World War I (1918) completed
the initial stage of Germany's annihilation.

If we are to understand the rise of the Nazi era and the conflict between
Britain and the German Reich, we must first examine the international
relations of the new German nation from 1870 onwards.


By 1900 it was all clear.

Improbable as it might have appeared, a German empire had emerged from
the post-Napoleonic morass: a nation culled from a garbled constellation
of feisty principalities had at last coagulated, 'by blood and iron,' round
the martial core of its feistiest province, the kingdom of Prussia. And so, in
the 1870s, there it stood before the eyes of the West: the Second German

An unstable compound: a coupling of feudal hunger and formidable
scientific achievement. After all, this was the uncouth matrimony of the
unfailing Prussian armies with the best music, physics, chemistry, political
economy, historiography, philosophy, and philology the West had to offer.
A formidable beginning.

And soon enough, this German dynastic state, conscious of its potential
and bursting with overconfidence, enticed the curiosity of the great British
Commonwealth. 2 In those early days, England had paid scarce attention
to German politics, preoccupied as she was with French colonial rivalry
and the 'Great Game' in Central Asia that pitted her military forces against
czarist Russia. 3 Germany had been too fragmented to claim a piece of the
geopolitical surveys of the British generals. Not that German commerce did
not matter to Britain: the opposite was true. But when, under the leadership
of the master tactician and Chancellor of the Empire, Otto Bismarck (1870-
90), the nature of the trade between Britain and Germany was gradually
reversed; that is, when Germany ceased to act vis-a-vis the United Kingdom
as the mere supplier of foodstuffs and recipient of her manufactures, to
become, in turn, a growing industrial power in her own right, the British
Foreign Office and the subsidiary clubs began to ponder the matter over
with some apprehension. 4

Evidently, the Germans were benefiting from the merits of borrowing:
they had had the opportunity to snap up a panoply of technological


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Introductory: The Eurasian Embrace 3


know-how ready-made from their European counterparts, and perfect it
dramatically, without the encumbrances and sunken costs of pioneering.
Yet even if untrammeled industrial production remained problematic: if
manufactures were to yield a profit, national business could seldom rely on
the local markets - they might be too narrow, they saturated fast. Where
was one to dump the surplus at a profit? Where did Britain unload hers?
In her colonies. Hence Germany too pushed for 'a place in the sun.'

The bill for national expenses incurred in outfitting warships and consular
administration overseas, which as a rule far outweighed the pecuniary
gains of the protected concerns, was, and has been, naturally footed by
the public. Indeed, colonies also served as a comfortable springboard for
imperial intrigue. Though the imperial chancellor Bismarck had preferred
to consolidate Germany's continental, that is, Middle-European position,
by weaving a steady and diplomatically criss-crossed reticulation of
arrangements in the midst of the other 'big players' (Britain, Russia, Austria-
Hungary, and France), the vested interests of commercial enterprise became
persuasive enough to change the iron chancellor's mind, and induce
him to bless the Reich's colonial bid. This took place in the first half of
the 1880s.

As was to be expected, the costs associated with the Reich's penetration of
Africa (southwest Africa, Togoland, the Cameroons, a stake in Tanganyika),
the Pacific (part of New Guinea, the Solomon, Marshall and Caroline
Islands), and the Far East (the outpost on the Kiao-Chao bay, with its
state-of-the-art colonial architecture, masterful civil engineering, and the
fashionable beach resort of Tsing-Tao), were, gauged against the profitable
extraction of raw materials and foodstuffs, somewhat disproportionate.
Germany acquired 'colonial territories some four times as large as herself.' 5
Notwithstanding (1) the public outlay for shielding commerce with 'the
flag,' (2) the earnest commitment of the Deutschkolonialer Frauenbund
(colonial women's league of Germany) to supply Teutonic females to the
meager German corps of settlers 6 (they were 25,000, including the soldiers,
by 1914), and (3) the rather speedy turnover of German investments in
hemp, phosphates, cocoa and rubber, these territorial acquisitions were
rated by the ruling circles a 'sad disappointment.' 7 Too costly, too thorny:
the Germans lacked that imperial desinvoiture with the natives, they knew
nothing of that calm poise wherewith the British sahib seeped into the
'local mind' to lay a firmer hold of it.

Naturally, the Germans faced a number of violent insurgencies amongst
their indigenous subjects - other than repress them ruthlessly, they did
nothing more. Bismarck grew impatient, the great Berlin banks showed


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4 Conjuring Hitler


no interest in these exotic experiments, and in the interlude, the British
empire was resenting ever more such German intrusion at the periphery:
for all its flamboyant Kultur, the Reich was evidently the imperial parvenu
of the world. Herbert Bismarck, the chancellor's son, in his capacity of
insider, confessed that embarking on a colonial policy 'was popular and
conveniently adapted to bring [Germany] into conflict with England at
any given moment.' 8

So the Germans wanted attention; they were keen to share with their
British cousins the condominium of the world, and eventually clash with
them, though it would assumedly have to be a collision of short duration.
It appeared Germany desired competition for its own sake - a competition
which, in the imagination of German rulers and nationalist intellectuals
alike, should historically have led to a theoretical 'change of the guard'
between Britain and Germany, something akin to the transition from the
Spanish to the British empire in the seventeenth century.

And so while Bismarck junior did not conceal his imperialistic enthusiasm,
the late chancellor Bernhard von Biilow (1900-09) would years later decry
in his memoirs that the German people had no political ability whatever. 9
Possibly it was all true, but it did not bode well for Germany's national
security. The ablest student of the era, Nowegian-American social scientist
Thorstein Veblen, remarked in 1915:

Doubtless, a penchant for profundity and deliberation bulks large among
the habits of those who cultivate [German] culture. But nothing can
be more profoundly and meticulously deliberate than the measured
footsteps of the man who no longer knows where he is going, though
he is on his way. 10

Because it knew not precisely where it was going, German imperial
policy might have been judged amateurish, but the facts facing external
observers persisted: here was an educated 'anthill', replete with technique
and presumption that was seeking to expand. And expand it did: despite
its naivety in the arts of imperial scheming, the Reich laid rail - the most
sophisticated - everywhere it could, established an enviable network of
commercial stations, introduced impeccable administration, and eventually
hoped to crown it all with the diffusion of its unsurpassed arts and sciences.
Not as politically experienced as the British, but nonetheless a competitor
of disturbing brilliance. To restrain, challenge, and defeat the Germans
would be no simple task.


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Introductory: The Eurasian Embrace 5


By 1890, admittedly not even the master strategist, Bismarck himself, who
was now being dismissed by the new Emperor, Wilhelm II, had been capable
of identifying a 'new course' for Germany. He clearly comprehended, as
will be emphasized hereafter, the importance of not antagonizing Russia,
though that proved extremely difficult, considering that Germany's closest
ally, the Austrian empire, was perennially at odds with Russia's aspirations
in Eastern Europe. Hence, Bismarck's cherished goal, a solid alliance of the
three continental sovereigns (the Dreikaiserbund), never materialized. Then,
the tentatively 'friendly' feelers he had sent toward England had always
been received with suspicion in London, for the Reich had been for some
time unabashedly fashioning itself as a rival - there only remained to assess
its degree of hostility. But that, as mentioned above, was a matter fuzzy to
Germany herself.

What was certain was that France, within the shifting circles of alliances,
was for Germany 'hopeless': in 1871, after the Franco-Prussian War, the
newly proclaimed Reich had annexed industrially-rich Alsace and Lorraine,
and thenceforth it was sworn hate between the two powers. By the time
Bismarck left, he had done precious little to allay the discomfort of

Collectively, the gist of all such interminable diplomatic jockeying
consisted in the Germans' unresolved complex of political inferiority vis-
a-vis the British: Kaiser Wilhelm, the grandson of Queen Victoria; Bismarck,
Admiral Tirpitz, the future father of the German Imperial Navy; and a slew
of German grandees were all fluent in English, and educated in the ways
of the British gentleman of leisure: the German attraction to Britain, the
fascination with her mastery of power, were strong. But the German Reich
was altogether a 'different' creature: it only wished it possessed an equal
level of imperial savvy to make itself heard. And so it tried, with whatever
it had - which was much, as the Allies were to realize two decades later,
but not enough.

Thereafter, with Wilhelm II, came the neuer Kurs: and this 'new course,'
which was in truth but the continuation of the old one, brought in relief
the former orientation and unveiled its blurred medium-term aim: in brief,
antagonism with Britain; antagonism to be settled by naval skirmishes, bold
diplomacy, and commercial and technological swagger.

In the voluminous stream of scholarly production dealing with the
Second Reich and the Griinderzeit (the 'founding epoch' of German imperial
hegemony in the late nineteenth century) much has been made of Wilhelm
II's infantile antics and capricious shallowness; much catastrophic action
ascribed to the Kaiser's neurotic shame for his withered left arm and hand.


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6 Conjuring Hitler


Leaving aside such psychologistic etiology a bon marche, which is graciously
passing out of vogue, it may be more to the point to remark that the
abiding tendency of Germany's new course appeared to be nothing more
than a disquieting drift to dissolution. As one German historian recently
observed, Wilhelm II was not the creator of German hubris, simply its most
conspicuous functionary. 11

Thus by the end of the nineteenth century economically speaking,
Germany and America were breathing down Britain's neck. But this
elementary recognition on Britain's part hardly exhausted the matter.
America spoke passable English, could be 'Liberal', and most important,
was, like Britain herself, an island: she could not represent a threat. But
the German language was as remote from the English as Wilhelmshaven
was close to Dover. Germany was at hand, on the continent. And there
was more.

Naval skirmishes...

It became apparent by the end of the century that Wilhelm II was
enthusiastically supporting the project of expanding the Imperial Navy.
At home, the cosmopolitans, the Socialists and the Liberals, were wary

- of course, such a move would have meant a positive confrontation with
Britain - but so were the conservative agrarians: a great Navy signified some
form of open trade, and heavy taxes. The Reich silenced its landlord class

- the so-called Junkers* - with protective tariffs, and set out to ratchet up
the maritime effort, cheered by the vast majority of the country - Liberals,
Catholics, pan-Germans, the rich absentee owners and not so rich Socialist
underclass, all, in one shape or another, 'nationalists': at the time it seemed
indecorous not to wear some of that collective pride for the so many
astounding achievements of the young Reich.

Propaganda, public rallying and, to respond to German jingoism,
whipping the average Briton into patriotic frenzy by feeding him a 'good
hate' amounted to so much routine for the British governors and their
dependable press organs: these things could be effected effortlessly, if the
need arose. 12 But the German intrusion upon the waters of the North Sea,
and therefrom the new fleet's predictable reach for the maritime expanses
of the globe constituted for Britain, to put it mildly, a grave worry. This
time the Reich had gone too far. It was encroaching upon the very means
of British imperial management, the hallowed 'Royall Navy,' which had
been the chief instrument of Great Britain's conquest of the world since

That is, the landed aristocracy, which rules from the bastion of the agrarian class, the
Junkers, from the Old High German Junchmo, 'young lord.'


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Introductory: The Eurasian Embrace 7


the prophetic Elizabethan days of John Dee, the Queen's astrologer,
cartographer, occultist, and intelligence officer.

The Germans were intuiting one thing too many: they were slowly
understanding that if they successfully coupled continental might - which
they could readily wield, being the Prussian divisions, solidly planted in the
heart of Europe, the best in the world - with a powerful fleet, their military
force de frappewould assuredly overpower that of Britain.

So then the issue of alliances came to the fore. Intuitively, the Germans
knew since the epoch of Bismarck that it would not do to find themselves
trapped between the 'hopeless' French, and the ambivalent Russians. A
prolonged war, if fight one must, on two fronts had to be avoided. This
was why Bismarck never sought to alienate Russia entirely; but the clumsy
anti-Slav intrigues of the Austrian partner in the Balkans stood in the way:
the Austro-Hungarian empire was the weak appendage of the Reich; the
German General Staff was conscious of this burden. And would live to
regret it - 'we are fettered to a corpse,' they would wail a mere month
after the beginning of the war. 13 But for the time being, Austria remained
the natural ally because she afforded a continuum of Germanic control
upon the southeastern reaches of Europe, and, moreover, Austrians spoke
beautiful German. That fin de siecle Vienna, though showing spreading
symptoms of decadence, was one of the vanguards, if not the vanguard of
'German' artistic expression - a crucible of extraordinary inventiveness,
second not even to Paris - is an important consideration in this regard.

Austrians spoke German, and the Prussians were convinced they could
bring off the great European race in any case; they thought they could
abundantly make up for the heavy military deficiencies of the Hapsburg
empire. All such expectations were clearly misplaced. But while the Reich
wallowed in its imprecision, Britain lost no time.

By 1900 it was clear to the British that the Reich could indeed 'pull it
off. It could overwhelm Britain and cause an advantageous (to the Reich),
yet temporary, paralysis of European affairs, during which it might turn
against France again to subdue her once and for all, and then direct her
gaze at Russia... Russia could either be inveigled by Germany into a binding
alliance, in which the latter would obviously dominate the former, or,
alternatively, the Russians could be slowly mangled into submission by the
Prussian armies. In either case, the British cauchemar would come true: if
Germany and Russia united in one form or another, the Eurasian Embrace
would come into existence: that is, a concrete Eurasian empire at the center
of the continental landmass, which would come to rest on an enormous
Slav army and German technological mastery. And that, the British elite


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S Conjuring Hitler


sentenced, was never to be, for it would have mortally threatened the
supremacy of the British empire.

The heartland, the crescent, and the nightmare of British geopolitics

The 'heartland' was a hypothetical area centered in Eurasia, which would
be so situated and catered to by resources and manpower as to render it
an unconquerable fortress and a fearsome power; and the 'crescent' was
a virtual semi-arc encompassing an array of islands - America, Britain,
Australia, New Zealand and Japan -which, as 'Sea Powers,' watched over the
Eurasian landmass to detect and eventually thwart any tendency towards
a consolidation of power on the heartland.

This lingo was coined by the pioneers of Geopolitics, a new-fangled
discipline developed at the turn of the twentieth century: on the surface,
it consisted of a systematic and semi-erudite compilation of geography,
elementary logistics, economic lore, and Machiavellian mystagogy collated
ad usum Delphini. But its ulterior motive was a transliteration of individual
human conduct into the dynamics of social aggregates: a political likening of
nations to organic, willed, living creatures. 1 4 Because of this, geopolitics was
likely to reveal in clear terms what the political agenda of a certain power
might have been at a given point in time. A revelatory and much influential
testimony was drafted during these times of anti-German conspiracies by
Sir Halford Mackinder (1861-1947), a professor at the London School of
Economics and one of Britain's founding fathers of geopolitics, in a piece
entitled 'The Geographical Pivot of History' which was published in the
Geographical Journal of the Royal Society in 1904. This article illustrated in
unequivocal terms the nature of the coming engagement.

Mackinder envisioned the alternatives and enumerated the stakes of the
game. This was a public document, telling a simple story. Its drift was a fair
exposition of the policy of the British Commonwealth, and subsequently of
that of its spiritual heir, the American empire: indeed, up until the present
time, the international policy of the US Administration has been waged
seamlessly and coherently in the spirit of Mackinder's vision.

By 1900, the writing was on the wall.

The conception of Euro-Asia to which we thus attain is that of a continuous
land, ice-girt in the north, water-girt elsewhere, measuring twenty-one
million square miles, or more than three times the area of North America,
whose centre and north, measuring some nine million square miles, or
more than twice the area of Europe, have no available water-ways to the


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Introductory: The Eurasian Embrace 9


ocean, but on the other hand, except in the subarctic forest, are very
generally favorable to the mobility of horsemen and camelmen. To east,
south, and west of this heart-land are marginal regions, ranged in a vast
crescent, accessible to shipmen. According to physical conformation,
these regions are four in number, and it is not a little remarkable that in
a general way they respectively coincide with the spheres of the four great
religions - Buddhism, Brahaminism, Mahometanism, and Christianity. . .
Britain, Canada, the United States, South Africa, Australia, and Japan,
are now a ring of outer and insular bases for sea-power and commerce,
inaccessible to the land-power of Europe... The spaces within the Russian
empire and Mongolia are so vast, and their potentialities in population,
wheat, cotton, fuel, and metals so incalculably great, that it is inevitable
that a vast economic world, more or less apart, will develop inaccessible
to oceanic commerce... In the world at large [Russia] occupies the central
strategical position held by Germany in Europe. She can strike on all sides,
save the north. The full development of her modern railway mobility
is merely a matter of time... The oversetting of the balance of power in
favor of the pivotstate, resulting in its expansion over the marginal lands
of Euro-Asia, would permit of the use of vast continental resources for
fleet-building, and the empire of the world would then be in sight. This might
happen if Germany were to ally herself with Russia. The threat of such an
event should, therefore, throw France into alliance with the over-sea
powers, and France, Italy, Egypt, India and Korea would become so many
bridgeheads where the outside navies would support armies to compel the
pivot allies to deploy land forces and prevent them from concentrating
their whole strength on fleets. 15

What this signified was that henceforth the modern struggle for world
power would come to be driven by the images of a British nightmare. And
these were the dreaded insights:

1. Britain feared most of all the possible emergence of a 'heartland' or
'pivot' as the nave of a land-fastness, impregnable behind bastions of ice,
moated by uninviting shores, and towering in the midst of a continental
space traversed by an extensive network of transportation - a chilling
dream of Cossacks at a gallop, bullet trains and shadowy Huns blazing
the highways of Central Asia. The earliest formulation of Mackinder's
plan was the product of Britain's inveterate enmity towards Russia rather
than a warning issued directly against Germany: it was in the plains of
Russia that the heartland was initially identified.


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10 Conjuring Hitler

After World War I, as Germany became the cynosure of international
checkmating, Mackinder, in a successive version of the original 1904
article, updated his theory in keeping with British imperial designs by
shifting the pivot along a southwestern trajectory, from the steppes of
Siberia down to a nondescript midpoint along the great fault line that
divides the West from the East, and which later came to coincide with
the Churchillian 'iron curtain' separating Eastern from Western Europe.
This virtual boundary maybe imagined as a meridian issuing from the
shores of the Red Sea, which meets the Black Sea by way of Palestine
and shoots through the Balkans and the Baltic, all the way north to
Murmansk in Russia (see Figure 1.1). Conceptually, the 'fault line' is the
great divide that roughly sets Muslim Arabs in the south and Orthodox
Slavs in the North, apart from the Modern Europeans in the West.

The fault line ideally bisects the heartland, which is located within
Eurasia. The heartland is the islands' island; Mackinder's motto thus
intimated that 'whoever rules the heart-land, rules the world island;
whoever rules the world island, rules the world. ' 1& In the northwest this
came to mean that if Germany would find ways of bridging the fault line by
cementingthe technological strength of the European Westwith the geographical
immensity of the East via Russia, she would become the unconquerable head
of the dreaded fortress looking over the Eurasian heartland.

2. The immediate revelation of such a nightmare was that no forces were
to be spared to obstruct political let alone military coalitions of any
form across the heartland, beginning with the plausible Russo-German
alliance. And this Britain could best achieve by marshaling a league of
sister islands, which she could dispose against Eurasia as a besieging
crescent of Sea Powers. Excepting the Japanese trump, sea-power is
Anglo-Saxon through and through; all the challenging isles listed by
Mackinder are emanations of Britain herself: from America, with the
addition of Canada, all the way round to Australia, including New
Zealand - the empire's white dominions.

3. Should Europe, the Near East, and Central Asia have been capable of
coalescing into a solid confederation, their combined mineral, hydric,
and natural resources (oil, grain, steel, water, lumber, and so on) would
have afforded this enormous Eurasian League a defensive advantage
such as would have nullified any prolonged blockade of the Sea Powers.
Eurasia could then resist a British embargo a outrance.

4. From this it followed that such a wealth of resources on the heartland
could have been naturally channeled, in the face of overt naval
aggression, to the launch of a defensive Eurasian fleet. The combined


P^pai-ata Oi chapoi 10


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Introductory: The Eurasian Embrace 1 1


Map by Sergei Donnashenko and Jessica Graybill


Figure 1.1 Eurasia and the Fault Line


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12 Conjuring Hitler


shield of land and sea forces from the continent against the crescent
of maritime foes would have not only repulsed easily the onslaught
from the sea, but in all likelihood ended with the utter defeat of the
Sea Powers and their concomitant subjugation to the hypothetical joint
command of the heartland.

5. The sudden appearance of the Prussian Reich had turned this Eurasian
chimera into a tangible eventuality: this time the menace was real)
the great enemy could come into being through a genial amalgam of
Russian vitality and German sophistication. The Eurasian Embrace is the
consummation of a Russo-German political, military and spiritual fusion.
Against such a fusion, Mackinder seemed to suggest, Britain would have
found herself powerless in the long run.

6. Hence the strategy of Britain became crystal clear: in order to deter the
emergence of this threatening rival on the heartland, she would have no
alternative but to encircle the heartland in a permanent siege. This would
be effected by driving wedges (the bridgeheads) in the vital nodes of
the continental body. In such areas the land armies could be trapped
in perennial warfare, and their generals would be so engrossed by the
exertion as to deflect their attention from the keen urgency to arm a
Eurasian fleet and drive out the foreign (seafaring) aggressor.

The remarkable character of this piece, aside from its fastidious
prescience, was its openly aggressive tenor. Though it was written in the
shade of a Russian menace, its reasoning seemed to suggest that Britain
had to favor the line of least resistance, and single out Germany as the
proximate adversary because: (1) the Reich was the dynamic half of the
Russo-German threat, and, (2) it could be surrounded and blockaded by an
entente of neighboring parties with somewhat greater ease, hence Britain's
forthcoming rapprochement with Russia, her traditional antagonist.

Naturally, such warming of Anglo-Russian relations led to no permanent
settlement of the Eurasian question, nor was it its purpose to do so: the
issue, overwhelming as it was from the British standpoint had to be tackled
one bridgehead at a time; the detente with Russia served as a mere prelude
to a general stratagem seeking the destruction of Germany. Britain could
not, and possibly did not wish to foresee the unfathomable costs that she,
and the world at large, would have to incur in order to accomplish this
stratagem, but the empire took its chances nonetheless.

The evidence that the destruction of Germany became Britain's chief
cbjective after 1900 is provided by the elaborate diplomatic activity that


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Introductory: The Eurasian Embrace 13


she would weave to provoke the world war, as will be recounted in the
subsequent sections of this chapter.

In fact, it is one of the tenets of Anglo-American historiographical
catechism that Germany had always been the incorrigible aggressor of the
Pax Britannica.

The rhetoric prevailing in Germany in the first decade of the twentieth
century about Einkreisung (encirclement) and the consequent popular appeal
to wage a 'righteous defensive war' to break out of this 'encirclement,'
accompanied by the irresponsible magniloquence of the military-industrial
and imperial cliques led by Wilhelm II, as well as the drunken claims of
so many nationalists about 'Germany's historical mission' and her 'duty
to wage war,' 17 have all been summarily singled out as so many definitive
and screaming proofs of Germany's indisputable guilt for triggering the first
world conflict. But these meager elements prove nothing other than the
malign influence of Germany's archaic nationalism and the utter confusion
amongst her rulers as to the country's immediate strategic imperatives:
stacked against the lucid analysis of Mackinder, which contemplated
already in 1904 a massive pre-emptive strike against threatening rivals in
Eurasia, German bombast shrank into insignificance: a prolonged world
confrontation could have never been the idea of an isolated, and also
inexperienced, German government. In Mackinder's paper there was little if
any indication that Germany was going to attack.

Rather, Germany's boisterousness was no more than a heartening cry
in the face of uncertainty. Nervous rather than cocky, the Reich prepared
for war with stage fright, cheering itself up, cursing its good fortune, and
damning everything, specially the day it had started gambling its fate on
the grand chessboard. Undoubtedly, if left to herself, Germany would have
never made the first move and opened the hostilities: she had too much
to lose. Germany had to be driven to it. In truth, her sole concrete goal,
had Britain kept out of Europe, never went beyond the wish to consolidate
a 'Middle-European Empire of the German Nation', that is, an ante diem
German-led European customs union, severed from Russia, and such an
arrangement was something England could cohabit with. is

Five years after the end of World War I, a US Senator, Robert Owen, would
undertake a deep, dispassionate study of the war's origins and present his
finding to the American people on December 18, 1923: the several claims
of Allied propaganda, namely that the Entente had to fight (1) to thwart
the Kaiser's plan to dominate the world by force, (2) to make the world
safe for democracy, and (3) to defend American ideals, Owen construed
respectively as 'false', 'ludicrous', and 'untrue'. 19 He found that:


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14 Conjuring Hitler


Neither the Russian or the French government was really believed that the
German government intended aggressive war on them but the military
preparedness of Germany and the bombast of some of its chauvinists laid
a convenient but false foundation for the French and British propaganda
that the German leaders had plotted the brutal military conquest of the
world. ..In 1914 Germany had no reason for war, no terra irredenta, no
revenge and knew that a general European war might easily destroy its
merchant marine, its commerce, both of which were rapidly expanding,
and cause the loss of its colonies. 20

The Germans were new to the heady breeze of world success - their
imperial tenure had yet to harden into maturity - but with their British
enemies it was a different story.

The last thing Britain would want to do at this early stage was to give any
inkling to the public, the enemy, or potential allies, of her desire to strangle
Germany in a permanent siege. Instead, in public she set out to treat her
nascent antagonism to the Reich as if it boiled down to a mere matter of
business: the British thus affected the irked demeanor of jealous proprietors
rushing to defend their commercial interests against the provocation of
the German upstart.

This justification was a full-fledged travesty, though it appears still to be
the explanation favored by the historians of the victorious West. 31

Yet in fact, the deep worry and restlessness caused by the German unknown
amongst the stewards of the British empire marked an epochal divide in the
overall strategy of Britain. By 1904, as revealed by her pattern of alliances, Britain
appeared to have resolved for the all-out encirclement of the heartland, and the
phenomenal, if half-blind, growth of Germany during the last two decades of the
twentieth century provided her with the occasion.

From the beginning Britain was the aggressor, not Germany.

Years later, in 1916, as Wilhelm brooded over the unspeakable butchery
at the front, he whimpered in a letter he sent the mother of a fallen officer
that he had never wanted this war, by which he meant a massacre of
global magnitude. 'This is exactly right,' rejoined the British Prime Minister,
Lloyd George, in a public response to the Kaiser's lament, 'The emperor
Wilhelm did not want this war. He wanted another war, one that would
have allowed him to dispatch France and Russia in two months. We were
the ones that wanted this war, as it is being fought, and we shall conduct
it to victory.' 32

Britain's - and later on America's - drive to conquest was foreshadowed
unmistakably by Mackinder's cursory yet almost oracular mention of the


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Introductory: The Eurasian Embrace IS


several bridgeheads that the Sea Powers needed to graft unto the heartland
to draw out its armies in a deliberate sequence of separate clashes. To isolate
each conflict, the targeted territorial portion had to be severed from its
adjacent district, and bled white by prolonged strife waged in the name
of political, religious, or ethnic diversity. Thus the Anglo-Americans have
always acted: in Europe by spinning everybody against Germany (1904-45);
in the Near East, by jamming Israel in the heart of the Arab world (1917-
present); in the Far East, by planting thorns in the side of China: Korea,
Vietnam, and Taiwan (1950-present); in Central Asia by destabilizing the
entire region into tribal warfare with the help of Pakistan to prevent the
Caspian seaboard from gravitating into the Russian sphere of influence

Most importantly, in such trying games of conquest, results might never
be expected to take shape quickly, but might take a matter of weeks, months
or even decades. Imperial stratagems are protracted affairs. The captains of
world aggression measure their achievements, or failures, on a timescale
whose unit is the generation. It is within such a frame that the incubation
of Nazism should be gauged: it was a long and elaborate plan to eliminate
the possibility of German hegemony over the continent. And the stewards
of the empire took their time.

The blood of the Romanovs and the encirclement of Germany

Germany and England prepared for war; the former looking forward to a
limited engagement, the latter to an all-out siege. In 1898, the German
Reich began to expand the Imperial Navy in earnest; by 1906, it had the
second-biggest fleet in the world. In 1900-02, Britain shifted her strategic
focus away form the outmoded anti-Russian intrigues in Central Asia,
and the petty African jealousies versus France, and narrowed it on the
progressive encirclement of Germany, with a view to directing upon
her at the propitious moment the first, northwestern land-bridge of the
comprehensive attack.

In 1904, by diplomacy, Britain drew France closer - according to the
deal, or the Entente Cordiale, as it came to be known: to the tricolore went
Morocco: Egypt to the Union Jack. z3

In March, Helmuth von Moltke, the commander in chief of the Germany
army, who would later bear the blame for losing the war after the first
collapse on the River Marne (September 1914, discussed below), fearing
the coming tempest, noted: 'No one has any idea what thunderstorms are


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16 Conjuring Hitler


forming above us; instead of preparing in solemn earnestness for the serious
times ahead the nation is tearing itself to pieces.' 34

In July of 1904, after four girls, a boy - an heir, the Czarevich Alexi was
finally born to the Romanovs, Nicholas and Alexandra. The doctors noticed
suspicious bleeding from the infant's navel, but the matter was promptly
dismissed. One year later, to the month, Alexei suffered the first bout of
what was, to the terror of his mother and father, diagnosed as hemophilia.
'Since the blood would not clot, the slightest cut endangered his life.' 35
Conventional medicine was powerless against the disease.

Six months prior to the Czarevich's first hemorrhage, in January 1905,
Russia witnessed her first and last spontaneous, popular uprising: it was
not led by self-styled 'irreconcilable atheists' like the Communist Trotsky,
who would have joined the ebullient flow shortly thereafter, 36 but by a
priest, pope Gapon. Protesting food shortages, low wages, and tyranny,
thousands marching behind the pope reached the Winter Palace, to be shot
at and dispersed by Cossacks and police officers: the day was remembered
as 'Bloody Sunday. 'There followed strikes and mounting tension. The Czar
made concessions; the St. Petersburg Soviet (Russian for 'Council') came
into existence as the spontaneous institutional embodiment of the local
interests of the community, along with the emperor's reluctant assent to
the formation of an advisory body, the Duma.

Throughout the year, in this ambiguous intermission of illusory reform,
many future leading revolutionaries partook in the fervor of the newly
founded Soviet, but their agitation was repressed: the Czar had indeed
bluffed, and many such disturbers of the imperial peace were arrested and
sent to Siberia, whence, one by one, they would all escape. Russia had been
shaken within. Without, a few months after the popular sedition, she was
beaten in Korea and Manchuria by Japan in a distant colonial dispute. The
defeat was unprecedented.

In the midst of the Russian debacle Wilhelm, at last, attempted the
Eurasian rapprochement; in July 1905 he lured the Czar to Bjorko, on the
Gulf of Finland, and succeeded in obtaining the approval of Nicholas to a
treaty, whereby (1) the two powers were bound to mutual support in the
case of war, and (2) Russia committed herself to informing France of the
agreement with a view of involving the latter in the alliance. 37

But as the Germans failed to grasp until the very last that Great Britain
was orchestrating a monumental siege against them - the ultimate political
misjudgment that would spell the ruin of Germany - a late alliance with
Russia could not be concluded. Probably, by 1905 it was too late. Indeed,
when Germany could have tied Russia to herself by accepting Russian


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Introductory: The Eurasian Embrace 1 7


securities (that is, extending her loans), as the occasion arose in 1887,
piqued by Russia's economic antagonism, she had refused. The financial
interests of France, and to a lesser extent Britain, had moved in at once to
advance the money, and thereby fastened resolutely the fate of the Russian
empire to their imperial policies.

Bismarck had merely toyed with Russia; he had never bound her to
Germany, as he ought to have done. The Eurasian embrace could have
only come into being through a German composition of Austrian and
Russian ambitions in Mitteleurcpa, with or without France. This was at heart
the Central Powers' geopolitical mission, as a counter to the Sea Powers'
forthcoming siege; in that, from Bismarck to Bethmann-Hollweg, the last
pre-war Reich chancellor, they failed utterly. There lay the seeds of Europe's
past and present dissolution.

The treaty of Bjorko was never ratified. Upon returning home, Nicholas
was severely dressed down by his ministers, who sobered him up by recalling
the Czar to his commitments vis-a-vis France, which in turn, after having
been informed of Nicholas's disquieting escapade, vetoed categorically any
participation in an entente with the Reich - it seemed that Wilhelm had
forgotten that the French were 'hopeless'. So Nicholas retracted and the
Kaiser protested vehemently, but in vain, for by September it was all over.
If deep Anglo-French money and German obtuseness had alienated Russia
from an understanding with the Reich, likewise time-honored and intense
Franco-Russian military cooperation definitively impeded any belated
German wish to remedy the irremediable; the Germans had missed their
opportunity, long before Bjorko. zs

In October 1905, the Czar recorded in his diary his first encounter with
a 'Man of God.' Rasputin had landed in St. Petersburg. The circumstances
surrounding his introduction in the imperial circle are still obscure, but
between this first meeting and 1907, Rasputin must have been summoned
to court during one of the Czarevich's hemophiliac attacks, and brought
it to a miraculous end. 29 By touch and prayer, the Siberian healer alone
could keep the Romanov heir alive. Alexandra, thanking the heavens for
the auspicious appearance of this wandering monk, took him in as the
spiritual guide, and let his unquestioned ascendancy grow upon her. The
Czarina was in Rasputin's thrall, as the Czar was in hers. Thus the fate of
the Russian empire fell into the hands of a peasant magus.

On Britain's agenda, after France came Russia: the Entente Cordiale (a
deux) with France became the Triple Entente of Britain, France and Russia.
In 1907, the mastermind of Germany's entanglement in the first world
conflict, Lord Grey, Britain's Foreign Secretary, negotiated with Russia a


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18 Conjuring Hitler


partition of Iran in exchange for Afghanistan and the surrender of Tibet.
'The Great Game [in the East] had seemingly been brought to an end' 30
and a war on two fronts predisposed against Germany.

Meanwhile, the naval race continued. Between 1907 and 1909 Britain
invited Germany twice to agree to a general curtailment of construction,
provided that Britain was assured numerical superiority in this respect. Twice
Germany refused: France and Russia might as well have been permitted
to enjoin the Reich to limit its own land forces, quipped Wilhelm. 31 And
he added:

We simply are Central Europe and it is quite natural that other and smaller
nations tend toward us. To this the British object because it absolutely
knocks to pieces their theory of the Balance of Power, i.e. their desire to
play off one European power against another at their own pleasure, and
because it will lead to the establishment of a united continent. 32

The premise was, from Germany's angle, correct, but the inference
erroneous: again, Britain had been fatally underestimated. Germany counter-
proposed twice in 1 909: first, in April, the diplomats of the Wilhelmstrasse*
suggested that the parties seal a naval convention, provided that Britain
acquiesced to a 'benevolent neutrality' in case of Germany's engagement
in a continental war. In other words, the Reich demanded that Britain
play the role of the passive spectator; second, in December, the Germans
offered anew to trade a limitation of tonnage for British neutrality and the
agreement on fixed naval ratios. Twice Britain refused. And what was more,
she resolved to scale up production so as to assemble two Dreadnoughts,
Britain's new, much perfected destroyers, for every German warship.

One last overture was made to Russia in 1911 during the parleys at
Potsdam, which had been officially scheduled to deal with the penetration
of German capital in the Middle East, and lasted several months: Germany
declared herself willing to rein in Austria's intrigues in Eastern Europe if
Russia proved amenable to withdrawing her support from an eventual
hostile policy instigated by Britain against Germany.

The Kaiser obtained a stretch of railway in Mesopotamia - the other,
broken, tracts of Germany's long-sighted and formidable blueprint were
bartered away to Britain and France - but no guarantee of neutrality on
the part of Russia.

The domicile of Germany's Reich Chancellery and ministerial offices; by metonymy
it came to indicate the German Foreign Ministry.


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Introductory: The Eurasian Embrace 19


Presently the margin for additional diplomatic maneuvering was
exhausted. From this time onward Europe was on the path to war. The more
the Kaiser had tardily sought to weaken the Triple Entente, the more Britain
strengthened it: in 1912 Britain signed a secret naval convention with
France, and the latter did likewise with Russia. Secretly, unbeknownst to the
Houses and most ministers, Lord Grey of the Foreign Office exchanged with
Cambon, the French ambassador in London, a series of letters in which,
on the basis of classified military conventions drafted by the General Staff
of both countries, Britain, in case of war, pledged intervention on the side
of France. 33

In these days, the strategists of Germany's General Staff were at work
rehearsing and fine-tuning the Schlieffen Plan.* This plan had been drawn
up in 1905, and, after 1906, modified by Schlieffen's successor, the younger
Helmuth von Moltke, the nephew of the victorious general at Sedan in

The plan aimed at settling the war with a single, potent, blow. Schlieffen
assumed that Germany would be engaged on two fronts: France to the
West, Russia to the East; the former having to be annihilated before the
latter could mobilize. Any fighting of extended duration, which would
have predictably drained the embattled and resource-poor Reich, was to
be avoided, and replaced instead by a stubborn resistance in the East, and
a stationary contingent facing France, to make room for the pearl of the
plan: 'a great wheeling wing going through Holland and Belgium and
coming down on the flank and rear of the French armies by passing west
of Paris.' 34

The British had intelligence of the plan, down to its minute details:
'unbeknown to anyone in Berlin, [the Schlieffen Plan] had come into the
possession of the French army in 1906, thanks to a traitor bought for sixty
thousand francs.' 35 Indeed, Belgium was going to provide the cornerstone
of Britain's diplomatic pretext for the commencement of hostilities.

Britain counted on Germany's inevitable violation of Belgian neutrality as
soon as Moltke was to launch the Schlieffen blitzkrieg. Already, in 1906, the
British General Staff, with the full logistical, and secret, cooperation of its
Belgian counterpart, was involved in simulated maneuvers across Belgium
featuring the deployment of a British Expeditionary Force on the continent
-which, indeed, would have been regularly fielded in August 1914 under
the command of Sir John French to aid the French armies against Germany's
Parisian offensive. The public was never informed of such plans. 36

After Count von Schlieffen, chief of the General Staff from 1891 to 1905.


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20 Conjuring Hitler


From then on (191 1-14) the series of crises had been almost uninterrupted: 37
incidents in North Africa, intrigue and tugs-of-war in the Balkans, warnings,
defiance, and counter-warnings from all sides.

By the spring of 1914 the Entente was ready to ambush the Germans.
On May 29, 1914, Edward House, President Wilson's chief advisor from
Texas and America's eminence grise behind the Anglo-American imperial
covenant, reported from Europe: 'Whenever England consents, France and
Russia will close in on Germany and Austria'. 3S

The 'useful idiots' of Sarajevo

Now, with an excuse or an 'incident,' one merely had to ignite this great
and patiently amassed bonfire of pent-up hostility in the heart of Europe.
What was wanting for sparking a war was a timely 'act of terror.' And a
terrorist to effect it. It was rather easily found in the inconspicuous figure
of a Serb student by the name of Gavrilo Princip. The occasion? Sarajevo.

On June 28, 1914, the legitimate heir to the Hapsburg throne, Archduke
Ferdinand, and his consort Sophie descended on an official visit to the new
province's capital.

As a retaliatory act against Austria's 1908 single-handed annexation
of Bosnia-Herzegovina, which the Serbs had claimed for themselves,
Cabrinovic, abetted by Grabez - two militants of a secret Pan-Serbian
organization suggestively called 'The Black Hand', whose motto was 'Union
or Death!' - hurled a bomb at the vehicle carrying their Royal Highnesses,
and missed.

The bomb went off and wounded a few passers-by. The carriage moved
on, and the visit proceeded as scheduled. 39 When the reception at the
town hall came to an end, the Archduke and his wife boarded the car anew;
suddenly Gavrilo Princip, the third party to the commando, came swinging
to the right side of the vehicle; as he approached he fired at Ferdinand and
his wife and killed both.

At the time, all three 'terrorists' were not even 20 years old.

The inciting incident that would have triggered the imbricate system of
alliances and eventually dragged their signatories into battle had happened,
at last.

This was an instance of terrorism: namely, a deed of violence, which,
at best, was devoid of any appreciable political gain or motive, and at
worst, as it elicited a far bloodier reprisal, was entirely deleterious to
the terrorists themselves. An act of terror generally takes the form of
a spectacular feat of devastation capable of rippling waves of public


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Introductory: The Eurasian Embrace 21


indignation, and accordingly provides the adversarial faction(s) with the
pretext for commencing war. Recruiting terrorists never seems a problem:
these appear at the basic level to be a loose collection of desperadoes, who
end up being easily trained, provisioned, and oriented by the undercover
intelligence services of the home country.

Thus, on the face of it, a senseless crime; in substance, a political gambit
orchestrated elsewhere. Where? The covert role of Serbian intelligence
in casting the three teenage students for the assassination was widely
acknowledged, but 'the real director of the conspiracy had been Russia's
military attache, Colonel Victor Artamanov, who had told [the chiefs of
Serb intelligence] in the early stages: 'Go ahead. If attacked you will not
stand alone.' 40

In general, the art of terror entails the (state's) underground promotion of
a fractious grouping: say, an 'ethnic army of liberation, ' or a radical militia,
whose vanguard - the expendable fringe - numbers so many Princips as
are readied for gaol or the gallows. Meanwhile the higher levels of this
conspiratorial franchise feature a mix of intelligence officers in charge
of disinformation, organization and cover-up, and hired 'consultants' -
themselves intelligence officers 'on loan' from other state agencies, foreign
and otherwise, or former soldiers of fortune, whose expertise runs the gamut
of recruitment, financial shuffle, subversive methods and like techniques
of destabilization.

In the simplest configurations, the subterranean instruction of the
terrorist 'cell' by the state's secret services is part of a maneuver aimed at
implicating this phantom 'organization' into a more or less spectacular act
of sabotage. Sabotage either against the state itself, or against the 'targeted
enemy', that is, a nation whose ruling clans are to be antagonized by the
terrorist recruits in the name of ethnic or religious rivalry. In the first case,
while the wounded government in the vengeful heat of retaliation 'clamps
down on the terrorists,' a variety of prearranged ends, all congruent in point
of social control and surveillance, is swiftly implemented.*

* This seems to be the stable pattern of terrorist activity throughout the twentieth
century, from the plot of the Black Hand in Sarajevo to the political assassinations
carried out by European revolutionary cells in the 1970s (for instance, the Memhof
gang m Germany, or the Red Brigades and their various counterparts of the extreme
Right in Italy. By striking panic among the population, Italian terrorist squads
progressively fomented a state of collective psychosis, which came to be perceived
popularly as 'the strategy of tension' of Italy's 'deviated secret services', and which
ultimately corroborated the grip on the country of then tottenngUS-backed Christian-
Democrat mafia), up to the carnage perpetrated by the Islamist Front in Algeria
(1992), and the recent lurking 'threat' of Bin Laden's Al-Qaeda - a true 'Godsend'
for America's imperial Establishment (as known, the evanescent Bin Laden and his
lieutenants are from the start an invention of the CIA).


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22 Conjuring Hitler


Sarajevo's example was a 'standard terrorist act' of the second kind;
in fact, it did not fail to achieve all the objectives expected from such
enterprise, namely, to (1) bring Germany into the war by way of Austria,
the enemy of Russia, who in turn protected Serbia; (2) advance the cause
of Serbia by harnessing her to the chariot of the Triple Entente; (3) sacrifice
the material perpetrators by condemning them to imprisonment and capital
execution; and (4) keep well hidden from historical memory the identity
of the plot's commanditaires.

Gavrilo Princip was the first of a long sequence of 'patsies,' 'pawns,' or
'useful idiots,' 41 whose individually unflattering but politically expeditious
task is to bring to a head decisions matured beforehand by the Elder
Statesmen. Many such 'useful idiots' will be encountered in this narrative
in connection with significant episodes: Felix Youssoupov* (the agony
of Rasputin, 1916), Anton von Arco-Valley^ (the shooting of Kurt Eisner,
1919), Oltwig von Hirschfeld, Heinrich Tillesen and Heinrich Schultz (the
attempted assassination, 1920, and final dispatch of Erzberger, 1921*), Erwin
Kern, Hermann Fischer and Ernst von Salomon (the trio behind the death
of Rathenau, 1922"), Martin van der Lubbe^ (the Reichstag fire, 1933), and
Alexei Nikolaev** (the killing of Kirov, which triggered the anti-Troskyist
purge, 1934).

Besieging Germany

In the summer of 1914, Germany stood behind Austria, Russia behind
Serbia. British diplomacy could now entrap both: the ally and the enemy

On July 6, Britain's Foreign Secretary, Lord Grey, informed the German
ambassador that Russia was yet unprepared to intervene, and that Britain had
no binding obligation vis-a-vis either Russia or France: a deliberate lie. 42

Two days later, the British Foreign Minister assured the Russians that,
according to 'very reliable military sources', the Germans were rapidly
conveying divisions to the East, and that the situation looked upon the
Reich with disfavor: an even bigger lie. 43

All such deceiving signals issued by the Foreign Office in cross-directions
behind closed doors were accompanied in Britain by a public show of

See below, p. 28.
t Chapter 2, p. 55.
* Chapter 3, pp. 96, 112.
** Chapter 3, pp. 1 18-19.
ft Chapter 5, pp. 208-9.
** Chapter 5, pp. 245-6.


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Introductory: The Eurasian Embrace 23


phoney attempts at mediation in the name of peace, initiated with an
eye to deceiving the multitudes. 44 Britain had always been careful to spin
the international tangle so as to drive the opponent in the position of the
assailant, and reserve for herself the role of the peace-loving defender. This
was a psychological artifice tailored for mass seduction, and the Germans
had no knowledge or understanding of such tricks.

Austria issued the ultimatum to Serbia: a comprehensive injunction to
annihilate any form of anti-Austrian propaganda in Serbia, and to open
a formal investigation into the assassination, in which delegates of the
Austrian empire were to partake. 45 Serbia accepted all points but the last
one, which, in a theatrical diplomatic counter-move, she offered to submit
to international arbitration at the international court of The Hague. Clearly,
she had been instructed to turn down the ultimatum by her patrons, who
had been waiting a long time for this moment: already on July 25, the
British Treasury began printing special Notes, non-convertible into gold,
marked for war expenses. 46

The war against Serbia into which Austria was deliberately incited by the
ruinous intrigues of Serbia at the instigation of Russia was a trap into
which Austria fell, not knowing it was fomented by Russia to create a
pretext of general mobilization and war and to make Austria and Germany
appear to the world as the willful originators of the great conflict. 47

The armies of Franz Josef prepared the attack against Serbia, Wilhelm
was overjoyed - heedless of the consequences. After one more round
of perfunctory diplomatic waltzes between London, Berlin, Paris, and
St. Petersburg, Austria-Hungary went ahead and on July 28 bombarded
Belgrade. The war had begun.

Russia, secretly goaded by France, who promised her support, 48 mobilized
along her western frontier, and the German generals nervously awaited the
green light from the Kaiser to launch the Schlieffen offensive. Pourtales, the
German ambassador in St. Petersburg, rushed to the foreign ministry, and
asked its head, Sazanov, to halt the Russian mobilization. He implored three
times. And when the Russian minister refused for the last time, Pourtales
handed him, with a trembling hand, Germany's declaration of war. It
happened on August 1.

However, upon hearing the news of Russia's massing of troops, Wilhelm
somewhat broke out of his stupor and commiseratively brought himself to
acknowledge the truth of the situation:


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24 Conjuring Hitler


In this way the stupidity and clumsiness of our ally is turned into a
noose. So the celebrated encirclement of Germany has finally become
an accomplished fact... The net has suddenly been closed over our heads,
and the purely anti-German policy which England has been scornfully
pursuing all over the world has won the most spectacular victory which
we have proved powerless to prevent while they having got us despite our
struggles all alone into the net through our loyalty to Austria, proceed to
throttle our political and economic existence. A magnificent achievement
which even those for whom it means disaster are bound to admire. 49

Indeed it was, and for such a disaster, the Germans had only themselves
to blame.

At the outbreak of war, Rasputin brooded: 'No more stars in the sky. ..An
ocean of tears... Our Motherland has never suffered a martyrdom as that
which awaits us... Russia will drown in her own blood.' 50

In yet another sudden coup de theatre, as Germany prepared to unleash
the onslaught on the Western Front, Britain issued one last cunning call for
peace by informing the soon-to-be-warring parties that she was willing to
guarantee her neutrality and provide assurances that France would not join
the side of Russia in an eventual Russo-German conflict, provided Germany
did not attack France. This last mischievous prank, which Wilhelm,
with diabolical perseverance, took for a British accolade to his eastern
invasion, nearly caused the already shaken Chief of the German General
Staff, Helmuth von Moltke, to break down: the German mobilization was
complete; the armies had to push forth, he insisted.

Pressured by the general, the German government as a brash counter-
bargain demanded no less than the acquisition of two French fortresses (Toul
and Verdun) as 'security' for France's neutrality. France naturally rejected
the offer. On August 3, Germany declared war upon France. Staggering from
one pitfall to another, Germany had turned herself into the world aggressor.
Abel Ferry, the French Under-Secretary of State, wrote in his notebook: 'The
web was spun and Germany entered it like a great buzzing fly.' 51

Finally, as her turn was next, Britain came full circle: knowing that
Moltke was ready to thrust Ludendorff's fusiliers through Belgium, the
British government solemnly declared that it could not possibly tolerate
the violation of Belgium's neutrality; it then professed its unconditional
adherence to peace, and, shameless, assured the public that it had signed
no secret compacts with either France or Russia. 52

When the Schlieffen Plan was enacted and the Reich's armies crossed
into Flanders, Britain sent Germany an ultimatum, which she knew the


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Introductory: The Eurasian Embrace 25

Reich would have ignored; but to avoid surprises (it expired at midnight)
the British Cabinet exploited the time lag between London and Berlin, and
shortened the waiting by an hour.

Sitting in silence round a large circular table covered with a neat green
cloth, the ministers furtively eyed the big clock until it struck 1 1:00. Twenty
minutes later Winston Churchill, the First Lord of the Admiralty, walked
into the hall to inform his colleagues that a telegram had been dispatched
across the empire summoning the Royal Fleet to begin operations. 53

And where did the summer of 1914 find Adolf Hitler? At 25, already
a veteran of Viennese flophouses - one amongst many bourgeois rates
-young Hitler joined, with a profound sense of deliverance and expectancy
a Bavarian regiment with the rank of private. A man that enlists, said
Pasternak, is not a happy man:

A few day later I was wearing the tunic which I was not to doff until
nearly six years later. For me, as for every German, there now began the
greatest and most unforgettable time of my early existence. Compared
to the events of this gigantic struggle, everything past receded to shallow
nothingness. 54

Hitler would fight on the Western Front and earn several decorations
for bravery.

The German March through Belgium and the initial clashes against
the French, who lost 300,000 men in less than two weeks, were entirely
successful for the Germans. Victory seemed assured. Paris was only 30 miles
away. But then the Schlieffen Plan went awry. Moltke, believing victory
certain, sent two corps to the East, for 'the Russians,' as he explained in
his memoirs a year later, 'had been able to invade East Prussia quicker than
expected, and before we had been able to achieve a decisive victory against
the Anglo-French armies'; he then concluded: 'I recognize that this was a
mistake, and one that we would pay for at the Marne.' 55

What really came to pass in the course of the offensive on the River
Marne, during which Moltke allegedly lost his wits, and communication
broke down among the several corps of the otherwise unfaltering German
war machine, remains a mystery. But for one reason or another, Germany,
overwhelmed by her rivals to a degree far deeper than expected, ultimately
faced the impossibility of carrying out the Schlieffen Plan as rapidly as
she had originally intended in the unfamiliar environment of modern
industrial warfare.


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26 Conjuring Hitler


The German advance in the West came to a halt, and

in the next few months the French tried to dislodge the Germans from their
positions. Neither was able to make any headway against the firepower of
the other. A succession of futile efforts to outflank each other's position
merely succeeded in bringing the ends of the front to the English Channel
on one extreme and to Switzerland on the other. In spite of millions of
casualties, this line, from the sea to the mountains across the fair face of
France, remained almost unchanged for over three years. 56

Caught between the wedge of trench warfare in the West and the stifling
naval blockade - which Britain was tightening all around the Fatherland,
including neutral outlets, thus violating international conventions - the
Germans tried to break free. Neither Germany's resistance on the home
front, nor the unrestricted submarine warfare of 1917 would slacken the

As for the eastern theater of war, things in late summer had gone badly
for the Reich: the front was broken.

General Hindenburg was 'a retired officer, whose principal occupation
for some years had been sitting at a marble-topped table outside a cafe in
Hamburg, making puddles with his beer'. 'To the amusement of young
German military cadets who regarded him as half-witted, [he explained]
that these puddles were the Masurian Lakes in which he would drown the
enemy if he ever had the good fortune to command an army in that area'. 57
He had volunteered to serve in the army at the outbreak of hostilities,
but was subsequently rejected. Yet his good fortune came nonetheless
when Headquarters suddenly recalled him on account of his profound
familiarity with the terrain upon which combat was being waged against
the Russians.

Hindenburg reversed the outcome of the engagement swiftly; accompanied
by Ludendorff, who had been dispatched by Moltke from Belgium to eastern
Prussia (now northeastern Poland) to assist the German counter-offensive,
he directed during September 8-15 the battle of the Masurian Lakes and
its last stages were fought on Russian soil.

Whether other generals - German and Russian, the former for sagacity,
the latter for incompetence - should have claimed authorship for such
victories 5S is a matter of minimal import if weighed against the implacable
German successes in the East throughout 1915. Though it had failed to
cause a complete collapse of the enemy, Germany's eastern advance so


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alarmed the Russians that Czar Nicholas II assumed the superior command
of the armed forces.

The Germans were flattered by the panicked resolution.

In June of 1916, running westward from the Romanian frontier, the
Russian General Brusilov, who had become a hero for smashing the
Austrian armies in Galicia at the inception of the war, attempted one
massive offensive against the Austro-German forces. Over the course of
three months, the outcome of the onslaught remained indecisive, but the
losses were unheard of: the Central Powers lost 600,000 men, and the
Russians over 1 million.

Conjuring Lenin

Suddenly, in 1916 the Russian rulers began to ask themselves: what did
they stand to gain from all this? What was there to be had from Germany's
enmity? That Russia could occasionally teach the Hapsburg emperor Franz
Josef a lesson in those eastern European and Balkan stockades that Russians
and Austrians were vying to control? At these costs?

Though Britain might claim that she was fighting for her empire, France
for her honor, and Germany for her survival, what could Russia advance
to justify the holocaust? That such misgivings would have soon preyed
on the Russians had been a predictable affair in London; for that reason
in 1915 the Czar had been promised by the British, as a tempting bait,
Costantinople and the Straits (yet to be wrested from Turkey) - no less facile
was the suspicion in St. Petersburg that the British promise was empty,
which indeed it was.

The year 1916, despite the human losses and the resurfacing restlessness
of the hinterland (starvation and political agitation), had not witnessed
catastrophic setbacks for the Russian army; therefore from a position of relative
strength, Russia could afford to initiate parleys conducive to a separate peace with
the Germans. Rasputin certainly wanted peace, and if he did, so did Czarina
Alexandra, who, with her husband away at the front, was left in charge of
the internal affairs of Russia.

Rumors started to circulate to the effect that Alexandra, being a 'German'
(her mother, Alice, a daughter of Queen Victoria, had married the Grand
Duke of Hesse, Louis IV), was conspiring with German agents to surrender
Russia wholesale to her enemy. 'Down with the German woman!,' the
populace clamored. 59 Yet the Czarina was embroiled into something
altogether different. 'That [Alexandra] became an instrument in the
hands of men who sought to bring about a separate peace with Germany


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28 Conjuring Hitler


is probable.' 60 And Britain now had to make sure that such 'men' ceased
this activity forthwith.

In December 1916, a cabal of blue-blooded rakes and shady bureaucrats
lured Rasputin into an evening feast, accompanied by opera singing. In
the midst of such merriment, the healer gulped down a poisoned drink
that could have sucked the life out of a regiment. Manifesting no visible
distress from the ingested bane, Rasputin, before he was given time to
regain the live music show, was repeatedly shot, stabbed, and beaten into
a pulp by the scion of one of Russia's most prestigious families, Prince Felix
Youssoupov, with a violence that petrified his accomplices. These then
rushed to throw the body of the healer, still breathing, into the icy waters
of a canal. A transvestite since the age of twelve, bordello impersonator in
drag and petulant libertine, Youssoupov had convinced himself, by 1916,
that Rasputin, through his magnetic hold on the Czarina, was driving
Russia to perdition.

On February 1, the Daily Mail, uniting its voice to the chorus of the
Russian mob, rejoiced at the magus's death. 61

To the Romanovs the healer had prophesied: 'If I die or you abandon me,
you will lose your son and your throne within six months.' 62

War debts: in 1916-17 Russia owed to Britain a sum that was roughly a
third of her annual income, 63 which was more than what Britain owed the
United States; and what Russia owed to France was half of what she owed
to Britain. Identifying what party benefited from the Russian holocaust
presents no difficulty: Britain obviously did. The conduct of the war in
Russia was no more in the Czar's hands than in those of Rasputin: rather,
orders were dictated by the British Treasury. 64 In Russia it was said at the
time that 'England and France will fight to the last Russian man.' 65

On January 12, 1917, Lord George Buchanan, British ambassador in St.
Petersburg, conferring with the Czar, was informed by the latter that a peace
conference, 'the final one,' was to be expected soon. Buchanan rejoined
that the Czar should take after the British government, and draw into the
Imperial Cabinet an exponent of the 'moderate Left' so as to reach the
twofold objective of soothing social disquiet while pursuing the offensive
against the Germans. The Czar did not seem to decipher the message, and
reiterated his intention of seeking the peace with Wilhelm II. Veiling a
threat, Buchanan alluded mysteriously to the possibility of revolution and
dropped the hint that he had had foreknowledge, by a week, of Rasputin's
assassination. Nicholas paid no heed. 66 Like his German counterparts, he
could not fathom how determined Britain was to prevent any form of
dialogue between Russia and Germany.


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The British ambassador in Russia himself was at the center of the scheme
to overthrow the czar if he ever should lose his stomach for war. . . [To that
end, he] had gathered a coterie of wealthy bankers, liberal capitalists,
conservative politicians, and disgruntled aristocrats. 67

Violent strikes erupted in the Russian capital a month after the entretien
between the Czar and Buchanan: the turmoil would turn into Russia's
famed February Revolution. When it exploded, Buchanan was 'out of the
office,' on holiday: safely withdrawn from the scene of a tumult that he
had contributed to kindle.

Undismayed at the thought of eventually facing 70 German divisions
wheeling into the Western Front, the British War Cabinet instead received
the news with satisfaction; Lloyd George, the Prime Minister, exclaimed:
'One of England's goals had been achieved!' Likewise, sharing Britain's
expectant mood, US President Woodrow Wilson in an address to Congress
acclaimed on April 2, 1917, the deposition of the Czar, speaking of 'those
marvelous and comforting events' in Russia, where 'autocracy' had finally
been struck down. 6S

This was truly absurd: in the midst of an unprecedented world war,
the Allied public was to believe that its rulers were worried about the
'democratic temperature' of Russia far more than they were about the risk
of losing the Russian ally altogether! Yet the public should have known
that of all scenarios it was a Russo-German peace that the Anglo-American
clubs feared the most, and that it was precisely to avoid this occurrence
that the war was being waged. And the Liberal press was surely not going
to enlighten its readers on the matter. Thankfully for these clubs, in 1917
Eurasia miscarried: Russia and Germany were, yet again, successfully kept

The overthrow of the Czar was no minor achievement. Indeed it must
have been part of a far wider scheme that had its significant counterpart
in a parallel mission conducted on the other side of the Russo-German
border (the 'fault line' proper) from a network connecting Berlin to the
Scandinavian capitals. Working assiduously against the Eurasian embrace
was another exceptional set of capable individuals. Their leader, Alexander
Israel Helphand (1867-1924), better known by his sobriquet, Parvus, had
started his modern adventure by joining the ranks of the revolutionaries.
From Odessa, his Russian hometown, he had gravitated naturally towards the
German-speaking world, and after earning a doctoral degree in economics
at the University of Basle, he had become politically active on the side of


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30 Conjuring Hitler


the German Socialists. Around 1910, disillusioned by organized socialism's
impotence, and having fallen foul of Germany's Leftist elite, Parvus had
disappeared from the chronicles. Inconspicuous and modest, he had left
Berlin... and resurfaced in Istanbul, transformed into a rich, extravagant
merchant with a knack for international intrigue.

That Helphand, on account of his multiple talents - as an energetic, but
disenchanted polyglot, deeply acquainted with the whole wide spectrum
of Socialist agitation, and wielding a fluent pen and economic sense - must
have been inducted into some form of 'network' can scarcely be doubted.
However, other than a passing allusion of the German Minister Brockdorff-
Rantzau to the nondescript 'powers ranged behind Helphand' (see below),
historical documentation affords no material wherewith the contours of
such an organization may be drawn with precision.

When the war came, Parvus was operative. In Istanbul, by guaranteeing
a steady supply of armaments and war materials to the government of
the Young Turks, he appeared to have played a significant role in securing
Turkey's entrance in the war on the side of Germany. Thereafter, as Russia
began to suffer the vertiginous reversal on the Eastern Front and the Entente
powers feared that the Czar might have renounced the fight, he was selected
for the top mission to Germany.

Effortlessly, he managed to come into immediate contact with the highest
levels of the German Foreign Ministry. His proposal: to invite the gentlemen
of the Wilhelmstrasse to finance and supervise the creation of a destabilizing
movement within Russia that could have toppled the czarist regime and
brought about a separate peace with the Reich. On the face of it, this plan
seemed a variation on the theme of Eurasian cooperation. But the intent
was the opposite.

Parvus would have later claimed that he had maneuvered the Germans
to foment a general revolutionary wave in Russia, which would have
hopefully spilled over to Germany and the rest of Europe, in the name of
his long cherished dream: the international Socialist alliance of the world.
His sincerity in this regard is hard to assess. The German diplomats, on the
other hand, were convinced that they were spinning the game; they had
naturally no curiosity for revolutionary experiments, and sought to 'use'
Parvus's 'Red' network of Communist agitprops as 'a means of exerting
pressure on the czar, and thus speeding diplomatic negotiations.' 69

It was precisely these separate negotiations between the German and
Russian empires that Parvus was expected to sabotage. Until the last stages
of the Bolshevik seizure of power, Helphand's chief assignment would be


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to steer the Germans so as to ruin their chances of communication with
the czarist empire. While the hired assassins of Rasputin and the British
ambassador, Buchanan, supported by a team of professional spies sent
from London, burned the bridges from St. Petersburg to Germany, Parvus
et al. burned those from Berlin to Russia. The task facing Parvus would
be greatly facilitated by the helpless naivety of his special interlocutor
within the German Foreign Ministry: Count Brockdorff-Rantzau, German
ambassador in Copenhagen.

The Danish capital, along with Stockholm, was selected as Parvus's
Scandinavian base of intrigue between Berlin and Russia. From there
Helphand ran an active and most profitable import-export company, as
well as a research institute and its associated newsletter, as fronts for his
circle of espionage. Suspended, like most aldermen of the Reich, between
patronizing benevolence and provincial presumption, Brockdorff-Rantzau
- a superb expression of Germany's despairing political ineptitude - left
posterity a record of his thoughts as he stepped into the trap that Parvus
laid out for him:

It might perhapsbe risky to want to use the powers ranged behind Helphand,
but it would certaintybe our admission of our own weaknesses if we were
to refuse their services out of fear of not being able to directthem... Those
who do not understand the sign of our times will never understand which
way we are heading or what is at stake in this movement. 70

He, least of all, understood the sign of the times. It is evident from this
important passage that Brockdorff, and the German Foreign Ministry in
general, was incapable of identifying the nature of 'these powers ranged
behind Helphand', and that such a fact naturally caused Brockdorff anxiety.
Given the stakes, a lacuna of such depth was, from the German standpoint,
absolutely inexcusable. Nonetheless, stubbornly refusing to fathom the
danger, and certainly encouraged by more than a few of his superiors,
Brockdorff persevered, convinced that he was the master of the game. Little
did the German diplomat perceive that, having succumbed entirely to the
seduction of the tireless Parvus, he was in fact allowing these enigmatic
'powers' backing Helphand to undermine the life-saving (for Germany)
peace talks with Russia, and quicken thereby the disintegration of the
German imperial establishment.

The message conveyed in the 1915 memoranda penned by Parvus for
Brockdorff and the Foreign Ministry was unequivocal: czarist Russia was the
irredeemable enemy of the Reich. Parvus admonished the Germans that, if


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32 Conjuring Hitler


they resolved to sign a contract with Nicholas, the likely outcome would
have been the formation in Russia of a reactionary government, which,
on the strength of its repossessed armies (freed from the war engagement),
might have circumvented the agreement and turned once more against the
Reich. The party they should have wagered on, Parvus insisted, was that of the
Bolsheviks, a determined, if somewhat meager, group bent on peace, and
the resolute enemy of Czar Nicholas. Lenin was the name of their leader.
Brockdorff was thoroughly captivated by the plausibility of such utterly
deceptive arguments. 71

In 1915 Germany started to pay. In two years the Reich allegedly devoted
over nine tons of gold to the subversive effort against the Czar. 72 Parvus
provided the business channels and the banking connections for remitting
the sums, which were devoted to fitting the revolutionary militia and funding
a sweeping propaganda apparatus, F/wda being the most notorious organ
originating from the gift. After such profuse immobilization of resources,
the Germans waited impatiently for these to bear fruit, but nothing stirred.
Parvus pacified the Herren at once and assured them that the investment
would yield. He then promised: they should have expected a quake on
January 9, 1916; 'the organization,' he told them, had scheduled a mass
strike on the eleventh anniversary of 'Bloody Sunday'

Then, on January 9, the czarist regime recorded without particular alarm
isolated acts of insurgency and sabotage, the sinking of a warship, and
scattered hiatuses caused by labor demonstrations, which were all brought
under control by the police without great difficulty. Von Jagow, the German
Foreign Minister, did not conceal his irritation, and a few other, more
alert diplomats, grew suspicious and begged their chief to terminate the
intrigue with Parvus. But Brockdorff vouched passionately for him, and
the top generals were not willing to discard the Bolshevik trump just yet:
agog, they kept on dreaming of a merciless peace and vast annexations
in the East - the granary of Ukraine, the Baltic seaboard, and indemnities
in gold.

However, it was evident by then that, contrary to Parvus's tendentious
claims, czarist Russia, despite the country's innumerable infirmities - such as
her large debt, retarded industrial adoption, rural misery, or the unspeakable
squalor of her city slums - was not a bankrupt concern, a rotten fruit about
to decompose, but rather an economic unit with enormous manufacturing
potential that was already exporting a third of the world's grain. 73

Notwithstanding, the Germans, blinded by greed, resolved to wait a day
longer, and continued to pay until, from the East, the signal was given in
February, merely two months after the death of Rasputin.


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The February Revolution of 1917 was never a German affair, and least of
all a Bolshevik production. Lenin, when it erupted, was caged like a lion in
Zurich, while Trotsky - the other protagonist of the subsequent November
takeover - was agitating in Manhattan. The latter, on the basis of several
testimonies, would expatiate in his lengthy history of the revolution on the
presumed genuineness ('namelessness') of the February uprising, which he
reconstructed in his narrative as the authentic proletarian prelude to the
forthcoming Bolshevik rumble. 74 It was nothing of the sort.

In February 1917, as the mob was cued once again to take to the streets,
seven of Russia's foremost generals and several garrisons of the capital
forsook the Czar, who, bereft of military authority, was de facto forced
to abdicate. 75 After placing themselves at the front of the protesting
cohorts, the mutinous officers headed for the Duma - Russia's surrogate
State Council - where they formally surrendered the 'revolutionary' will
of the masses to the bourgeois exponents of the assembly, that is, to the
Liberal conspirators (and interlocutors of Buchanan), with whom they (the
seditious military) colluded.

The Liberals, in turn, were ready to hand over the scepter of power to
Nicholas's brother, the Grand Duke Michael. But the Grand Duke did not
want anything short of popular investiture: he thus refused. So the Liberals
alone were saddled with the burden of command. There was no paradox
in this ramshackle devolution of power, as Trotsky would claim - as power
bounced from the masses back to royalty by way of the soldiery and the
conniving bourgeoisie. The February Revolution was in truth a misbegotten
Liberal putsch, designed to retain the Russian armies on the Eastern Front
under the aegis of a constitutional regent. But as the royalty withdrew, the
matter nested uncomfortably in the widening gulf formed by the uneasy
coupling of bourgeois with Socialist leaders. The equilibrium was precarious,
to say the least.

For the time being, out of the putschist Duma was carved the nucleus
of Russia's new executive: the Provisional Government. It was oddly
complemented by the resurrected Soviet, which was rapidly attracting
Russia's motley wing of revolutionaries: the Bolsheviks were itching to
capture it.

So at long last the time came to implement Parvus's masterstroke: in
April 1917, with the agreement of the German authorities, he secured
Lenin's passage through Germany in an armored train, from Switzerland
to Finland, and thence to St. Petersburg.

Once alighted from the car, Lenin proclaimed his 'April Theses' (the
Bolshevik program): peace with no annexations; no parliamentary


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34 Conjuring Hitler


republic, but a republic of Soviets; confiscation of all landed estates
and the establishment of 'Model Farms'; one bank under the control of
the Soviets.

Under German, and thus treasonous, sponsorship, Lenin returned; so
did the Menshevik Plekhanov, who would support the pro-war Provisional
Government, escorted to Russia by British destroyers. 76 En route from New
York with an American passport, Trotsky, after being intercepted aboard
a Norwegian liner and detained in Halifax by Canadian naval officers
on legitimate suspicion of traitorous and subversive activities (that is, to
conspire against Russia's new Provisional Government, a fighting member
of the Entente), was inexplicably released upon orders from London and
allowed in May to join his comrades in the Russian capital. 77

Admittedly, this was for Britain the delicate piece of the great siege. The
czarist regime had proved too unreliable and weak to play along the British
directives since 1914. Before the dreaded (by Britain) prospect of a separate
peace with the Reich materialized, the Czar was successfully ousted from
the stage. This was the dynamics behind the February Revolution. Then
Britain contemplated three possible courses of action:

1. The continuation of the February plot. According to its original
architecture, the plan envisaged the creation of a Liberal Cabinet,
buttressed by the Soviet (a parliament of sorts), and formally bound
to the Royal House. The February episode was, in short, designed
to implement at once Britain's political structure - a constitutional
monarchy - in Russia. Evidently, the grafting was impracticable, but
the coup, by repatriating pro-war Marxists like Plekhanov and other
Mensheviks, who could be counted on to legitimate in the Soviet the
Cabinet's protracted war effort, and by salvaging the royal superstition
in the figure of a Romanov, was not lacking in brilliance. In fact, Allied
power, beginning with the United States on March 9, had promptly accorded
the new government diplomatic recognition. It remained to be seen whether
the Provisional Government, even if shorn of imperial galloons, because
of Grand Duke Michael's defection, could foster the cohesion necessary
to pursue the war.

2. If the Provisional Government failed, the Bolshevik card could have been
played, for which Britain could also thank Parvus and the unwittingly
self-serving dealings of the German rulers, and attempt the social
experiment in terra nova: for no one, despite the April Theses, could
clearly foresee what sort of regime Lenin and his associates would have
erected if they were to take power.


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Introductory: The Eurasian Embrace 35


This second eventuality evidently presented a higher degree of
risk, because the Bolsheviks had vowed to withdraw Russia from the
conflict. The advantage of their takeover, however, resided in their
congenital aversion to the German dynastic spirit, which was capitalist
and imperialist.

Colonel House, privy councilor of US President Wilson and always a
pragmatic supporter of Bolshevism, offered in late 1917 the rationale
for the West's conspiratorial endorsement of the otherwise repugnant
(to Western Liberalism) Bolshevik Communism:

It is often overlooked that the Russian revolution, inspired as if by
deep hatred of autocracy, contains within it... great motives of serious
danger to German domination: [for example], anti-capitalist feeling,
which would be fully as intense, or more intense, against German
capitalism... 78

Though the Leninists would have made peace - to withdraw the
peasants and workers from the front - so went the British reasoning,
imperial Germans and Bolshevized Russians could hardly fuse into the
embrace: 'A treaty means nothing,' Lenin would tell his followers after
signing the peace with Germany in March 19 18, 'there is no justice that
can exist between two classes.' 79

In years to come, through financial manipulation - especially military
aid - and fine diplomacy, one could hope to instigate a vast Communist
state against the Reich: the path was indeed fraught with mortal hazards,
but well worth the walk.
3. Again, were Russia's Provisional Government to fall, a coalition of White,'
czarist, counter-revolutionary generals could plunge Russia into civil war
and tame the country thereby. A meeting of like minds between Russian
Whites and the Reichswehr generals, greatly facilitated by spiritual and
class affinity, would have become, in time, an embrace.

Of the three possible developments, this last was for Britain the least
desirable. And if it came to pass, no choice was left to the Sea Powers other
than attempting to bribe the Whites away from the German embrace, which
in turn carried even more risk than the Bolshevik option.

In the eight months of uncertainty between February and October 1917,
the Provisional Government legislated much, but effected little. Populist
barrister Kerensky assumed the role of prime minister; thereupon he
rushed to the front to enhearten the faltering troops. In June, the Russian


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36 Conjuring Hitler

army ventured one last sally against the Austrians, who were forthwith
adjoined by supporting divisions of Germans. At the sight of the German
Feldgrau (field-gray) uniforms, the Russians threw down their shields and
fled in panic. In July the Bolsheviks bungled a putsch. The Provisional
Government responded with firmness. Lenin disappeared in Finland;
Trotsky and other Communist ringleaders were thrown in jail. Informed
of the Parvus connection, Kerensky was about to arraign the Leninst gang
on charges of treason and conspiracy as 'German agents/ but as the White
counter-insurgency (the czarist loyalists) appeared to stir in several districts,
he refrained from persecuting the Bolsheviks and let them loose instead.
Desperate logic brought him to think he could use the Red agitators as
allies against czarist counter-revolutionaries.

Meanwhile, the Sea Powers deemed it was time to switch program, drop
Kerensky, and opt for second best (Bolshevism).

Germany and 'the powers ranged behind Helphand' had paid in the
West, and evidence suggests that Wall Street paid in the East: behind the
humanitarian facade of a 'Red Cross War Council, 'American capitalists had
been conveying sums earmarked for the Russian Revolution. J. P. Morgan
associates and interests linked to the Federal Reserve Board of New York
fronted such a Council, which paid Kerensky after May 1917, and according
to an article of the Washington Post (February 2, 1918), successively shifted
the funding to the Bolshevik cause. 80 In September of 1917,

Buchanan, the British ambassador, told his government that the
Bolsheviks 'alone have a definite political program and are a compact
minority. ..If the Government are not strong enough to put down the
Bolsheviks by force, at the risk of breaking with the Soviet, the only
alternative will be a Bolshevist government.' 81

One month later, the Bolsheviks, a fringe movement with no popular
backing, which in May had run 'a poor third to the socialist parties,' 82
seized power without firing a shot.

[On] the day of the revolution, the fashionable people were on the
Nevsky Prospect* as usual, laughing together, and saying that the
Bolshevik power would not last more than three days. Rich people in
their carriages were scolding the soldiers, and the soldiers 'argued feebly,
with embarrassed grins'. 83

St. Petersburg's main artery.


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Introductory: The Eurasian Embrace 37


five years of civil war lay ahead.

In March 1918, Bolshevik Russia signed a harsh peace with the German
generals at Brest-Lit ovsk,* 1 and, fulfilling the rapacity of these, ceded to
them the Ukraine, the Baltics and gold. The Eastern Front was now quiet
and the Reich divisions in the East could be rolled back to France... but the
Sea Powers had acted with prudence.

As they soberly pondered over the scenarios outlined above and waited to
see which would have come to a boil first, they took no chances, and jammed
into the Western Front the American infantry. Not coincidentally, America
formally joined the war, in April 1917, when the Russian front appeared
to be creaking. 'The important fact was that Britain was close to defeat in
April 1917, and on that basis the United States entered the war.' 84

America's intervention to the side of Britain was effected rather adroitly.
Pressured by the Germans to plead with Britain in order to make her desist
from the illegal blockade of the Reich, the Americans refused. By doing
so, they left Germany no option but to engage in unrestricted submarine
warfare, which was officially declared on January 31, 1917. The anticipated
sinking of American cargoes, which were profusely refurbishing the Allied
military engagement, would have then yielded the suitable pretext to break
off diplomatic relations with the German Reich, and in fine wage war
against it. The spectacular precedent for the casus belli (to rouse the patriotic
masses) had been previously engineered with the sinking of the British
cruiser, the Lusitania, which was made to yaw deliberately into the maws
of German submarines in May 19 15. 85

Germany had managed to delay America's intervention from 1915 to
1917. Submarines had been withheld from combat, apologies given and
reparations paid, but [by 1917] time had run out. 86

The sequence of events in flashes: on February 22 revolution broke out
in Russia, the czar fell on March 2, Lenin's passage was scheduled for March
27, Trotsky was intercepted on April 1, President Wilson declared war on
Germany on April 6 and Lenin shipped on the 9th, Trotsky disembarked
at St. Petersburg on May 18, US Commander Pershing sailed for Europe on
May 29, 1917. Russia and Germany signed the peace on March 3, 1918;
thereafter American soldiers - build-up completed - reached the European
shores in waves of 330,000 per month. 87 By November 1918 they numbered
over 2 million. 88

t Now in Poland.


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38 Conjuring Hitler


The last days of America: from republic to truculent empire

By the last quarter of 1916, the Allies had become dependent upon the
United States not only for supplies but also for financing.

And it was in 1917 that Britain, who was nearly bankrupting herself in
the first onslaught against the heartland, gradually passed on the military
command of the great siege to the far fitter and greener might - military
and economic -of the United States. This was done with the understanding,
however, that Britain, being the experienced player, always retained an
exclusive right to the strategic command of this siege.

By accepting the responsibility and committing her troops to the
European fight, America took on consciously the duty of an imperial power.
This was an ominous relay between the two English-speaking islands, and
a decision that would have radically disfigured the complexion of America,
and eventually that of the world at large.

The United States was not prepared to take over control of the sea herself,
therefore she could not allow the defeat of Britain - nor did she trust
Germany in the least. America's elites were Anglophile, and the American
public, who had lent millions of dollars to Britain, saw the world through
the lens of British propaganda: if the boom of inflation and prosperity
sparked by the enormous Entente purchase of war materiel had collapsed
because of an Allied defeat, the money loaned in Wall Street would have
been as good as gone. All these factors demanded that the United States,
beckoned by Britain, throw her imperial lot in with the vicissitudes of
the heartland. 89

The days of a great confederation of free cities in free states, the reverence
due to Virginian gentlemen of letters, the reconciliation with Nature, and
the pioneering spirit of the communes, that is, all the American treasures
that could have afforded Old Europe and the world a kingdom of peace
were abandoned remorselessly. A studied hunger for more time and space,
and the irresponsible pursuit of bellicose vainglory - the late trademarks
of the British empire- were being purchased by America at the expense of
her youth. In the United States, the mood changed.

In 19 14 90 percent of the American people had been against joining the
war; 90 presently such temperance had to make room for aggressiveness:
it was soldiers and cheering crowds that the US needed. The clubs saw to
it that the shift was a fast one, through fear. Armaments were scaled up
and punitive expeditions were hatched in the midst of 'a popular fear of
aggression from without.' 91 Imbued with 'a spirit of particularism... and


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Introductory: The Eurasian Embrace 39


animosity between contrasted groups of persons/ America turned patriotic. 92.
Now it was all about the gung-ho 'love for one's country,' which was not love
at all, but the readied call to hurt the 'enemy/ whoever he was, wherever
he lurked, anyhow, any time. Riding the wave of this induced, collective
dementia, the citizen came to see himself and his folks as victims of plots,
which were rumored to feed his credulity and strengthen within him the
new idolatry of the red, white, and blue, 'American Pride,' and the 'Star
Spangled Banner'. 93

From 1917 the public was fed fantastic stories dressed up as news, such
as the 'discovery' that the Germans had secret gun emplacements in the
United States ready to bombard New York and Washington. This alarming
'news' had been planted by the Allies as early as October 1914 and had
succeeded in finding its way into presidential intelligence reports... 94

Beyond the appeal to geopolitical likeness, cultural kindred, the threat
of German submarine warfare, and the jumbo loans to the Entente, there
was one more means whereby the United States could be baited to share
the burden of the great siege, and this was Palestine.

Within the British Cabinet, the Prime Minister, Herbert Asquith, and
the War Minister, Earl Kitchener, did not wish to fragment the European
offensive for the sake of a Middle Eastern adventure. But the vanguard of
imperial stalwarts, who were ranged behind the charismatic figure of Lord
Alfred Milner, a former colonial officer turned oligarchical mastermind,
thought otherwise. 95

From the Manchester Guardian, in November 1915, recruits of the so-called
Kindergarten - Milner's club, also known as the Round Table - intimated
'that "the whole future of the British Empire as a Sea Empire" depended
upon Palestine becoming a buffer state inhabited "by an intensely patriotic
race".' 96 Indeed, Palestine was 'the key missing link' that joined together
the limbs of the British empire in a continuum stretching from the Atlantic
to the middle of the Pacific. 97

If World War I represented in fact the beginning of the heartland's great
besiegement, the Milner faction thought it appropriate to seize the occasion
and thrust, with the opening assault, two wedges at once: one at each
extremity of the fault line. For that, America could be involved with troops
in the Eurasian north (versus Germany), and the political campaigning of
her Zionist lobby in the Middle Eastern south (versus the Arabs; see Figure


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40 Conjuring Hitler


1.1, p. 11). But Asquith and Kitchener were not gazing that far. And the
Kindergarten had no intention of letting the opportunity pass.

On 6 June, 1916, Kitchener drowned in a 'providential' shipwreck on his
way to Russia in a mine-laden sea. 9S Betrayed in a backroom conspiracy of
the Liberal Party Asquith fell, and on December 7, 1916, David Lloyd George
became Prime Minister. Exponents of the Round Table were forthwith raised
to several high posts, and the master himself, Milner, was made into the
chief strategist of the War Cabinet. Thereupon British troops were embarked
for the Middle East to fight the Turks.

On December 11, 1917, General Sir Edmund Allenby and his officers
entered the Holy City of Jerusalem at the Jaffa Gate, on foot."

By August 1918 the first act of the great northwestern siege was brought
to a close. After Ludendorff's last great attack in the spring, the Allies,
bolstered by American manpower, repelled the infiltration, and beat the
influenza-ridden Germans back to the 'Hindenburg Line.' Germany realized
that she could not hold out any longer. She capitulated, and the armistice
was signed in November.

By August of 1918 Germany had given her best, and it had not been
adequate. The blockade and the rising tide of American manpower
gave the German leaders the choice of surrender or complete economic
and social upheaval. Without exception, led by the Junker military
commanders, they chose surrender... Looking back on the military history
of the First World War, it is clear that the whole war was a siege operation
against Germany. 100

Ten million dead had not been sufficient to break the country and
bring it amongst the satellites of the Sea Powers. Germany had not
yet been vanquished on her own soil. To make her suffer a crushing
and final defeat within her confines - the second and final act of the
northwestern siege (that is, World War II) - the British schemers of the
interwar period would apply themselves for the next 20 years to enforcing
vis-a-vis the defeated Reich an ambivalent policy mix of sanctions and
foreign direct investment. In fact, the obverse of this underhanded policy
concealed the clubs' peculiar intent, which was to revamp the military
and economic establishment of Germany while waiting to identify the
'right' sort of political leadership that could have 'used' this new, refitted
Reich to Britain's advantage. In brief, the scheme consisted in rearming
the enemy of yesterday, and so conspiring as to plunge Germany in
another battle, which would offer (1) the pretext to annihilate Germany


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Introductory: The Eurasian Embrace 41


finally, and (2) the chance to take possession of Germany's geopolitical
position. To this complex feat of provocation, which featured the
incubation of Nazi Fiihrer Adolf Hitler as the extraordinary 'drummer'
of an unrecognizable, orientalized* Germany, the remainder of the present
narrative is devoted.


See Chapter 5, footnote on p. 243.


Pi^parata 01 chapOi 4i


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2 The Veblenian Prophecy

From the Councils to Versailles by
Way of Russian Fratricide, 19 19-20


MEPHISTOPHELES: Faust, stab thine arm courageously, And bind thy
soul that at some certain day Great Lucifer may claim as his own.
FAUST: Lo, Mephistophiles, for love of thee [stabbing his arm]. I cut mine
arm, and with my proper blood assure my soul to be great Lucifer's...
MEPHISTOPHELES: But, Faustus, thou must write it in manner of a deed
of gift.

FAUST: Ay, so I will [writes]. But Mephistophile, my blood congeals and
I can write no more.

MEPHISTOPHELES: I'll fetch thee fire to dissolve it straight.
FAUST: What might the staying of my blood portend? Is it unwilling I
should write this bill? [re-enter Mephistophiles with a chafer of coals].
MEPHISTOPHELES: Here's fire; come, Faustus, set it on.

Christopher Marlowe, Dr. Faustus, Sc. V (58-91). 1

The impossible revolution

Germany surrendered in November 1918, Kaiser William II abdicated and
the Reich imploded. From the interior of Germany's disarrayed society
emerged for an instant, to demand 'change,' a diffuse and overall pacific
procession of the underclass and its Bohemian phalanx - anarchists,
intellectuals and artists. This manifestation was promptly quashed by the
German elite's weakened yet spiritually intact military appendage with the
tacit approval of the propertied middle class. The German armies marched
back home to strangle the sedition were spearheaded by 'creatures of steel':
young and merciless storm-troopers forged by war that commingled with
ghostly formations of unyielding veterans in a novel alliance blessed by
divinities theretofore unnamed. The country witnessed the birth of the so-
called Conservative Revolution: a movement issued from the fathomless
depths of Germanhood, drunk with the ecstasy of war, yet ferociously
hostile to the modern pursuit of gain, as well as to the archaisms of royalty
and hereditary nobility. Nazism was a very special offshoot of this 'revival
from the deep,' which ramified in a tangled web of associations, parties,



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The Veblenian Prophecy 43


and secret orders - of such a revival writer Ernst lunger, also a war veteran,
became the celebrated troubadour. In one such order, lance corporal Hitler
was inducted in late 1919. Meanwhile the Allies cleared the Russian stage of
the last vestiges of czardom: actively funding the nihilistic dictatorship of
the Bolsheviks, they allowed the latter to buy off the bulk of Nicholas's army
and defeat the czarist White generals in Russia's civil massacre of 1919-22.
Simultaneously, at Versailles, the Anglo-Americans laid the groundwork for
the incubation of Russia's forthcoming enemy: by imposing reparations
that did not seriously cut into the income of Germany's privileged classes,
they induced a process of rehabilitation of the Reich's reactionary clans,
with the secret intention of fostering a radical, anti-Bolshevik force, which
could have been catapulted against the Russian ramparts and smashed
thereafter in a repeated two-front global engagement. The only thinker
of the age possessing the clairvoyant lucidity to assess and comprehend
these transformations was the American Thorstein Veblen: after having
examined the late development of the German Reich, he predicted its
rout and, more importantly, he alone became alive to the reawakening of
a peculiar sort of religious furor, which the war seemed to have unleashed
all across Germany. Already in 1915, he depicted what was in fact an
amazing sketch that foreboded the haranguing Fiihrer; furthermore, in
1920, after the infamous Peace Treaty ratified in Versailles failed to carry
out the dispositions which Veblen had thought necessary for disarming
Germany and turning her into a peaceable partner of the Anglo-Saxon
commonwealths, he prophesied by 20 years the forthcoming armageddon
between Bolshevik Russia and Reactionary Germany (1941). This prophecy,
uttered in a review of J. M. Keynes's best-selling book on the Parisian Peace
Treaty, stands possibly as Political Economy's most extraordinary document
- a testimony of the highest genius - and as the lasting and screaming
accusation of the horrendous plot that was being hatched by the British
during the six months of the Peace Conference following World War I.

Germany never experienced revolution. Much would be made of the
alleged rift between Left and Right; many would account it as one of Hitler's
ingredients for success. But the chasm dividing the kept from the proletarian
classes was more apparent than real: the future clashes between the Nazi
Brownshirts and the Red squads of the Communist Party were much more
the effect of foreign intrusion into German politics than the result of a
congenital antagonism gnawing at the foundations of the German order, as
will be shown in Chapter 4. This is to say that, as for most of the 'democratic'
West, Imperial Germany was overall a stable and cohesive society, and that
whatever its sources of class contention and inequality, these were never


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44 Conjuring Hitler


articulated creatively and effectively by a true revolutionary movement.
There was no true will to sedition in Germany before World War I, nor
would there be afterwards. For six strange months between the surrender
of November 1918 and the proclamation of the Weimar Republic in June
of 1919, Germany would burn with the fever that follows a change of
regime: a period of semi-benign protest, unorganized, which came soon to
be marred by the interference of intellectual independents, private militias,
foreign intrigue, and finished by the returning armies, which cleansed the
isolated uprising in blood. This was the relatively unknown interval of the
German Councils, after which Hitler came of political age.

We now turn to the narrative of the German revolution that was not
meant to be - it never was for reasons that Veblen made manifest after he
dissected the body of Europe's Labor movement at the end of the nineteenth
century: on the basis of these early observations, which he coupled with
his thorough study of the doomed Reich, Veblen would later have found
himself ideally situated to cast the shocking prophecy of 1920.


At the turn of the twentieth century, save a few obdurate militants, orthodox
Socialists in the industrialized West were giving up on 'Revolution.'

The working masses were somewhat less discontented with the room
and board with which the establishment was providing them - the billeted
quarters were, relatively speaking, growing somewhat larger, and the bill of
fare more varied every year. Partem ettircenses (the bread line and the movies)
had contributed their satisfactory share to the capitalists' comprehensive
effort to tame the unrest of the masses.

In Germany by 1912, when the SPD (Sozalistische ParteiDeutschlands) -
the Socialist Party of Germany, the world's largest and most organized
-became the leading political concern of the country with 34.8 percent of
all votes in 1912, z the laborers' acquired distaste for the winds of change
had found its most mature expression in August Bebel, the unchallenged
Napoleon of German Socialism, who characterized Revolution as 'the great
crashing mess' (der grosse Kladderadatsch) . 3

Plainly, the working ants of the German anthill harbored no keen desire
to revolt, nor were their French and British counterparts any more willing
to shake their own tree, so to speak. They merely wished to compromise
and, like the polychrome crew of a whaling ship, went no further than
chaffering with the captains over their due share.


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The Veblenian Prophecy 45


But in principle, all Socialists were internationalists - brothers across
borders - and pacifists. Then the war came, and the great cosmopolitan
assembly of the world's Socialists, the so-called International, which had
been poised to receive no less an award than the Nobel Prize for peace, was
torn asunder by the pull of chauvinistic rage. 4

In August 1914 the parliamentary faction of the SPD voted unanimously
for the War Credits. In England and France, the proletarians likewise rallied
behind the flag and readied themselves to slaughter their homologues
athwart the firing line. The Kaiser in a felicitous rhetorical turn proclaimed
that he no longer knew parties, but only Germans.

'This is betrayal!,' decried the sparse chieftains of the intransigent Left,
who held the gentrified leaders of the SPD responsible for reneging on the
internationalist and humane bent of the party. The revolution, they said,
was being sacrificed by a posse of factory foremen-turned-bourgeois, whose
co-opted role was that of shaping the workforce into a contented fixture
of the capitalist stronghold.

And the denunciation was not far off the mark. More precisely the alliance
of elite and proletarians, sealed in the name of patriotic superstition, was
a peculiar consummation of conservatism. The kept class, headed by the
emperor in Germany, and by the bureaucratic and business elite in the
Liberal commonwealths, being in great measure 'sheltered from the stress
of economic exigencies which prevail in any modern, highly organized
industrial community' was (and still is) by nature the standard-bearer of
all those socially retarded (that is, barbarian) practices that breed in the
shaded precinct of privilege and hereditary faineantise: for example, sports,
finance, and war. 5

The abjectly poor, and all those persons whose energies are entirely
absorbed by the struggle for daily sustenance, are conservative because
they cannot afford the effort of taking thought for the day after tomorrow;
just as the highly prosperous are conservative because they have small
occasion to be discontented with the situation as it stands to-day. 6

Lodged in the urban slum, where the exercise of prevarication and brutality
fashioned the mind, and suffering therefore deprivation and spiritual
debilitation, the underclass was made to acquire great fluency in the
language of invidious rivalry and clannish ferocity.

It cost the Junkers no time to clothe the masses inFeldgrau, the field-gray
color of the Reich's uniforms. French, British, American, and Nipponese
ardor in reaching the war front was likewise remarkable - less so that of the


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46 Conjuring Hitler


Slavs, whose patriotic fitness, let alone business sensitivity, appeared to be
never quite attuned to the governing passions of the times.

Exposed since birth to the violence of the ghetto, the German underclass
was further 'sterilized' by the repeated practice of trade unionism, whose
bargaining routines, by making membership exclusive, that is, 'scarce', 7
habituated the members to secure privileges at the expense of their fellow
laborers: a business-sawy blue-collar chauvinist always made a 'good' army

The prolonged discipline of warlike stimulation and business chicane
turned the laborer into a foolproof instrument of the Western hierarchies,
and the great expectations of the revolutionaries into much regrettable
disappointment. Veblen in 1907 noted:

That part of the population that has adhered to the socialist ideals has
also grown more patriotic and more loyal, and the leaders and keepers of
socialist opinion have shared in the growth of chauvinism with the rest of
the German people. ..[The SPD leaders] aver that they stand for national
aggrandizement first and for international comity second... They are now
as much, if not more in touch with the ideas of English Liberalism, than
with those of Revolutionary Marxism. 8

Barring the rashes caused by a few slipshod anarchists, Germany, in fact,
possessed no rebellious core threatening to break out and consume her
wholesale. Certainly the SPD suffered trouble and profound divisiveness
over the war: in 1917, the splinter grouping of the 'Independents' seceded
from the party's main body to form the US PD,* while strikes intermittently
roiled the industrial performance of the Socialist electors throughout the
conflict. Doubtless, dissent existed. But all in all, like Russia'a peasant
wasteland, Germany's enchanted forest, tenanted by most obedient
laborers, haughty bourgeois, and blind aristocrats, was easily domitable
terrain - from within as well as from without. Tractable human material,
despite the country's professed devotion to war, which was itself, quite
aptly, a somnambulistic enterprise.

September 29, 1918, appears to be the point of attack in the script of
Germany's so-called 'Revolution of 1918-19. ' 9

On September 13, Austria sent out an SOS; two days later, the defensive
line of the Central Powers collapsed: the Allies had pierced the Balkan

Unabhan%i%e Sozialistische Pattei Deutschlands, the Independent Socialist Party of


P^pa^ata oi chapoi 46


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The Veblenian Prophecy 47


ramparts and forced the capitulation of Bulgaria. On the same day, the Allies
in the West attacked the Hindenburg line on a wide front. It was Germany's
last fortified line of defense and it began to give way.

For three years, Germany had been de factoruled by her generals; by one
in particular, Erich Ludendorff . It was he who contrived every spectacular
attempt during the conflict to break loose from the siege: he launched the
unrestricted submarine warfare, sent Lenin to Russia, foisted the 'predatory
peace' on the Bolsheviks, and organized the last great assault of spring
1918. Presently, he was about to close the door on the Second Reich with
another 'colossal' exploit. 10

When he saw the Reich compromised, Ludendorff turned the unthinkable
into a fait accompli: he ordered parliamentary democracy and took the SPD
into the government. As he brought this about, he also made haste to
inform the Kaiser and the Cabinet that the cause was lost, and urged that
an armistice be sought with the Allies forthwith. 'So we have been lied
to all these years!' howled the ministers. The emperor himself was quite
incredulous, though no one could treasure the sentiment of a discredited
mascot, least of all Ludendorff, who was taking aim to hit three targets with
a single shot: (1) pacify the home front and soothe the Allies by setting
up a parliamentary facade prior to the peace talks; (2) saddle the Socialists
with the shame of defeat ('the poisoned gift' of command); and, most
important, (3) save the army.

On October 5, the German public was finally apprised that it now had a
parliamentary democracy under the Liberal Prince Max of Baden, and that
as its very first act this government had addressed an immediate petition
for peace and armistice to the American President.

On January 8, 1918, President Wilson had issued a loose platform
for a new world order, the so-called Fourteen Points, based upon:
transparent diplomacy, free trade and navigation, disarmament, and self-

Between October 3 and 23, Wilson cabled the German Chancellery
three notes, in which he demanded that the Reich (1) retreat from the
occupied territories; (2) cease the U-boat war; and (3) force the Kaiser's
abdication. Suddenly, on October 25, Ludendorff, on the basis of mixed
information from the front, recanted it all: he hustled the Kaiser to break off
the negotiations with Wilson and resume the fight; Wilhelm, and Germany
had had enough of the general: he was dismissed and replaced with General
Groener, a logistics expert at the War Ministry. A chasm gaped in the
foundations of the Reich.

Then the big mess came crashing down upon the Fatherland.


P^p^ata Oi chapoi 47


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48 Conjuring Hitler


On Schilling Wharf, outside Wilhelmshaven, a corps of naval officers,
in open defiance of the new government's orders, decided to launch the
German flotilla, which throughout the war had lain at anchor and rusted
by inanition, in a temerarious sortie against the archenemy, the Royal Navy
-a mutiny, in short.

On October 30, 1918, the crews of the Thiiringen and the Helgoland
mutinied against their mutinous officers, in what amounted, in fact, to a
pledge of allegiance on the sailors' part to the new government. The sea
dogs' obstruction impeached the sortie. While the disobedient (to their
immediate superiors), but law-abiding sailors were incarcerated, their
shipmates of the Third Squadron staged a manifestation in Kiel protesting
their incrimination. A lieutenant named Steinhauser was sent to disperse
the rally; facing non-compliance he ordered his platoon to fire on the
protesters - 29 were mown down. But before the rest scattered, a sailor
swung around, drew a pistol, aimed at Steinhauser, and gunned him down.
On November 3, 1918, it was Revolution in Germany.

On the morning of Monday, November 4, the sailors elected Soldiers'
Councils (or Soviets),* disarmed their officers, armed themselves and ran
up the red flag on their ships. The marines of the garrison declared their
solidarity to the movement, and the dockers moved for a general strike.

From the third day onwards it no longer took sailors to trigger off
Revolution: it was spreading under its own impetus like a forest fire. As
if by tacit agreement, the pattern everywhere was the same: the garrisons
elected soldiers' councils, the workers elected workers' councils, the
military authorities capitulated, surrendered or fled, the civil authorities,
scared and cowed, recognized the new sovereignty of the workers' and
soldiers' councils. 11

After the officer caste, to which Germany had surrendered total command
of herself even before the war, momentarily relinquished the helm with
Ludendorff's dismissal, it was left, for a time, to the army's and the
industry's rank and file to improvise in the rudderless nation a semblance
of administrative emancipation: it irresistibly took the form of a 'council' - a
spontaneous anarchoid life-form prone to jealous self-governance, whose
ganglia fed off the associative limbs of the communal body: agriculture
and artisanry.

It was 'wild' - chaotic, and scarcely representative - Soviets that Germany
witnessed in these days: they were untamed by the suddenness of the

The so-called Rate (sing. Rat), the German equivalent of 'Soviet.'


P^p-^ata oi chapoi 48


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The Veblenian Prophecy 49


uprising, and the undeniable bullying of the underclass, which, as payback
for years of resented regimentation, was avidly seeking to redress older torts
and clamor its right to rule.

The aristocrats momentarily recoiled in their estates' subterranean
corridors, while the bourgeois cast preoccupied glances from their
windowsills. Von Biilow, the erstwhile chancellor of the Reich's apogee,
looked on:

In Berlin, on November 9, 1 witnessed the beginnings of a revolution...
She was like an old hag, toothless and bald... I have never in my life
seen anything more brutally vulgar than those straggling lines of tanks
and lorries manned by drunken sailors and deserters... I have seldom
witnessed anything so nauseating, so maddeningly revolting and base,
as the spectacle of half-grown louts, tricked out with the red armlets of
social democracy, who, in bands of several at a time, came creeping up
behind any officer wearing the Iron Cross or the order Pour le merite, to
pin down his elbows at his side and tear off his epaulettes... [Quoting
Napoleon] Avec un bataillon on baity trait toutt ctttt canaillt' '. . . 12

In less than two weeks Germany counted 15,000 of such Soviets: they
featured a simple hierarchical structure that was capped by an executive
directorate of six members, the Council of the People's Commissars, led by
SPD leader Friederich Ebert. Thus all decisions had in fact been remitted to
a solid majority of non-revolutionary Socialists - overall, the uprising, at
least in the beginning, was a pacific one. The fate of the 'Revolution' was
in the hands of the SPD.

The 'mess' was not going to last long. But the pang of dissent of November
1918 was genuine: it appeared to have been unmarred by sooty conspiracies
and Bolshevik agitation, whose exponents, by then grouped in the so-called
Spartakus League, formed but a trifling minority of the movement. And
yet the insurgents, most of them Socialists drawn from the proletariat,
middle-class intelligentsia, and non-commissioned officers, 13 were now at a
loss to make good of this exhilarating respite from the Junkers' corvee. Like
his confrere in the Soviet of St. Petersburg in 1905, the Common Man of
Germany's Rattrepublik (Councils' Republic) of 1918 was meekly requesting
benevolent stewardship from the top.

The rebellious lull was not going to last long because the workers
controlled less than the soldiers commanded, which was nothing; and
those with the keys to the financial network were obviously absent from

'With a single battalion one could sweep all this rabble away.'


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SO Conjuring Hitler


what turned out to be a convulsed village fair, overhung by unfavorable
skies. Before these could so darken as to unleash a full-blown storm, a
double betrayal was consummated at the Wilhelmstrasse: the aristocracy
in the guise of the army and the bureaucracy, agreed to throw the Kaiser
overboard if the Socialists, in the name of 'order, ' set out at once to smother
the 'Revolution' - to betray, that is, blood of their own blood.

The German revolution found an ignorant people and an official class
of bureaucratic philistines. The people shouted for Socialism, yet they
had no clear conception of what Socialism should be. They recognized
their oppressors; they knew well enough what they did not want; but
they had little idea of what they did want. The Social Democrats and
the Trade Unions leaders were linked by blood and friendship with the
representatives of the Monarchy and of capitalism, whose sins were their
sins. They were satisfied with the juste milieu of the bourgeois; they had
no faith in the doctrines they had proclaimed, no faith in the people
who trusted them... They hated the revolution. Ebert had the courage
to say so out right. 14

On November 9, though the rattled Kaiser was still somewhat reluctant
to dismount from the throne, the Chancellor Max von Baden issued a
semi-mendacious announcement of Wilhelm's abdication. The emperor
hesitated for a brief moment, then, fuming, he hurriedly boarded a train
to Holland, wherefrom he would officially abdicate only three weeks later,
and disappear from recorded memory. Thereafter, soon exhausted by the
incipient intrigue, Prince Max washed his hands of the whole affair by
nominating, unconstitutionally - for it was a prerogative of the emperor
- the Socialist Fritz Ebert as Reich Chancellor, and fled to his domain on
Lake Constance, never to be seen again.

It was during this time that, without knowing whether he represented a
republic or an empire, Matthias Erzberger, a restless and notorious Catholic
politico from Wiirttemberg, accompanied by two officers and the German
ambassador to Bulgaria, Count Obendorff, was sent as Governmental
Representative on the Armistice Commission to the forest of Compiegne*
to tender Germany's surrender to the Allies. Marechal Foch, Erzberger's
interlocutor, began to enumerate to the German legation what appeared
to be the conditions of a Diktat rather than an armistice: evacuation of
war zones; surrender of ports, war material, equipment, prisoners (without

Fifty miles north of Paris.


P^pai-ata Oi chapoi 50


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The Veblenian Prophecy 5 1


reciprocity), tonnage and vehicles; and annulment of the Soviet peace
of Brest-Litovsk. General Hindenburg cabled Erzberger that for the sake
of lifting the strangulating blockade the armistice had to be signed.
Erzberger, a consummate haggler, succeeded in wresting from Foch a
rebate on the weapons to be released and an extension on the evacuation
deadline. The German signatures were affixed to the document of the
armistice on November 11, 1918. The following day, upon his return to
Germany, Erzberger was congratulated by Hindenburg and Groener on his
performance. 15 World War I had formally come to an end.

When the news reached Adolf Hitler, he was recovering from temporary
blindness at the military hospital of Pasewalk in Pomerania. After four years
of unceasing activity on the western no-man's land, which he had zigzagged
in a myriad of suicidal missions as Meldeganger (message courier), he was
clouded by a blinding spray of mustard gas in Flanders during the last
stages of the war. Upon learning from the hospital's chaplain of Erzberger's
accomplishment, he despaired, and mused:

Again, everything went black before my eyes; I tottered and groped my
way back to the dormitory, threw myself on my bunk, and dug my
burning head into my blanket and pillow... And so it had all been in
vain. In vain all the sacrifices and privations; in vain the hunger and
thirst of months which were often endless'. vain the death of two
millions who died... There followed terrible days and even worse nights
- I knew all was lost. Only fools, liars and criminals could hope in the
mercy of the enemy. In these nights hatred grew in me, hatred for those
responsible for this deed. 16

Now Fritz Ebert, the brand new Socialist chancellor, had to fulfill his half
of the covenant with Groener and the army: he was to tame the Conciliar
Movement, and lead it on, unawares, to the slaughterhouse. Meanwhile,
the Councils' improvisation, performed with reckless underestimation of
the forces of Reaction, was brought nonetheless to a higher pitch: when it
first convened in Berlin on December 16, 1918, the First National Congress
of the Workers' and Soldiers' Councils moved at once to reform the army:
the supreme command, they proclaimed, was to rest with the People's
commissars, disciplinary powers were to be wielded by the councils, insignia
of rank abolished, and chiefs chosen by acclamation.

The generals could tolerate this circus no longer; Ebert and associates
needed only to provide them with a pretext to suppress the show. On
Christmas Eve, 1918, it was easily found by accusing, mendaciously, the


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52 Conjuring Hitler


officious praetorian guard of the Revolution, the People's Naval Division
- a pell-mell but decently equipped aggregation of proletarian rebels in
arms - of foul play and conspiratorial subversion, and withholding its
pay accordingly. Violent confrontation ensued between the sailors and
the Socialist leaders. As Ebert refused to see its commander, the Division
occupied the Chancellery, thus offering the generals sufficient grounds
for the much desired military intervention. One such high officer at the
War Ministry, who, aside from Groener, promised Ebert immediate succor,
was General Kurt von Schleicher, a creature of shadows, who would haunt
henceforth the anguished demarche of German politics until the rise of
Nazism: incarnating despite himself the cursed fate of Germany, he would
rise to become Weimar's last chancellor.*

In the first clash that followed between regulars and Reds, the Reds, on
the brink of a scorching defeat, were suddenly rescued by swarms of popular
sympathy, which flooded the streets and held back the Reichswehr troops
from dealing the sailors the crushing blow. The rebels carried the day, and
got their pay; the number of dead remains unknown.

This was merely the prelude of the greater wave of repression that was
gathering at the gates of the German capital, and which would decide the
fate of the Revolution in the week of January 5-12, 1919.

On December 30, 1918, by further meiosis, The German Left (SPD),
through its 1917 filiation of the 'Independents,' spawned the extreme
nucleus of the KPD,^ Germany's Communist Party, which did not at
first fashion itself after Lenin's dictatorial Bolshevik organization. Karl
Liebknecht and Rosa Luxemburg, who had drafted its manifesto, became
its icons. 1 7 Till the very end of parliamentary rule in 1933 the Communists
would antagonize the mother party (the SPD) for allegedly behaving as the
meretricious handmaiden of capitalism. Subsequently maneuvered from
Russia, the KPD would wage its Muscovite politics in an air of unreality,
and with such fractious obstinacy as to elicit the founded suspicion that
it came into being more as a tool of destabilization than as an organ of
proletarian representation. The KPD played no significant role in the
uprising of 1919.

In January the government finally acted: Ebert appointed his fellow
Socialist Noske commander in chief of elite squadrons of shock troops
(special forces) that had at long last returned from the front, loose gangs of
eternal lansquenets that showed no inclination to depose their weapons: the

* See Chapter 4, pp. 196ff.

t Kommunistische Partei Deutschlands.


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The Veblenian Prophecy 53


Freikorps. For a Socialist tribune of 'the people' to preside over this sort of
company had to have been a disquieting assignment, but Noske shrugged:
'It's all right by me,' he said, 'someone has got to be the bloodhound.'

The home front was now teeming with these marauding ghosts of the
Thirty Years' War and the resurrected barbarian clans of Tacitus's Germania:
splintered brigades of unshaven hunters - limbs of a single body blindly
obedient to their fearless chief- were about to conquer the urban centers.
'Principes pro victoria pugnant, comites pro principe (The chiefs fight for
victory, but the retainers for the chief).' 18. The names of many such fearsome
chieftains would inscribe themselves in the chronicles of the counter-
revolution: Ehrhard ('The Consul'), von Epp, Reinhardt, von Stephani,
Maercker, Pabst...

The Freikorps, recruited frantically at the end of the war and now
numbering roughly 400,000 men, were unleashed upon Berlin and many
other tumultuous German cities, which had seen the advent of Soviets. The
so-called 'White' (that is, counter-revolutionary) repression was merciless.
In Berlin, on the night of Jaunuary 15, Liebknecht and Luxemburg were
knocked senseless with rifle butts and then shot in the head: they had had no
part in the 'revolution', but their continual exposes on the KPD's press organ
Die rote Fahne (The Red Flag) of Ebert's lurid compact with Quartermaster of
the General Staff Groener had to cease. Good riddance even for Moscow,
bent as it was on 'win[ning] dominant control... over the [newly formed
Communist] Party,' 19 and purging it of its independent minds.

It was a new breed of men, 'slender, haggard. ..forged of steel,' that
marched back home with a vengeance from the front . z0 Neither disconsolate
monarchists nor rugged proletarians with nothing to come home to, these
Geachteten, banished scavengers, who for the most part had once been part of
the lettered bourgeoisie, had fallen prey to a different sentiment. It was as if
the disintegration of the Reich's nobiliary scaffolding in November 1918 had
uncorked a more ancient worship of the unfathomable idea of Germany.

All of them were looking for something different... They still hadn't
received the password. They foreboded this word; they would utter it,
ashamed of its sound, tweak and eviscerate it with silent fear, and though
they avoided it in the play of their various discussions, they always felt it
hovering upon them. Eroded by time, mysterious, fascinating, intuited
and not acknowledged, loved and not obeyed, the word radiated magic
forces from the heart of deep darkness. The word was: Germany. 21

Combat, 'the tempests of steel,' and the laceration of the Wilhelmine
pretense had awakened a great many veterans to the exigency of building a


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54 Conjuring Hitler


new order. While they were convinced that Germany's Prussian humiliating
past had to be repudiated entirely, the intellectual spokesmen of the
Freikorps grappled uncomfortably with their middle-class heritage, whose
custody of intellectual tradition they valued but whose philistinism they
abhorred. In the course of numberless punitive raids conducted in the
industrial slums, the White squadrons of the Freikorps surveyed the proles
huddled in their feculent foyers and bunks with a blend of languor and
excitable repulsion: the country was torn; to them this ghetto-humanity
was one of aliens.

We marched in the suburbs, and from tranquil houses, elegant, ensconced
in the foliage, cheers were echoed and flowers thrown at us. Many
bourgeois were on the streets and waved at us, and some houses flew
the flag. What hid behind those drawn blinds, behind those indifferent
window panes, underneath which we passed haggard, exhausted, yet
resolute, deserved, so we thought with conviction, our dedication. Here
life had taken another course, reached another level; its intensity exuded
an extreme sophistication that jarred with our rough jackboots and filthy
hands. Our cupidity did not rise up to those houses, but they sheltered,
we knew it, the fruits of a culture belonging to a century that had just
run its course. The world of the bourgeois, the ideas created by the
bourgeoisie, the worldly learning, personal freedom, pride in work, agility
of the spirit: all of this was exposed to the assault of the bestialized masses
and we stood as its defenders because it was irreplaceable... Yet it was we
who fighting behind old banners saved the Fatherland from chaos. May
God forgive us, that was our sin against the spirit. We thought of saving
the citizen yet we saved the bourgeois.

Once even I went inside a proletarian dormhouse. I saw a room not
larger than ten square feet, full of beds. Seven people, men, women,
and children slept in that dump. Two women were lying in bed, each
with a child; when we came in one of them burst out with a stridulous
laugh and those that were loitering before the front door came streaming
inside. The sergeant approached; swiftly, then, the woman lifted her
blankets and gown, and a crackling erupted from her white buttocks.
We startled back as the others doubled over in crass laughter, clapping
their thighs, choked by guffaws; even the kids laughed: 'pigs!' would
shout the women and children, and all of a sudden the room was full
of screaming bodies; we backed up, slowly, until we found ourselves in
the hallway again. zz


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The Veblenian Prophecy 55


Profiting from the middle class's apathy, the new lansquenets tamed the
underclass and muffled in blood this brief civil war which, paradoxically,
Social Democrcy waged against its very children - the working class - by
the proxy of White counter-revolutionary brigades. 23

In Munich, events had been no less extraordinary. Even before Erzberger
signed the armistice, on November 7, massed on the Theresienwiese, a
150,000-strong crowd of children, men, and women, led by a blind
peasant by the name of Gandorfer, acclaimed Kurt Eisner as leader of the
Bavarian Republic, a former Berlin playwright of Jewish origin, and former
USPD radical.

In harangues addressed to swarms of soldiers and civilians, Eisner
envisioned a 'dictatorship of freemen' and railed against Liberalism's
poisonous alchemy: how can one commix, he growled, brotherly love
with the struggle for profit? That was like 'casting quicksilver in lead...
Nonsense!' 34 Hardly a representative of South German rhythm, Eisner was
rather 'one of those hybrid personages, such as arise in History births in
times of chaos, an apparition conjured from some political Walpurgis to
cast the anathema on the cadaver of the Second Reich. ' Z5

With a view to manipulating the millenarian fervor of Munich's new
apostles of radicalism and their desire to purge Germany's imperial past
out of collective recollection, the US Administration seized the opportunity
and invited Eisner to initiate a campaign, which, through the disclosure of
classified government documents, should have ushered in the complete and
public avowal of Germany's culpability for starting the war. Eisner complied
by publishing duly edited - to enhance their sinister drift - excerpts of
documents retrieved in the Bavarian Foreign Office.

Eisner's possibly well-intentioned but de facto pandering move elicited
an uproar of indignation from the still patriotically sensitive masses, whom
he was thus beginning to alienate.

The frenzied march of the Munich Council proceeded nevertheless; in
late November, at the cry of 'Los von BerlinV ('Away from Berlin!') the
Bavarian Republic broke off relations with Berlin's Foreign Ministry.

The middle class grew restive, and a White repression was feared. The
Bavarians voted on January 15, 1919. In all 32 districts in which he had
presented his candidacy, Eisner was beaten - his affiliated party fringe
garnered about 2 percent of the vote. His career was finished.

On February 21, as he rehearsed the farewell speech on his way to the
Landtag,* Count Anton von Arco-Valley, a youth of 24, emptied his revolver
at Eisner, who, hit repeatedly in the head, sank down in a pool of blood.

The building of the State Assembly.


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56 Conjuring Hitler


Arco-Valley was knocked senseless with a crowbar by Eisner's bodyguard
and surrendered to the authorities, to which he confessed that he had
committed the crime to prove his mettle to the recruiters of a secret lodge,
a certain Thule Society, which had refused him admission on account
of his racial 'impurity' - his mother was Jewish. Another useful idiot?
Most likely.

Possibly, the Thulists, by inspiring Arco with the 'pledge,' sought to cause
a Red (Bolshevik) takeover of the Councils, and thereby elicit the retaliation
of White forces, to which they were providing a logistical base of sorts. 2(3

After the assassination, the Central Committee of Munich's Councils
imposed a curfew and declared a general strike all across Bavaria. In March,
the legacy of Eisner was disputed by two hostile factions: the Socialists under
the local leader Hoffman, and the anarcho-Communist revolutionaries. In
a five-day interlude - from April 7, the day of the official proclamation of
the first Munich Ratenpublik, through to April 12, 1919 -during which the
Hoffman Cabinet, overwhelmed by the conjoint revolutionary action of
the Councils of several neighboring cities, retreated to the nearby city of
Bamberg, the anarchist harlequins staged a fanfare against boredom in the
newly proclaimed Bavarian Soviet. The programmatic highlights of their
sideshow were state-mandated proficiency in the poetry of Walt Whitman
for all pupils by the age of ten along with the abolition of history classes,
and issues of a special money stamped with an expiration date. Z7

In a still mysterious succession of maneuvers, a triumvirate of Russian
Social Revolutionaries* - Levien, Levine, and Axelrod - allegedly operating
without any sort of mandate from Moscow, zs supplanted the incumbent
rebels and managed to establish itself at the head of what would be the
second and final Conciliar experiment in Munich on April 12, 1919. The
anarchists scampered at once from the political scene,

'...vivas to those who have failed...' (Walt Whitman) 39

while the three 'Russians,' as the revolutionary agents came to be referred
to, nurtured with the help of the local Red Army a recrudescence of terror
and debauchery.

Their tenure was not bound to last longer than a fortnight, however,
for the White guards of Noske, previously summoned by the Hoffman
government exiled in Franconia, were about to encircle Munich. In the

One of the competing revolutionary factions of Russia, which in principle, and unlike
Bolshevism, stood for the peasantry but which ultimately, before it was wiped out by
Lenin and his associates, afforded many a nest to an inchoate and perplexing pack of
political assassins.


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The Veblenian Prophecy 57


last scramble before the White wrath descended upon the Bavarian capital,
Levien and Levine, reviled as 'Jewish instigators of the working masses,'
were expelled from the Councils' Congress, though their connection to
the Red Army remained strong.

Determined to suppress the source of anti-Semitic instigation, which,
so they held, had turned popular sentiment against them, the 'Russians'
ordered the liquidation of the Thule Society, whose authorship and diffusion
of an endless stream of Jew-baiting pamphlets had been identified without
difficulty 30 Two hundred of its affiliates were wanted; by the end of April,
seven of them -men and women of high 'lineage'- were apprehended and
sequestered in a public gymnasium. Before the Whites entered the city, they
were put against the wall and executed - the martyrs of Thule.

The White retribution for the Red anarchy, and its crazed Russian coda,
was bloodier than Berlin's. The White 'liberators' of Munich featured
among others a Captain Ernst Rohm, as the chief of munitions in von
Epp's brigade, and Thulist war veteran Rudolf Hess, a new recruit in the
Regensburg Freikorps.

By May, order had been re-established in Bavaria.

Inducting Hitler into the mother lodge

Such was the world Hitler found upon returning to Munich as a
convalescing soldier in December 1918. Allegedly, his first political duty
- an appointment to distribute 'educational' material to the troops - took
place under the revolutionary administration of the Workers' and Soldiers'
Councils (from late February to April, 1919), and was thus carried out under
Socialist auspices.

Of this chapter of his life the Fiihrer was reticent.* Upon leaving the
hospital Hitler did not join a Freikorps to fight Left-wing radicalism; he
steered clear of the bloody street-fighting of the spring. 31 Ever since Nazi
hierarchs had wondered, 'What the hell was Adolf doing in Munich in
March-April of 1919?' 3Z

Hitler was waiting to be molded.

When in May discipline was instituted anew in the ranks of the army,
Hitler was exposed to a program of anti-Bolshevik propaganda coordinated

Indeed, this early account of Hitler's activities has saddled him with the additional
charge - surely a trifle, if weighed against the Fuhrer's load of sins - of political
incoherence and opportunism. Yet the inconsistency is more apparent than real: for
instance, Hitler's avowed anti-monarchism, like that of the Gecichteten, would remain
one of his abiding traits, as much as his attraction to corporatist economics - both of
which were two defining features the Right shared with Left. This embarrassing falter
in the FUhrer's evolution strengthens the contention that Hitler m 1919 was in fact
far more a creation than a creator: a pupil seeking a master, and not vice versa.


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SS Conjuring Hitler


by a Captain Mayr, who, after the liquidation of the Red Army had been
in search of capable proselytizers in uniform. Mayr would serve as Hitler's
first political 'midwife.'

After attending a series of courses at Munich University in politics and
economics, the latter taught by Gottfried Feder, an engineer by profession,
it was not long before Hitler discovered the prodigious effects of his own
oratorical gifts. By August, in the capacity of Bildungsoffizier ('instruction
officer'), he was already entrusted with a jam-packed lecturing assignment,
which he fulfilled with enthusiasm, drawing increasing numbers of soldiers
and listeners, who recognized him as Mayr's most talented propagandist.

In early autumn, he was dispatched as an informant to spy on the several
political formations that were mushrooming all over Germany in these
times of political upheaval.

On Friday, September 12, 1919, he was sent to report on a meeting of
the German Workers' Party (Deutsche Arbeiterpartei, DAP). As he walked
into a squalid tavern attended by a meager scatter of listless hangers-on,
Gottfried Feder was delivering a tirade on usury, which Hitler had already
heard. As he prepared to leave, a Professor Baumann stepped up to perorate
the merits of separatism - France was indeed conspiring at this time with
whatever natives it could bribe to sever from the Fatherland as large as
piece of southwestern territory as it could to create a buffer zone between
herself and Germany.

Suddenly Hitler lunged for the lectern, and in a bout of possessed
nationalist eloquence, drove Baumann out of the locale. Anton Drexler,
a railroad locksmith and chairman of the Party, did little to conceal his
exhilaration at such a display of rhetorical virtuosity; he pushed on Hitler
a pamphlet of his composition and invited him to return, forthwith. He
immediately confided to the others: 'He's got guts, we can use him.' 33

A few days later Hitler received in the mail an unsolicited membership
card of the DAP bearing the number 555. 34 He did return.

On October 16, 1919, in a crammed basement hall of one of Munich's
large drinking saloons, the Hofbraukeller, 35 which was hosting the DAP's
first public appearance, Hitler provided a torrential diatribe to an audience of
111 individuals, including a young Bait sociology student, Alfred Rosenberg,
and his master, Dietrich Eckart.

Upon inhaling the fluid, the two, who had of late been vainly scouting
the Bavarian waste for a suitable 'drummer,' tapped each other with side-
glances of gleeful shock: 'He's come.' 36


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The Veblenian Prophecy 59


Once in every generation a spiritual epidemic spreads like lightning...
attacking the souls of the living for some purpose which is hidden from
us and causing a kind of mirage in the shape of some being characteristic
of the place that, perhaps, lived here hundreds years ago and still yearns
for physical form... You can't hear the note from a vibrating tuning fork
until it touches wood and sets it resonating. Perhaps it is simply a spiritual
growth without any inherent consciousness, a structure that develops
like a crystal out of formless chaos according to a constant law. 37

For a time Hitler drew two stipends, as an army informant, and party
speaker. On March 31, 1920, the date of his official discharge, Hitler
committed to a life of political activism.

At the behest of an occultist by the name of von Sebottendorff, Karl
Harrer, a sports journalist, together with Anton Drexler, had in October
1918 founded a 'Political Workers Circle' with a view to constituting a front
for the Thule Society. The Thule Gesellschaft was incorporated in August
of 1918 by Sebottendorff, as a branch of 'a much more important secret
society known as the Germanenorden — Germanic Order' 3S - which in turn
had been founded in 1912, and whose role in the counter-revolutionary
movement in Munich has been mentioned above.*

The creation in January 1919 of the DAP, a political unit in full trim that
would have relayed the 'masses to the nationalist Right,' achieved this
purpose. 39 From the Germanic Order, Thule inherited the symbolic insignia
of the swastika, 40 the eagle and the dagger, and a racial gnosis insisting on
the purity of the affiliate's blood.

The Hakenkreuz or gamma cross is a solar emblem and a polar sign: 'it
evokes a circular movement around an axis or a fixed point... it is always
suggestive of movement, dynamism, unlike the cross.' 41 According to the
Germanic mythology of the Germanenorden, the swastika rotated around
a polar axis planted in the Hyperborean (northernmost) sacred island of
Thule, the cradle of a white race of ancestors.

When order begins to totter, particularly during the caesura between
two historical epochs, [peculiar] forces rise from their subterranean and
angular lairs, or even from the zone of their private dissoluteness. Their
end is despotism, more or less intelligent, but always shaped after the
model of the animal kingdom. Therefore, even in their speeches and
writings, they are wont to attribute beastly traits to the victims they
strive to annihilate 42

* See pp. 56-7.


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60 Conjuring Hitler


In June 1918 von Sebottendorff had boosted the nascent organization with
the acquisition of a newspaper, the Volkischer Beobachter. Poet and freelance
writer Dietrich Eckart, one of the Society's 'luminaries' that attended the
October 16 gathering, would later provide the sum with which the Nazi
party acquired the paper as its official press organ in December 1920. 43

Eckart had continuously made use of his own periodical, Aufgut deutsch
(In Plain German) - a forum for conservative-revolutionary literati - to
inveigh against 'Jewishness,' which, he averred, consisted at heart of a
form of earthly, materialist, worship. To such adamant 'affirmation of life'
on the part of Jews, he added, must be opposed a peculiar feeling for
immortality, which was through and through a Teutonic sentiment - a
notion of eternal regeneration through unrelenting death and sacrifice.
Something which Ernst Jiinger, a bard whose visions were not too remote
from the lore of the Thulists, would describe as 'the double-entry of life'
- die dcppelte Buchfuhrung des Lebens. 44

Eckart's meditation ended in a somber tone, brooding over the
forthcoming irreconcilable yet necessary coexistence of Jews and Germans,
the former acting upon the latter as a formication of vital 'bacteria' within
an organism, the German nation, yearning for eschatological deliverance
at the end of time. 45

From the columns of the Volkischer Beobachter, von Sebottendorff had
similarly intimated on November 9, 1918, the day of the Revolution, that
'the whole living realm is doomed to extinction, so as to make everything
else live; even we must be prepared to suffer death in order to let our
children and the children of our children live. The humiliated anguish of
Germany is the threshold beyond which life renews itself.' 46

Following his induction into the Society as an honorary member by way
of the DAP, 47 Hitler underwent the proper initiation into mysteries of the
mother lodge. 4S

Other members of the Thule Gesellschaft that would bear upon the
vicissitudes of Nazism were, among others, Hitler's economics teacher
Gottfried Feder; Hans Frank, the governor of occupied Poland during
World War II; the future Deputy Fiihrer, Rudolf Hess, and the Third Reich's
ideologue of the race, Alfred Rosenberg.

There develop in the great Orders secret and subterranean channels in
which the historian is lost. 49

The Allied betrayal of the Russian Whites

But in Russia the fratricide was going to be something else.


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The Veblenian Prophecy 61


Many critics of contemporary historiography have demanded that the
Russian chapter in modern primers be rewritten; and rightly so. What ought
to be spelt out in simple words is that the 'Bolshevik menace from the East '
was from beginning to end a fake specter animated by the lies of the Western
apparatuses. The Communist presence in Eurasia added yet another degree
of complexity to the 'strategy of tension' in the West: in fact, it allowed to
keep Eurasia in check, and the world poised on the brink of an ever pending
ideological, or rather imaginary, conflict - a conflict with the faceless,
despotic, 'asiatic enemy'. How Western Russia had been consigned to Lenin
and his acolytes has been recounted in Chapter 1 . Thereafter, the Allies had
to shield their 'revolutionary assets' and see to it that these consolidated
their hold over the entire landmass, from Moscow to Vladivostok. To effect
this, the White counter-revolutionary armies of the generals loyal to the
Czar had to be wiped out - and Britain had to come up with a peculiar
plan. Peculiar, because the scenario was rather awkward: the Reds, who with
the support of foreign capital, had been gradually erecting from Moscow a
despotic bureaucracy since late 1917, were surrounded by the White czarists
in the north (Murmansk), the south (the Caucasus), and the east (Siberia).
The Whites, dynastic and traditionalists, professed themselves as friends of
the Allies - and they were sincere - whereas the Communist Reds employed
only the foulest language when speaking of the American and European
'Liberal democracies': in words, and in words only, their ideological hatred
for Western capitalism knew no bounds. Now the catch of such a scenario
was that the West had to behave in such a way as to fool both its public
and the Whites into believing that it was supporting the latter, when in
fact the Anglo-Americans were looking forward to the complete physical
elimination of the White czarists - their allies, on paper. And all of this had
to be done to fulfill the aim of setting up a Communist enemy in the East,
against whom, in time, the 'new reactionary' Germany would have risen.*
So the problem which faced the British clubs was how to make a clean job
of backstabbing the Whites, after these had repeatedly called upon Britain
and her allies to help them defeat the 'Red, blasphemous monsters.' What
Britain would do, with the help of America and the most heinous complicity
of France and Japan, who should have had no part in this anti-European
plot, was to engage in a mock fight on the side of the Whites versus the
Reds, committing very limited resources and men. Thus what was in fact
an operation of sabotage by neglect - a pretense to fight - was masked as
a pro-White intervention, whose surreptitious objective was to instigate

The dynamics of this part of the plot are discussed in the final sections of this


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62 Conjuring Hitler


the Whites to combat under unfavorable conditions, deceitfully hamper
their advances, prepare the terrain for their rout, and finally evacuate the
Allied contingent by blaming the defeat on the putative inefficiency of the
Whites. This would have turned out to be yet another indescribable disaster
engineered by the western elites, not only for the terrible loss of Russian
life it would have entailed, but especially for the murderous mendacity
and duplicity displayed by the Western governments in provoking it, and
subsequently justifying it to their electorates.

As had been the wish of the Sea Powers, the Bolsheviks were now in
command of a region corresponding to the heart of the 'land-mass,' that is,
western Russia, with its 70 million people, half of the country's population.
Now one had to monitor and steer the next steps of this infant power. As
promised, Lenin signed the peace with Germany (the Treaty of Brest of
March 1918), and the truce on the Eastern Front brought the complexities
of the 'game' into relief.

1. Germany, as seen, was 'at peace' with Bolshevik Russia in March
1918; she could now shift her eastern divisions to the Western Front.
To parry this eventuality, Britain involved the United States in the
war, and thus propped up the Western Front with massive American

2. In June 1918, the fear of the Allies, according to a US State Department
memorandum, was that Germany might at any time violate the Treaty
of Brest, turn against the detested Bolsheviks, and ally herself with the
former inimical yet kindred White czarist generals to build a counter-
revolutionary White International across the Eurasian landmass. The
Germans had indeed begun to move in this direction in early 1918
by dispatching forces in Finland, the Baltic states, and the Ukraine to
support White against Red troops. 50

3. It was going to take pains to convince the public of the Allied Liberal
democracies, whose raison d'etre was the sacred defense of property,
that Bolshevism, which lived to abolish it, was 'the lesser evil' between
Red and White rule. This was done by resorting to the bogey of 'White
autocracy' - a diversionary exercise that had been conjured with success
during the deposition of Czar Nicholas in March 19 17.* It was hoped that
the average Westerner would come to fear in his dreams the traditional
bugaboo of the ferocious Boyar far more than the thoroughly unfamiliar
figure of the 'collectivizing commissar.'

* See Chapter 1, p. 29.


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4. The Sea Powers in effect looked forward to the strengthening of Lenin's
regime, and to its eventual unbridgeable opposition to any form of
German influence.

5. To counteract point (2), namely, Germany's advance into Russia, a
makeshift Eastern Front had to be recreated immediately.

6. The Whites had to be lured into the Allied camp, away from any tempting
alliance with the Germans, and, by a savvy and systematic policy of multiple
sabotage by neglect, be thrown to the Reds to die a slow death in a civil war. In
other words, what was required was an Allied scheme that could afford a
light military intervention in the cardinal apices of the landmass. From
such a fanned vantage point, the Allied outposts would have sentried
the conduct of the Whites.

7. If the Whites, the better soldiers, could not be so debilitated as to lose
the Civil War against the Reds; if the Whites, that is, should have won
the Civil War, the Allied vanguards in Russia were to encourage at once
the fragmentation of the heartland into as a many competing fiefdoms
as there were White commanders. 51

The plan was difficult, but feasible.

A sizable portion thereof had already been completed during the 1917
intrigues, which had dealt the rival factions highly uneven hands. In the
fall of 19 19, when the decisive battles of the Civil War took place, the Red
Army had 3 million men under arms, who would become 5 million by the
spring of 1920, 5Z whereas the combined effectives of the White Armies never
exceeded 250,000. 53 While the Reds could tap a population of 70 million,
altogether the Whites could never rely on more than 9 million individuals.
Though they were the superior fighters, they could be strangled with
moderate ease. It was going to be a game of debilitation and patience.

Before signing the peace with Germany Lenin and Trotsky had already
declared themselves amenable to take 'potatoes and ammunition from
the Anglo-French imperialist robbers'; now, they wondered naively what
prevented all the imperialist powers, including Germany, from burying their
past grudges and ganging up against their Communist foe; 54 and while they
mused, the Allies set out to implement the second phase of the plan.

Far eastern Russia. As their 'eastern sentinel,' in February 1918 Japan,
France and Britain hired Semenov, the notorious Cossack chief of a gang
of torturers, rapists and assassins, 55 and enjoined him not to extend his
radius of terror beyond his remote base at the confines of Mongolia. 56
On the surface Semenov passed for a White, but he was merely a pawn.
In April 1918, with a nod from Washington, Tokyo debarked the first
squadron of reconnoitering officers in eastern Siberia to keep an eye on


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the Whites from Manchuria, whose western periphery would be guarded
by the Cossack satraps.

Northwestern Russia. Simultaneously, a British corps was landed in northern
Russia - in the Murmansk region, neighboring Finland. The official mission
of such a corps was to rally the local forces against German meddling in
Finland. In this northern corner of the heartland, and in open defiance
of Moscow's anti-imperialist directives, the Soviet of Murmansk would
work hand in glove with the Allies to repel the Finnish White Guards,
and thwart the German scheme of establishing a submarine base in the
White Sea. By November 11, 1918, the day of the armistice, these goals
were accomplished. 57

Siberia and The Urals. In May 1918, there were 40,000 native Czech
soldiers strewn in several trains along the Trans-Siberian railroad, bound
for Vladivostok- Russia's far eastern port on the Pacific Ocean. Thence, this
corps of Legionnaires recruited in Ukraine before the war and once loyal to
the Czar was to be conveyed halfway across the world to the Western Front
as reinforcement to the Allies. France had an idea: responding to the Sea
Powers' urge to recreate an Eastern Front, she took the fate of the Czechs
under her own wing, and instigated her new proteges to cause an incident
with the Reds whereby hostilities might be opened. Easily effected: when
the Soviet authorities demanded that the Czechs surrendered their weapons,
the Legionnaires refused. The tension degenerated into conflict. On May
25, the Czechs overpowered the Red garrison at Chelyabinsk in the Urals. A
month thereafter they would have occupied several other Siberian centers,
and overseen therein the constitution of Councils by the local bourgeoisie.
Playing cat's paw for France and her seafaring Allies, the Czechs had thus
erected a new front in the east. Then, upon orders from France, they were
ordered to dig in into the heart of Eurasia and stake another vantage point
from which the Allies might survey the Russian evolution.

In July the Legion seized the city of Ekaterinburg: the bodies of the
imperial family were found littering the cellar of a merchant's villa, in
which they had been sequestered by the Soviets. Before the Czechs entered
the city, the Bolsheviks had murdered all the Romanovs at close range to
eliminate the possibility of their restoration to the throne: in 1917, the
Kerensky government had entreated Britain to offer asylum to the Czar and
his family, but not to mar the sensitivities of the Labour Party, the British,
always the foes of 'autocracy,' had declined. 58 Apparently, Britain hadn't
been able to forgive the Czar for attempting to betray her in 1916.


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With the momentary Czech capture of Kazan on the Volga, in August
1918, the treasure trove of the Red government - the former gold hoard
of the Czar - fell into the possession of the Allied camp.

Moved by the cavalier actions of the Czechs, on July 17, 1918, President
Wilson drafted his controversial^^ Memoir, in which he gauged America's
military intervention in the Russian quagmire admissible 'only to help the
Czechoslovaks consolidate their forces...' 59 America's standby operation
-entrusted in late August to US General William Graves, who, before taking
his leave was admonished by the President to 'watch his step' 60 - was not
orchestrated to engage Bolshevism, but, again, to observe the steps of the
Whites. Finally, in August, 1918, the expeditionary corps of all three Sea
Powers, Britain, America, and Japan, and of their French minion were
landed in Vladivostok. Upon being deployed, all four powers publicly
announced to Russia that they had come in peace, 'as friends' to save them
'from dismemberment and destruction at the hands of Germany.' 61 But
no one in Siberia ever caught sight of German troops intent on harassing
either the native peoples or the Czechs. The Allies were not speaking a word
of truth. By autumn, the Japanese contingent numbered 72,000 men - ten
times larger than the American one. 62

By mid- 19 18, Siberia demanded a White commander.

Before the local orientation could identify a chief, the British rushed
to slip a straw man in the cockpit. For the role British intelligence cast a
former czarist admiral, Aleksandr Kolchak, who had been on its payroll
since November 1917.

Flanked and directed by General Knox, Britain's intelligence officer in
the Siberia, Kolchak, with the cooperation of the Siberian Whites, and the
discreet assent of the Czechs, usurped command of the Siberian counter-
revolutionary outpost a week after the armistice in the West, on November
18, 1918, and made Omsk the capital of his dictatorship. His was also the
gold taken at Kazan, for the time being. News of the riches at the disposal
of the Supreme Ruler were then flashed around the world. 63

Prague. As a thank you to the Czechs for their rumble in the Urals, on
October 28, 1918, from the fragmentation of Austria-Hungary, the Allies
reinvented Bohemia as the brand new Czechoslovak Republic, and, duly,
France was the first to give it official recognition on October 15, 1919; the
others followed suit.

London. At the end of the war, everyone was betting on a surefire victory
of the Whites over the Reds. 64 In January 1919, on Churchill's map in
Whitehall, the situation looked desperate for the Reds. 65


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66 Conjuring Hitler


Paris. In the same month, the Great Powers had convened at Versailles*
for the Peace Conference that would redraw the world map after the Great
War. Russia's absence from the proceedings was conspicuous: the country
had in fact no legitimate representation, riven as it was by the contest
yet unsettled between Whites and Reds. The time had come for the Allies
to tilt the scales in favor of their Red creature. Against the czarists, they
elaborated a sophisticated tactic of debilitation by tarry and deceit, whereby
the designated White victim, while cordoned off and 'outgunned/ 66 would
be goaded by the slowly evanescing presence of the Allied instigators to engage
the far more numerous Reds along a vast, fissured front, which the Whites could
not control.

The first step in this terrible Anglo-American ploy was to isolate
progressively the Whites with a diplomatic discourtesy: from Versailles,
with studied aloofness towards their White 'ally, 'and tacit encouragement
for their Bolshevik work-horse, the Allies invited the two factions to meet
in Turkey with a view to negotiate. In Paris, and elsewhere, the Whites
felt outrageously offended: this, they railed, amounted to granting the
Bolsheviks official status and treating them like equals! Though the Reds
said yes, the Whites would not deal with the godless impostors.

In the West the public, ever confused, did not quite understand why
their governments were so slow in doing away with this nasty Bolshevik
variable - Whites aside. Were not the Reds a plague on the capitalist West,
they asked?

Ever mendacious, the Elder Statesmen of the West adduced the customary
pretexts: a blockade round Russia, they responded, would be cruel, and
a serious intervention would have required no fewer than 400,000 men
- an absolute luxury, exclaimed the British Prime Minister, Lloyd George,
who, like his American counterpart, agreed instead to a 'plan of limited
intervention'" by now, a code-name for the Allied standby operation of
anti-White sabotage. 67

In fact, no restraint - ethical or otherwise - had prevented the British
(1) from killing by means of the 19 14-19 blockade approximately 800,000
innocent Germans, 68 and (2) from fitting an army of 900,000 for their
Middle-Eastern expedition in World War I: cruelty and expense had hardly
ever detracted Britain from pursuing a vital imperial goal. Clearly the
Western spokesmen were yet again peddling lies, and the public never
seemed to possess sufficient imagination to conceive that its very leaders

See the following section.


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The Veblenian Prophecy 67


Map by Sergei Donnashenko and Jessica Graybill


Figure 2.1 White nests in the Russian Civil War

had not only installed the Bolsheviks in power, but were presently scheming
to hand them over the whole of Eurasia.

Southwestern Russia. In the South, White General Denikin was the master
of a sector projecting from the northern shores of the Black and Caspian


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68 Conjuring Hitler


seas (see Figure 2. 1). 69 Britain and France would see to it that Denikin's
muster for 'Russia, One and Indivisible' went to the devil.

Since November 1918, Britain had intrigued with as many satellites as
she could bribe abaft the Whites' enclave: that is, beyond the Caspian Sea
in Transcaspia, where she struck several oil deals, and in Transcaucasia -
Azerbaijan and Georgia - from which she killed two birds with one stone by
securing imports of cotton and opposing every effort of Denikin's to restore the
Caspian fleet. 70 Likewise, France, whom czarist Russia had saved from defeat
in the summer of 1914 by attacking the Reich, declared, most ungratefully,
that she did 'not believe in White Russia.' Nor did she profess to have
any liking for the Red Kremlin either - so what would she do? She would
'concentrate on separating Russia from Germany by means of a "barbed
wired fence" of friendly states anchored in Poland.' 71 And Britain could
not be more approving.

The British Establishment had, as usual, inveigled the French politicians
into their Russian occupation scheme. [Prime Minister] Clemenceau was
invited to sign, in the utmost secrecy, a convention whereby the British
would cut the French in on some of Southern Russia's choicest real estate.
On December 23, 1917, two months after Lenin's coup, the treaty was
signed by Clemenceau and the British. French divisions would be sent
to occupy Ukraine, in exchange for which Clemenceau would receive
concessions in Bessarabia and the Crimea, as well as in Ukraine - an
area larger than France herself. The British Establishment had conceived
this munificent scheme in order to divert attention from their own
monopolization of petroleum in the Caucasus and the Persian Gulf. 7Z

So in December 1918, escorted by a regiment of Greeks and Poles, the
French wetted the anchor at Odessa in Crimea. But after being severely
thrashed by a corps of Ukrainian irregulars, the French disengaged in April
1919, though not before destroying the entire Russian Black Sea Fleet - 'to
leave nothing for the Bolsheviks,' so they claimed - 73 and laying open
thereby the whole of Denikin's left flank. 74

Throughout this distressing intermission, hamstrung in the rear by France
on the Black, and Britain on the Caspian Sea, General Denikin sent repeated
requests for aid to representatives of those self-same powers, who took
no time to respond 'absorbed' as they were in the intricacies of the Peace
Conference. 75 Yet in spite of the crippling, Denikin's recruiting elan in the
South grew in June, so much so that he pledged allegiance to Kolchak in
a drive to unite Russia that moved the admiral to tears.


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White Siberia. Presently, the focus shifted to Kolchak. By May of 1919,
his western advance across the Urals was nearly triumphant.

The Whites, enthusiastic, kept pressuring the Anglo-Americans for official
recognition. The latter, hard pressed to mask their dissatisfaction, had to
resort to some other charade to gain precious time: raising their brows
like distrustful schoolmasters, they conditioned diplomatic recognition
upon the establishment in White Siberia of a Liberal democratic order
a la Kerensky. In other words, to obtain London's seal of approval the
Whites were warned that they had better introduce reform in land tenure,
suffrage, and so on - the usual institutional package containing all that is
fit, according to Britain. 76 Kolchak naturally assented, and the Allies curtly
replied that 'they would consider': naturally, the recognition would never
be granted.

But Kolchak could not be sacrificed just yet: his gold chest exceeded by
52.7 percent the entire gold reserve of the Bank of England. 77 In the summer of
1919, over a third of this treasure was dispatched by train to Vladivostok,
where no less than 18 foreign banks, eager for a share of the Russian
business, had established branches. Thereafter the gold was either sold on
the international market in exchange for foreign cash, or was swallowed in
the vaults of banks in Yokohama, Osaka, Shanghai, Honk Kong, and San
Francisco as security for loans. 78

Though Kolchak splurged like a king, the Siberian tangle was such as to
make his task 'almost impossible.' 79 How?

1. The Cossaks to the Far East had been planted in his side by the Japanese
to strangle the vital flow of provisions traveling on the Trans-Siberian
railway from Vladivostok to Omsk.

2. Immediately after Kolchak's coup, the Czechs suddenly made a public
display of their fatigue and confessed the desire to withdraw from the fray.
Directed by General Janin, specially expedited from France to engineer
the Czech backstab of Kolchak's White armies, the Legion left the Ural
front en masse, receding towards Japan's westernmost outpost. Presently
the Czechs abstained vigorously from all participation in Russian central
affairs, exasperating Kolchak 'to the point of madness.' 80

3. As for US General William Graves, the gossip in Siberia was that by not
supporting Kolchak he was in fact giving aid to the Bolsheviks. 81 Which
was the truth. Likewise, the British did nothing.

By August, Kolchak was losing.


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70 Conjuring Hitler

Thereafter, the stories of White discomfiture were all the same: they
began with smashing offensives that brought the Whites to over-extend
themselves, until they were systematically routed by the Red Army, whose
far superior numbers always allowed it to regroup and drive back the White
assault. Numbers and numbers alone settled this matter.

By November Kolchak was finished; he had lasted but a year.

In a two-month epic exodus along the Trans-Siberian railroad, Kolchak
hitched his six convoys to a locomotive bound to Vladivostok to escape
from the creeping Red hordes - in one such convoy was the gold. Traveling
in the front cars of the caravan were the French General Janin and the
Czechs, who so relented the pace of the advance as to allow the Reds to
overtake the tail of the train. In the long 1,500-mile trek, 1 million men,
women, and children would perish.

In January 1920, the British War Office was proud to report that Kolchak
had ceased to be a factor in Russian military affairs. sz The mission was
accomplished: American and British troops evacuated Siberia. On January
31, two Czech officers boarded Kolchak's car and informed the commander
that he would be surrendered to the local authorities. 'So the Allies have
betrayed me?' the White admiral calmly enquired. In February 1920, while
facing interrogation by the Reds, Kolchak, this sad king of all dupes, would
avow in a moment of placated distress: 'the meaning and essence of this
[Allied] intervention remains quite obscure to me.' 83 He was shot and
dumped under the icy crust of the Ushakovka river soon thereafter. Along
with the head of Kolchak, the Bolsheviks were served two-thirds of the
Czar's gold, the remainder having previously been deposited in the safes
of the West.

The only losses suffered by the Allies were incurred in the North. There,
owing to the ragged countenance of the White resistance, the Allies,
commanded by Anglo-American forces, were reluctantly called upon from
backstage to engage the Reds in a series of broken escaramouches, which
enabled them to temporize and hold the position in a stratagem of wait-
and-see staked on the fortune of Kolchak. Demobilization began in March,
and was completed by the end of 1919, when the admiral was lost. After
relinquishing some war materiel, the Allies left the White generals behind
to grapple with their (bleak) destiny. Upon seizing Archangel'sk in February
1920, the Bolsheviks immediately butchered 500 White officers.

In Russia, the Anglo-American death toll for what had been in essence a
game of make-believe tallied up to approximately 500 lives out of a force of
18,000 men - in the West, instead, the United States had promptly expended
1 14,000 lives of the 2 million troops sent to France, in a deployment costing


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The Veblenian Prophecy 71


$36.2 billion. 4 When it came to killing the Germans, America had been
ready to see 2 million of its soldiers die. But when the time had arrived
to fight the 3-5 million 'evil Communists/ London and Washington
committed together approximately 1 percent of the American contingent
in France. And of their men, sent to overview the end of the Whites, the
Anglo-Americans had even been willing to sacrifice a handful, just in order
to keep up appearances - to 'show' that, because a few of theirs had been
cut down by Red fire, Britain and America had indeed come to 'help the
Whites.' Which was the opposite of the truth. Siding 'officially' with the
Whites, 500 Anglo-Americans soldiers were killed by the Reds in a tussle
in the polar north, which was part of an extraordinary double-cross of the
White generals staged by the Anglo-American clubs for the benefit of the
Reds themselves: such was the twisted beauty of imperial scheming.

In the Baltic, the recurrent pattern was slightly altered by the paradoxical
presence of German regulars and Freikorps, commanded by General von
Goltz. A clause of the armistice tolerated their incumbency in Courland*
'as a stopgap measure,' 85 to oppose the Red invasion of the Baltic seaboard,
which the Allies sought to retain as an independent buffer between Germany
and Russia.

As Goltz's armies prepared in June 1919 to give White commander
Yudenitch main forte to launch a wide offensive against St. Petersburg, they
were recalled by the German government under the peremptory injunction
of the Allies, disbanded and repatriated forthwith. Embittered, Goltz would
later remember how Yudenitch 's Northern Army of unkempt beggars was
massacred after having been 'egged on in the most unscrupulous manner
[by] the British.' 86

In the South, France cut the Bolsheviks further slack by encouraging its
other great protege in the East, Poland, with whom the Reds had locked
horns over territorial disputes, to sign two successive truces with the
Russians. Thereupon the Red Army, commanded by the dashing young
General MikahilTukhachevsky, shifted massive reinforcements to the south
to defeat Denikin in the fall of 1919, and Wrangel, the second-in-command,
the following year, thus suppressing once and for all the southern hotbed
of anti-Bolshevik resistance. As the White squadron chiefs were hurriedly
evacuated aboard Allied vessels, their horses, forsaken on the surf of Crimea,
thrust themselves in the water chasing after their riders. 87

Japan, the sole Sea Power with a contingent of 70,000 men that could
have struck the Reds and never did, 88 finally retired in 1922 after having

The ancient region lying astride Latvia and Lithuania.


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72 Conjuring Hitler


lamed Kolchak, vouched for the indescribable violence of the Cossack
cutthroats, and corroborated its hold over Manchuria. In 1922, the czarist
empire became the USSR, the Union of Soviet Socialist Republics. The great
'imaginary foe' of the West had at long last been conjured. 89

US President Wilson was satisfied that it had been left to the Russians 'to
fight it out amongst themselves. ' w And Secretary of State Lansing, officially
America's most vehement anti-Bolshevik, resignedly declared in early 1920:
We simply did the best we could in an impossible situation, which resulted
from Kolchak's inability to create an efficient army.' 91

On the surface, the Sea Powers seemed to have been moonstruck by an
odd sort of geopolitical geometry, whereby the prospect of facing a viscerally
anti-Western Communist dictatorship ruling over a surface 60 times greater
than the German Reich roused far less concern than the Germans' appetite
for Middle Europe. Indeed, Lloyd George assured his Cabinet in December
1918 that a Bolshevized Russia was by no means 'such a danger [to England]
as the old Russian Empire, with all its aggressive officials and million
troops,' 92 and a year later he candidly reiterated, shattering therewith the
hopes of the last fighting Whites, that Kolchak's and Denikin's Russia, 'One
and Indivisible,' was not in Britain's 'best interests.' 93

Nor could they be blamed of cynical indifference, the Allies pleaded, for
they had extended aid to the Whites to the extent of tons of war materiel
and provided millions of dollars worth of assistance, although Churchill
himself admittedly found such a claim 'to be vastly exaggerated on the
grounds that British aid consisted largely of WWI surplus that was of no
further use to Britain and had little monetary value.' 94

Presumably the actual beneficiaries of Allied aid, as many had suspected,
were not the Whites, but, contrary to all preconceptions except those of
geopolitics, the Reds themselves.

The magnitude of Western assistance to the Bolsheviks is not known,
though in early 1918, for instance, it was a matter of some notoriety that
the United States was conveying funds to Bolshevik Russia for purchases
of weaponry and munitions via Wall Street operator Raymond Robins, for
whom Trotsky was 'the greatest Jew since Jesus.' 95

The significant number of contracts, concessions, and licenses
subsequently released by Lenin's empire to American firms during the Civil
War, and in its immediate aftermath, formed something of a smoking gun
of Bolshevism's early Allied sponsorship: $25 million of Soviet commissions
for US manufactures between July 1919 and January 1920, 96 not to mention
Lenin's concession for the extraction of asbestos to Armand Hammer in


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The Veblenian Prophecy 73


1921, 91 and the 60-year lease granted in 1920 to Frank Vanderlip's* US
consortium formed to exploit the coal, petroleum and fisheries of a North
Siberian region covering 600,000 square kilometers (Frankfurter Zeitung,
November 20, 1920). 9S

Finally, in 1933, the Soviet government, upon perusal of 'official American
documentation, 'would waive 'any and all claims... for the damages allegedly
caused by the United States in the Soviet Union through its participation
in the [Siberian] intervention': 99 for nebulous reasons, it would take the
Reds 13 years to acknowledge officially that General Graves had come to
Siberia to help, not to thwart them.

Never, surely, have countries continued to show themselves so much
at their worst as did the Allies in Russia from 1917 to 1920. Among
other things, their efforts served everywhere to compromise the
enemies of Bolshevism and to strengthen the Communist themselves.
So important was this factor that I think it may well be questioned
whether Bolshevism would ever have prevailed throughout Russia had
the Western governments not aided its progress to power by this ill-
conceived interference. ..These expeditions were little side-shows of
policy, complicated and obscure in origin... embracing in their motivation
many considerations having nothing to do with a desire to overthrow
Soviet power for ideological reasons. 100

American historian and diplomat George R Kennan had, like many of his
compatriots, been somewhat at a loss to plumb what had been a contrived
method of solving the first equation of Eurasia's system: that is, by raising
a phantom regime in Russia hostile to Germany. Contemporaries had
failed to appreciate that the White elephants were naturally foredoomed
- the breaking of the Eurasian embrace demanded it, and all such Allied
'sideshows' were but sequences of premeditated butchery. Feigning a
cautious policy of intervention, the governments of Britain, France and the
United States misled their public into believing that they indeed requited
the hatred of the Communists by 'siding' with their enemies' enemies
(the Whites), when in fact they had been double-crossing these Whites all
along. Hence the reproach that the Allies had shown themselves 'at their
worst,' translated by and large into an ungracious refusal to tribute the
due credit to what amounted to a perfectly executed maneuver, costing
a collateral loss of but 500 lives, to rid the landmass of the bulk of the
Junkers' potential Russian allies beyond the Eurasian fault line. Save for the

The chairman of the National City Bank in New York.


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74 Conjuring Hitler

distasteful bickering of Russia's fratricidal war, whose loss of life amounted
to around 10 million souls, the operation had been a complete success
- this was rather the Allied West 'at its best.'

The peace treaty that was too harsh

Woodrow Wilson's Fourteen Points, issued during the terminal phase of
the war, in January 1918, as the tentative charter of the world's post-war
community, had merely contemplated the 'restoration' of invaded territories,
and assured the fighting parties that there would be 'no annexations, no
contributions, no punitive damages.'

On November 5, the American position was further clarified by the note
of the US Secretary of State, Lansing, to Germany, according to which
the latter would 'make compensation for all damage done to the civilian
population of the Allied... Powers and to their property. such an
aggression by land, by sea, and from the air.' 101 Upon these premises the
Germans signed the Armistice.

Meanwhile, on February 6, 1919, the National Assembly convened in
Weimar, away from the provisional disorders of Berlin, and five days later
republican Germany was given her first president: the Socialist Friedrich

Soon it was the 'reparations' that they all began to argue about. If by
'damage' only wreckage of property had been intended, France, upon whose
soil the devastation had been wrought, would have claimed the bulk of the
indemnities. To tilt the scales somewhat more in Britain's favor, Jan Smuts,
an affiliate of Milner's Kindergarten* as well as South Africa's negotiator in
Paris, found a loophole in the Lansing Note: citing the wording of the clause,
according to which Germany 'was liable for all damage done to civilians,'
he cunningly bent Wilson into including in the reparation bill allowances
for soldiers' families, as well as pensions for widows and orphans.

Economist John Maynard Keynes, representing the British Treasury at
Versailles, reckoned that not only did such allowances violate Wilson's
negotiatory Points, but they also amounted to a figure two and half times
the total bill for the war damages inflicted on the Western Front. Adding
to a preliminary remittance in cash of $5 million, expected by May 1921,
the allowances (25 billion dollars), and the compensation for war ravages
(10 billion dollars), Keynes assessed the reparation load at 40 million
dollars: a figure equal to three times the Reich's pre-war income, which,

See above, p. 39.


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The Veblenian Prophecy 75


he affirmed, was beyond the paying capacity of vanquished Germany. 103
He was indignant - the envisaged sums appeared patently absurd.

But the victorious public was fed expectations of another species: the
British adumbrated a request of $120 billion; the French a fantastic toll of
$220 billion. 103 With such a heated audience thirsting for extravagantly
vindictive tributes, Lloyd George and the French PrimeMinister, Clemen ceau,
Britain's and France's chief negotiators, could scarcely afford to parade on
the home front a loot of 'merely' $40 million without risking a political
lynching. Then Lloyd George chanced upon the clever device of leaving
the final figure unnamed, deputizing the task to a commission of experts,
which was scheduled to deliver an estimate in two years -by May 1921. The
explosive mixture was skillfully inoculated in the text of the Treaty by John
Foster Dulles - a New York lawyer connected in high places - in the form of the
infamous Article 231, which had gone down in history as the 'war guilt clause'
(Kriegsschuldfrage). By this Article Germany was coerced to accept the respon-
sibility, and thus sign a 'blank check,' 'for causing all the loss and damage to
which the Allied. . .and their nationals havebeen subjected as a consequence
of the war imposed upon them by the aggression of Germany. '

The apportionment of the prospective German spoils was thus tentatively
arranged by the victors: 50 per cent to France, 30 percent to Britain and the
remaining 20 percent divided up amongst the lesser allies. 104

Having served its purpose, the decoy of the Fourteen Points was torn
up and tossed in the trashcan. Its mouthpiece, Wilson, like a dollar watch
wound too tight and then discarded, ticked into malfunction and finally
broke down: in Paris the President fell seriously ill. He had sworn for no
annexations, yet he acquiesced in Allied occupation; he had promised
no indemnities, but he agreed to unilateral reparations. He had vowed
to uproot 'secret diplomacy' and watched his allies make it the very clay
wherewith the Treaty was being fashioned: when the German delegation
arrived in Paris in late April to receive the contents of the Treaty on May 7,
1919, Lloyd George stuttered as he read a document that neither he nor any
other Allied plenipotentiary had seen in its completed form. 105 They had
all haggled furiously, but the hand that had drafted the achieved compact
had remained hidden.

When the Germans were apprised of the Treaty's nature, they sat back
dumbstruck. Then, recomposing themselves somewhat, they invited their
leader, Foreign Minister Count Ulrich von Brockdorff-Rantzau - the very
man whom Parvus Helphand had gulled in 1917*- to deliver the legation's

See Chapter 1, pp. 31-2.


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76 Conjuring Hitler


remonstrance: in a long speech, Brockdorff lamented the violation of the
'pre-armistice commitments. As a deliberate insult to his listeners, he spoke
from a seated position. ' 10&

In Berlin, the Reichstag (the parliament) excoriated the Treaty with an
uproar of abuse. At Versailles the German legation counter-proposed: in a
masterful 443-page response redacted in keeping with the original Wilsonian
pact, the Treaty's Articles were rebuffed one by one: Germany offered $25
billion dollars, and 'most territorial changes were rejected except where they
could be shown to be based on self-determination (thus adopting Wilson's
point of view)'. 107 Even the doyen of sociology, Max Weber, was dragged
by Germany into the foray to protest, as Lenin had done years previously,
that the war had been every power's sin. 10S

But the Allies were irremovable: Germany the sole culprit of the war's
atrocities, was given a five-day ultimatum to accept the Treaty on pain of
military invasion. Not to affix its signature to such a Schandfrieden (shameful
peace), Weimar's first government under the Socialist Scheidemann resigned
in concert after only four months. In a desparate act of wounded patriotism,
on June 21 the crews of the German fleet impounded at Scapa Flow in the
Orkney Isles scuttled 400,000 tons of expensive shipping, and lost ten sailors
to British gunfire in the undertaking. 109 In Berlin it was Matthias Erzberger,
once again, who bent over to take the brunt of unpopular decisions: in
November he had signed the humiliating armistice, now, as Finance Minister
of the new Cabinet, he took it upon himself to inflict upon this whole affair
the last turn of the screw. He challenged the parliament's diehard opponents
of ratification to lead, as men of their word, a government that would face
renewed hostilities. While these immediately recoiled from the prospective
engagement, General Groener assured Reich President Ebert that he would
placate the (infuriated) army. By a parliamentary maneuver designed to
save the honor of the 'patriots' as well as to enable the pragmatists to ratify
it, the Treaty was accepted on June 23, and Germany was spared Allied
occupation. 110

As to the territorial alterations, the Treaty carried two significant
dispositions. The first was the Polish Corridor: France had wanted to give
east Prussia to Poland, but the drafters of the Treaty conceived a far more
sophisticated arrangement whereby east Prussia was to be traversed by a
corridor connecting Poland to the North Sea by way of the free city of
Danzig, a full-fledged German enclave to be placed under international
tutelage. This corridor thus severed a sizable block of eastern Germany from
the body of the Fatherland. As a contraption for sparking eventual ethnic,


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The Veblenian Prophecy 77


territorial, and political incendiary dispute, it was bound to be efficacious:
in fact, it was the trigger set up for the next war.*

The second territorial provision was the Rhineland settlement: the
Rhineland and a zone 50 kilometers wide along the right bank were to be
permanently demilitarized and any violation of the clause could be regarded
as a hostile act by the signatories of the Treaty. The condition implied that
any German troops or fortifications were excluded from this area forever.
'This was the most important disposition of the Treaty of Versailles, as it
exposed the economic backbone of Germany's ability to wage warfare to
a quick French military thrust.' 111 French troops were granted the right to
occupy such a zone for 15 years.

Bearing down 'like two jailers' upon the flanks of 'the chained giant,' 112
Versailles' novel creations, Poland and Czechoslovakia, kept a careful watch
over Germany, who thus found herself stripped of her armed forces, which
were reduced to a professional contingent of 100,000 men. The country
was deprived of many of her mines; reduced in population by 6.5 million
citizens (10 percent of the total) 113 and 2.4 million souls lost at war; bereft
of her merchant navy, her colonies, and 13 percent of her territory; depleted
of 75 percent of her iron ore reserves, 26 percent of her coal production,
as well as 44 percent and 38 percent of her pig iron and steel production
respectively; 114 and 'obliged to devote part of [her] industrial might to
building ships for the Allies and to provide coal to France.' 115

By the time the Germans assented to ratify the Treaty, Keynes had already
abandoned the Conference in high dudgeon, chagrined by the pensions
clause - 'one of the most serious acts of political unwisdom,' he wailed,
'for which our statesmen have ever been responsible.' 1 1& A clause whose
provenance, however, he could not afford to divulge because it was the
ruse of his good friend Smuts. 117

When the final bill was issued in May 1921, Germany would be asked
to pay, in 37 yearly installments, $34 billion: two and half times her 1913
annual income and ten times the tribute she had imposed upon France in
1871. Keynes had decried the pretension that such a sum could have been
remitted through trade surpluses by a much weakened Reich in a competitive
environment. After much diligent accounting of Germany's assets, he had
suggested a reparation tribute of $10 billion dollars (that is, 75 percent of
Germany's 1913 net product), to be amortized over several decades. 118

With the blockade the Allies had already murdered 800,000 Germans and
1 million of their productive animals; blackmailing Weimar to kill more,

* See Chapter 5, p. 242-3.


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78 Conjuring Hitler

Britain had her way, and brought Germany to sign the humiliating compact.
On June 28, 1919, exactly five years after Gavrilo Princip's assassination of
Archduke Ferdinand, as Dr. Johannes Bell, Minister of Transportation in
Weimar's second Cabinet, accompanied to Versailles by Foreign Minister
Muller, stooped to sign the Treaty, the pen's ink, like the blood in Faustus's
arm, congealed: the pen would not work. Edward House, America's secretive
negotiator, who stood by, leaned forward to offer his. 119

Only then was the blockade lifted; only then did the Allies allow ships
carrying food to dock at German ports.

Though his virtuosity and 'good heart' might have all been expended
for naught, Keynes was yet determined not to begrudge his bourgeois
aficionados another 'classic' inspired by the recent Parisian events, which
he drafted hastily in the winter of 1919; he entitled it The Economic
Consequences of the Peace. The book, which sold 100,000 copies instantly,
and was translated into eleven languages, featured an unrelenting and
self-satisfied indulgence in technical detail, mingled with occasional
psychologistic portraiture, which alternatively dwelt on the buckle of
Qemenceau's shoe, Wilson's neck muscles, and Lloyd George's goat-footed
purposelessness. The Treaty, Keynes sentenced, was harsh and unjust, and
it would fuel terrible resentment.

The book was the sort of Christmas buy that the educated middle classes
could never forbear in their periodical and conscientious drive to keep
abreast of international affairs. And it was the kind of book, too, that
whispered the things these educated and yet perennially baffled readers
wished to hear: little tales about the regrettable myopia, benighted
judgment and malicious blunders of senescent fighters called upon tasks
greater than they; little tales whose moral is that bad deeds always happen
by pernicious mistake. Needless to say, Keynes's opus, like all expressions
of so-called 'enlightened conservatism,' did not challenge the current state
of affairs: the best solution, he concluded, was to stand behind the Weimar
Republic, which was after all the creature of Versailles. He invited the
various parties to moderation. So he played it safe and took the 'the middle
road,' enumerating in his valediction the alternatives to Versailles, which
were made to appear invariably worse than the status quo. Interestingly,
this 'appeasing' excerpt foreshadowed the taste of the game that Britain
would play in the 1930s versus the rest of the international community
to push Hitler to war.* A game featuring Soviet Russia as the proverbial
'subversive enemy in the East,' against whom Britain would pit a Germany

See Chapter S.


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The Veblenian Prophecy 79


dumbfounded, and perennially jostled by her fear of Communist Russia, on
one hand, and her no less intense contempt for the European neighbors,
on the other.

The present Government of Germany stands for German unity more
perhaps than for anything else... A victory of [Communism] in Germany
might well be the prelude to revolution everywhere; it... would precipitate
the dreaded union of Germany and Russia; it would certainly put an
end to any expectation which have been built on the financial and
economic clauses of the Treaty of Peace... But, on the other hand, a victory
of reaction in Germany... from the ashes of cosmopolitan militarism...
would be regarded by everyone as a threat to the security of Europe,
and as endangering the fruits of victory on the basis of the Peace. ..Let
us encourage and assist Germany to take up again her place in Europe
as a creator and organizer of wealth... 120

Overall the Germans relished the book.

The seemingly honest and straightforward self-denunciation coming
from a prestigious exponent of the British camp could not fail to soothe
somewhat Germany's wounded honor, and much hope was thus staked on
the book's cheering exhortation to set in motion 'those forces of imagination'
necessary to overcome this 'dead season of [the West's] fortunes.' 121

'Dead season', indeed, which did not, however, prevent Keynes from
engaging immediately thereafter in happy-go-lucky speculation against
the Reichsmark of poor, 'ruined' Germany: he sold it short, while buying
dollars, making a killing. But in May 1920 the fall of the German currency
momentarily halted: Keynes went under by £13,000. The book's royalties
and a further advance from Macmillan, the publisher, of £1500 were
not sufficient to plug the gamble loss: pawning his good name, Keynes
was afforded a credit reprieve by his bank's director, who knew him as a
famous man. 122

The ball was now in the court of the United States, which was entitled
vis-a-vis the Allies to approximately $10 billion worth of credits, over
40 percent of which from the British. Britain was a net war creditor as
well, but the bulk of her loans to France, Russia, and Italy (roughly 90
percent) was of poor quality; understandably, Keynes had suggested as
the chief remedy to the financial deadlock of the Peace Conference the
cancellation of Allied inter-indebtedness. 123 But America, still holding on
to her legitimate claims, withdrew from the European swamp. With two
successive votes (November 1919 and March 1920) the American Senate, in


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SO Conjuring Hitler


a sudden plot led by Republican Senator Henry Cabot Lodge, defeated the
Treaty, and left it to France and Britain to deal directly with their German
neighbor. The United States would seal a separate peace with Germany in
Berlin, on August 25, 1921, whereby the reparation dues indirectly owed
to the United States were safeguarded.

By killing the Treaty, America not only yielded purposely to Britain and
France the delicate management of the reparations, of which she ultimately
held the strings, she also voided, no less designedly, a triangle of military
assistance, contracted separately in 1919, between America, Britain, and
France, aimed at protecting the latter 'in the event of any unprovoked aggression
by Germany.' 12 ^

Wilson, the rusted air pipe of much empty promise who had sworn
to keep America out of the war in 1916, succumbed to thrombosis in
a campaigning tour de force across the American heartland from Kansas
City to Tacoma, which he had undertaken in early 1920 as a last measure
to garner votes in favor of active American participation in the post-war
administration of Europe. He was voted out of office in 1921. In Omaha
Wilson, like many other 'moderates,' saw in the Parisian Treaty the seed
of 'another and far more disastrous war.' 125

But his Fourteen Points had baited the Germans into surrender - it had
not all been in vain.

Dreaming of Hitler and deciphering Versailles

Thorstein Veblen (1857-1929), more than a social scientist (the West's
greatest), was a sea captain.

Shortly before the new century, he embarked on an evolutionary
expedition to scrutinize human anthills with the cool meticulousness of
an entomologist. But humans being in some critical respects different from
insects, he soon ran into methodological difficulties: how was he to account
for society's several forms of aggregate motion? Like various arthropods, men
might practise deception, wage war, toil for the sustentation of the 'home,'
and minister to an awesome 'queen' - thus far the zoological similitude
might impose itself with cogency. But there were things that men did which
the ants did not: for instance, they prayed and they dissipated. Why?

Veblen recognized that there was an entire range of human activities that
were afforded no representation in the animal kingdom, which was broadly
delimited by survival, cunning, and organization. And these activities
were too singular and too strikingly human not to be accounted for in
some form. What of, say, witch hunts, religious worship, mass sacrifice, or


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The Veblenian Prophecy 81


imperial pageantry? Who thought them first, and why? The origin of all
such collective rites, Veblen reasoned, had to be lurking in a remoter lagoon
he was yet to find. And while in the solitude of the cabin he engraved with
neat calligraphy his travelogue in violet ink, his drifting ship kept gliding
along. Until the bowsprit struck upon something. He had reached the reefs
of 'occult agencies'. He never would or could steer his vessel through such a
cruising ground, but he circumnavigated it, closely, and almost obsessively,
alone, for over two decades - too frightened to penetrate it, too enthralled
to lose sight of it.

There is no call to undervalue occult agencies [such as manifest destiny,
national genius, or Providential guidance]... but granting that these and
their like are the hidden springs, it is also to be called to mind that it is
their nature to remain hidden, and that the tangible agencies through
which these presumed hidden prime movers work must therefore be
sufficient for the work without recourse to the hidden springs; which
can have an effect only by force of a magical efficacy. 1 2(3

In 1915, Veblen returned from a long, virtual exploration of the German
anthill. The famed culture of the Fatherland, whose language he read with
facility, was far from foreign to him. Though a hyphenate creature of three
worlds - the heart in Norway, the mind in America and the spirit at sea - by
style, school, method, and erudition, Veblen was a 'German' institutionalist
scholar himself.

But the re-emergence in the late Wilhelmine empire of the 'feudalistic
ideal,' the 'overbearing magniloquence,' and the 'predaceous rule of the
Teutonic invaders,' gripped him with a discomfort so acute that by the
end of the investigation it had matured into full-blown revulsion. 127 As
emphasized earlier, Veblen believed that the commonwealths of the West
should have had much to fear from Germany's peculiar blend of 'warlike
swagger' and technological sophistication. 1ZS But beyond this central
political preoccupation, Veblen had discovered in the folds of German
society, underneath the thin cloak of Prussianism, the presence of a deeper
spring of collective motion. Something whose alien drift, under particular
circumstances and through the agency of 'gifted personalities, ' might have
carried sufficient force to envelop the whole of Germany's social aggregate
and transform it into an entity altogether diverse. Possibly inspired by
recollections of Anabaptist furor, the captain gave the following description
of the singular categories of 'gifted' types and of their potential doings
under the influence of this hidden source:


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82 Conjuring Hitler


In the successful departures in the domain of faith... it will be seen that
any such novel or aberrant scheme of habits of thought touching the
supernatural uniformly takes its rise as an affection of a certain small
number of individuals, who, it maybe presumed, have been thrown into
a frame of mind propitious to this new fashion of thinking by some line
of discipline, physical and spiritual, or rather both, that is not congruous
with the previously accepted views on these matters. It will ordinarily
be admitted by all but the converts that such pioneers in the domain of
the supernatural are exceptional or erratic individuals, specially gifted
personalities, perhaps even affected with pathological idiosyncrasies
or subject to preternatural influences... The resulting variant of the
cult will then presently find a wider acceptance, in case the discipline
exercised by current conditions is such as to bend the habits of thought
of some appreciable number of persons with a bias that conforms to
this novel drift of religious conceit. And if the new variant of the faith is
fortunate enough to coincide passably with the current drift of workday
habituation, the band of proselytes will presently multiply into such a
formidable popular religious movement as will acquire general credibility
and become an authentic formulation of the faith. Quid ab omnibus, quid
unique creditur, credendum est. Many will so come into line with the new
religious conceit who could not conceivably have spun the same yarn out
of their own wool under any provocation; and the variant may then even
come to supplant the parent type of the cult from which it sprang. 139

Veblen would not conclude his report without a physiognomic sketch
of this German aberrant type that periodically heralded such religious
awakenings 'from the deep.'

Temperamentally erratic individuals..., and such as are schooled by special
class traditions or predisposed by special class interest, will readily see
the merits of warlike enterprise and keep alive the tradition of national
animosity. Patriotism, piracy, and prerogative converge to a common
issue. Where it happens that an individual gifted with an extravagant
congenital basis of this character is at the same time exposed to
circumstances favorable to the development of truculent megalomania
and is placed in such a position of irresponsible authority and authentic
prerogative as will lend countenance to his idiosyncrasies, his bent may
easily gather vogue, become fashionable, and with due persistence and
shrewd management come so ubiquitously into habitual acceptance as in


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The Veblenian Prophecy 83


effect to throw the population at large into an enthusiastically bellicose
frame of mind. 130

The year was 1915. Veblen had dreamt of the Freikorps, Jiinger, and

A convinced pacifist before 1914, he turned his coat to the disbelief of his
colleagues and friends in 1917, when America entered the war. Shielding
his approval of the US Administration's military effort behind a wall of
silence and impenetrable reserve, 131 he advanced a proposal for securing
lasting peace in the terminal chapters of his 1917 opus The Nature of Peace
and the Terms of its Perpetuation.

For Veblen, the Great War offered the opportunity to rid the West of its
chief ill: the dynastic spirit, of which, he claimed, Germany was imbued
to a pathological degree.

Veblen insisted that with Germany's dynastic spirit, whose proneness
to mischief was compounded by its extreme and unpredictable fanatical
excrescences, no compromise was possible. It had to be extirpated, root and
branch. The German people, he added, was no less susceptible to kindness
than its European neighbors, but prolonged and unfortunate habituation
to received schemes of feudalistic servility had molded its mind into a
ferocious patriotic bent, which was 'not of the essence of human life.' 13z
Germany, after the fire, would have to unlearn such archaic preconceptions.
The remedy he envisaged for cementing a peaceful alliance of the West
was what he termed 'coalescence by neutralization.' This meant forming
a League of Nations, which would be led pedagogically by Britain and
America - Veblen recognized these two countries for the time being as the
pacific pillars of the world comity, despite the grave shortcomings of their
inequitable monetary systems. Admitted within the League 'on a footing of
formal equality, ' Germany was to divest herself of her monarchy and shape
her citizens into 'ungraded and masterless men before the law.' 133

Veblen admonished the Western statesmen, were they to win the war,
not to impose on Germany a trade boycott - a traditional trigger of national
jealousy: 'the people underlying the defeated governments,' he wrote, 'are
not to be dealt with as vanquished enemies but as fellows in undeserved
misfortune brought on by their culpable masters.' 1 34 There followed a list
of categorical directives applicable in the eventuality of Germany's defeat:
(1) elimination of the imperial establishment, (2) removal of all warlike
equipment, (3) cancellation of the German public debt, (4) assumption by
the League of all debts incurred and equal distribution of the obligations
assumed impartially among the members of the League, victors and


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84 Conjuring Hitler


vanquished alike, and (5) a single indemnification for all civilians in the
invaded territories. He trusted that Britain, in whose hands the naval control
would 'best be left/ 135 and America, 'about whom the pacific nations are to
cluster as some sort of queen-bee, ' 13& would implement them faultlessly. In
1917 Veblen appeared to confide in the good faith and missionary calling
of the Sea Powers.

But the latter draft, in spite of the impeccable mechanics, was more the
fruit of wish than of dispassionate reflection.

Veblen detested the Anglo-Saxon captains of finance and the inequality
they congenitally thrived upon not much less than he despised the Junkers,
the German absentees. And when the Russian Communists stormed the
Winter Palace in St. Petersburg, his heart caught fire — he hurrahed the
Bolshevik takeover of November 1917.

It thus seemed that in Lenin's Russia, the aspirations of Veblen might
have found their definitive countenance: a promised land without landlords
and corporate officers, where machines would be allowed to whir at capacity
under the expert watch of disarticulated 'Soviets of engineers.' 137 Eden,
perhaps. And though he was an assiduous traveler, he never visited the
Soviet Utopia, but rather contented himself with reading the extraordinary
tales of early Red enthusiasts, who marveled over the thousand wonders
of this mythical Eurasian realm of social emancipation.

'Bolshevism,' he wrote in 1919,

is revolutionary. It aims to carry democracy and majority rule over into
the domain of industry. Therefore it is a menace to the established order.
It is charged with being a menace to private property, to business, to
industry, to state and church, to law and morals, to civilization, and to
mankind at large. 13S

Enough, that was, to throw a heretic and master of iconoclasm of his caliber
squarely into the Red camp. By the end of the war he had taken sides, he
had chosen his colors.

And then in 1920 he was asked to review for the Political Science Quarterly
what had already become the Liberals' new bible: Keynes' bestseller on the
Peace Conference.

Hardly anyone noticed, but on this occasion, the captain sculpted
Political Economy's most beautiful piece.

Sparing formalities, Veblen moved to demolish Keynes's tract in toto. The
book's 'wide vogue,' he wrote, was in fact the commercial echo of the


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The Veblenian Prophecy 85


prevailing attitude of thoughtful men toward the same range of questions.
It is the attitude of men accustomed to take political documents at face
value. . .Keynes accepts the Treaty as. . .a conclusive settlement rather than
a strategic point of departure for further negotiations and a continuation
of warlike enterprise. 139

It was rather unforgivable, Veblen suggested, for an expert 'so advantageously
placed' as Keynes to fail so sonorously to discern the obvious nature of
the pantomime orchestrated at Versailles. Behind a 'screen of diplomatic
verbiage,' the Elder Statesmen were pursuing a precise design, whose main
points Keynes, above all desirous like any other publicist of repute to reflect
'the commonplace attitude of thoughtful citizens,' successfully avoided.

The main argument, which Veblen was presently ready to unfold,
was comprised of three propositions: (1) the thesis, (2) the prophecy, (3)
the clue.

1. Veblen's thesis. 'The central and most binding provision of the Treaty
is an unrecorded clause by which the governments of the Great Powers
are banded together for the suppression of Soviet Russia... It maybe said to
have been the parchment upon which the Treaty was written.' 140 Veblen
presently broke his brief intellectual truce with the Western establishment
and resumed his inveterate opposition to capitalist oligarchism, determined
this last time to fight till the end. Still riding on the wave of his starry-
eyed tryst with Bolshevism, he reiterated that Communist Russia was a
menace to absentee ownership, that is, a threat to a system predicated
on the abolition of the disproportionate rents afforded by property and
finance. Therefore, he continued, only the complete and swift annihilation
of Bolshevism might be counted on to guarantee the peace of the business
democracies of the West.

2. The prcphecy. The pessimism, shock, and moral indignation at the
Treaty's provisions, which ever since Keynes are still a must for anyone eager
to strike the 'Liberal pose,' footed up to much unwarranted affectation,
said Veblen, for 'the stipulations touching the German indemnity' rather
betrayed 'a notable leniency, amounting to something like collusive
remissness.' In other words, all the reparations garble was truly 'a diplomatic
bluff, designed to gain time, divert attention, and keep the various claimants
in a reasonably patient frame of mind during the period of rehabilitation
to reinstate the reactionary regime in Germany and erect it as a bulwark
against Bolshevism.' 141 The contrivance thought out by the British
delegates in Versailles not to fix the terms of the German tribute sought
to flush a torrent of 'bargaining, counter-chaffering and indefinite further


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86 Conjuring Hitler


adjustments/ in the swirl of which 'Germany must not be crippled in such
a degree as would leave the imperial establishment materially weakened in
its campaign against Bolshevism abroad and radicalism at home.' 142 So the
Treaty was in essence an articulate trap by which the German upper class
- the custodians of Reaction - were to be left untouched, and thus uncured
of the feudal disease, while the grief and resentment of the underclass - the
proximate victims of the reparations' bloodletting - was counted on to
provide as much fodder for 'radicalism' as the sheltered Junkers required
to re-establish a reactionary, anti-Bolshevik regime.

3. The Clue. What gave the Allied plot away? On the basis of his 1917
recommendations, Veblen observed that 'The provisions of the Treaty
shrewdly avoid any measures that would involve confiscation of property'
'There is no reason, other than the reason of absentee ownership', he

why the Treaty should not have provided for a comprehensive repudiation
of the German war debt, imperial, state, and municipal, with a view to
diverting that much of German income to the benefit of those who
suffered from German aggression. So also no other reason stood in the
way of a comprehensive confiscation of German wealth, so far as that
wealth is covered by securities and is therefore held by absentee owners,
and there is no question as to the war guilt of these owners. 143

The levers of command of a modern democracy are not operated from its
ministries, but from its financial network. The financial strength of a capitalist
tegime is crushedthe momentits portfolios of securities - bonds, stocks, debentures,
and cash and all like titles of ownership - are passed into foreign hands. Such
critical confiscation, which would have sapped the tenure of the German absentee
owners, was never effected under the terms of the Treaty, and deliberately so.
Thus the nature of Versailles' diplomatic contrivances revealed that 'the
statesmen of the victorious Powers have taken sides with the war-guilty
absentee owners of Germany against their underlying population.' 144

From this it followed that all dispositions touching disarmament and
indemnificationweie to be sabotaged behind a hustle and bustle of diplomatic
trucking so prolonged and muddled as to disaffect the participation of the
unknowing public. Hereafter it will be seen how* Germany would begin
to rearm in earnest with the secret cooperation of Russia as early as 1920,
while, as a whole, her burden of reparations would have been, by 1932,

See Chapters 3 and 4.


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The Veblenian Prophecy 87


'very slight.' 1 ^ 'Indeed,' Veblen concluded, 'the measures hitherto taken in
the execution of this Peace Treaty's provisional terms throw something of
an air if fantasy over Mr. Keynes's apprehensions on this head.' 146

In sum, Veblen's thesis was, of course, wrong: one thing of which the
Liberal regimes of the West were never afraid was precisely Bolshevism, which
they secretly nurtured since it took its baby steps in the spring of 19 1 7. Veblen
remained convinced to the last of Germany's war-guilt, when in fact, as
argued in the previous chapter, the Prussian Reich had been but the drunken
victim of an extraordinary siege entirely orchestrated by England.

As to the clue, the fate of Germany's financial wealth, whose complicated
shuffle in the international system would indeed set off the disastrous
hyperinflation of 1 923, * followed a path more tortuous than Veblen could
have foreseen in 1920, though his inference was on the mark.

But as far as the conspiratorial dynamics of the Treaty was concerned,
Veblen was clairvoyant; he had made three considerations: (1) Germany
was spiritually prone to a cyclical recrudescence of eerie fanaticism; (2)
the sham of the reparations was designed to cause distress only among
ordinary Germans; (3) the German dynastic absentees, that is, the true
rulers, had been spared by the Allies any sort of punitive sanction. Therefore
Veblen could deduce that the Treaty concealed a complex manipulation
of the German situation - a manipulation whereby a movement animated
by 'truculent megalomania' could be expected (1) to exploit popular
dissatisfaction by fomenting radicalism at home, and (2) eventually come
to an understanding with the propertied and military elites under the
sign of war. The attack would be suitably directed against the enemy of
choice: Bolshevism. In brief, with the terminology of hindsight, Veblen's
review divined the advent of Nazism as the conjured champion of the
disgraced German masses, and as Europe's contrived anti-Communist
bastion. Versailles was an indescribable fabrication.

Thus Veblen prophesied no less than: (1) the religious nature of Nazism
(2) the reactionary coming of the Hitlerites, and (3) Operation Barbarossa,
Germany's invasion of Russia of June 22, 1941 (in his words: 'suppression
of Soviet Russia,' 'Germany... as a bulwark against Bolshevism'), more than
20 years prior to the events.

The Treaty was no lamentable fumble, or, say, 'a disaster of the first
rank,' 147 as all Keynesian fans have always been itching to believe; it was not
the accidental prelude to World War II, but rather its conscious blueprint.

Had Veblen not invited all those Bolshevik romances to cloud his gaze,
this gentle Quixote of the deep north would have seen that Versailles was

t See Chapter 3, p. 121 ff.


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SS Conjuring Hitler


not aimed at Moscow, but at Germany herself; aimed, that is, at a colossal
conflagration by which Germany, caught again between two fronts, could
at long last be razed to the ground and sundered in two, right along the fault
line - as she would be after World War II.


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3 The Meltdown and the
Geopolitical Correctness of
Mein Kampf

Between the Kapp and the Beerhall Putsch,


Barbarians since time immemorial, rendered ever more barbarous by
diligence, science and even by religion... This is a harsh thing to say, yet
I must, because it is true: I cannot imagine a people that is more torn
than the Germans. You see craftsmen, but no human beings, thinkers, but
no human beings, priests, but no human beings, masters and servants,
young ones and settled families but no human beings - is this not like
a battlefield, where hands, arms and limbs lie scattered helter-skelter,
while gushes of lifeblood sink through the sand?...

Friedrich Holderlin, Hyperion 1

Yet I long for Kaukasos!...I was told long ago that our forefathers, the
German tribe quietly coasted down the Danube of a summer's day and
reached the Black Sea, meeting with the children of the Sun seeking
shade... For a while they stood in silence, then offered their hands in

Friedrich Holderlin, The Migration 1
Erzberger: one man alone against the inflation

After the Treaty of Versailles was ratified, the incubation of Nazism began.
Underneath the republican pretense of Weimar, the reactionary Right slowly
reorganized itself: it spoke through the Nationalist press, and intimidated
the Leftist opposition by unleashing against it the rage of jobless hooligans,
whom the Conservatives shielded and patronized. Mistaking the Weimar
regime, which was but the sham government imposed by the Allies, for a
workable political experiment, the Catholic politician Matthias Erzberger
treated the phoney Republic as a frail outfit which he trusted he might heal,
without suspecting the perilous nature of the task. As he proceeded in the
guise of Finance Minister to tax the elite heavily (1919), hoping thereby



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90 Conjuring Hitler


to defuse the risk of an inflationary implosion that loomed in the massive
public debt amassed by Germany to fund the war, Erzberger was slandered,
warned, and finally killed (1921). The incubation of Hitlerism, however,
was from the first threatened by stalwarts of the old order - army generals
and erstwhile high-ranking stewards of the Reich - that were seeking to
enliven a monarchical league across Central Europe and Russia (1920).
Nazism was still in its embryonic stage, and would have not survived such
a change: the disgruntled royalists within the army wanted to go back to
the old days; they shared a vision that had virtually nothing in common
with that of the Nazis. England signed on IgnatzTrebitsch-Lincoln, an agent
steeped in counter-insurgency tactics and disinformation, to thwart, expose,
and burn all the monarchists conspiring against the Weimar Republic. The
powerful industrialist Walter Rathenau, who threw himself actively into
the politics of Weimar in 1921, likewise had ideas about taxing the rich
into oblivion and therefore elude the provisions of the Versailles Treaty,
but he too was defamed at home, and manipulated abroad into ratifying
a 'secret' and, at first glance, strange pact of Russo-German collaboration
(1922), through which the two 'European outcasts' would engage in full
military cooperation before worrying at each other's throats in 1941. Before
Matthias Erzberger might even begin to tap the financial holdings of the
German absentee owners, these cashed in their War Loan certificates, and
exported abroad the wealth of the country. As the rich redeemed their
Treasury Bills and the government bought foreign exchange with which
to pay reparations, the Reichsmark lost value fast: thus the so-called
'external depreciation' of the German currency was caused. Thence the
Reich, in order to sustain the payments system, began to indebt itself at an
accelerating pace by selling a swelling mass of government bonds (1921).
The Reich's short-term indebtedness soared until it literally 'exploded' in
1923 under the pressure of non-renewal and massive redemption on the
part of the former subscribers, both of which contingencies obligated the
central bank to transform the bonds into a sea of (worthless) paper notes.
The year 1923 marked the near disintegration of the German community:
in its calamitous course, the infant Nazi Party made its first attempt at
seizing power with the Beerhall putsch in early November. The putsch
failed, but the Nazi creature, though immature, held remarkable promise:
marked by a fervent Anglophilism and a fanatical, unbounded hatred for
the USSR, which Hitler perceived as an expression of Judaic subversion,
a new movement had emerged that might very well be none other than
Britain's reactionary candidate for the forthcoming Russo-German conflict,
as predicted by Veblen in 1920.


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The story of Matthias Erzberger may best be understood if it is borne in
mind that the Treaty of Versailles was never meant to weaken the elites of
Germany, although the diplomatic and official rhetoric of the time gave
credence to the contrary. As one historian put it, the Germany of the Second
Reich was made of a Quartet and a head. The head of the quadruped was
the monarchy, the administrative front legs were the bureaucracy and the
army, whereas the agrarians and the industry formed the hind legs - the
rest was cartilage and sinew. 'The essence of German history from 1918 to
1933 can be found in the statement There was no revolution in 1918... The
only visible change was [the monarchy's] decapitation in November.' 3 What
this signified was that any politician that would attempt to effect any sort
of reform in the name of democracy with the newly available tools of a
parliamentary system, would in fact be confronted by the opposing strength
of the old order, which presently stood behind Nationalist parties set up
ad hoc, with its industrial and financial might literally undiminished. That
being so, any attack leveled at the upper class would be counteracted by
a barrage of threats and abuse from the press, physical intimidation by
thugs secretly protected by the elite, hostility from the judicial courts, and,
last but not least, by the utter impassibility of Britain and the Allies, who
would look on, surveying these savage fights with attentive detachment,
like spectators in an amphitheater.


Ever since its unreal conclusion, it has often been the vogue among
historians to look upon Weimar as an era of missed opportunities.

There were really two Germanies.. .Germany had tried the way of
Bismarck. it was ready to try the way of Goethe. ..The Republic
was born in defeat, lived in turmoil, and died in disaster... Still, the choice
of Weimar was neither quixotic, nor arbitrary; for a time the Republic
had a real chance. 4

It never did.

The Republic was, as Veblen understood, damned from the start. The
salient developments of Weimar's 15-year run-up to the Third Reich were but
the pangs of Nazism's gestation. The interminable parliamentary jockeying;
the failures of 32 parties, 20 Cabinets and 9 elections; the 224,900 suicides 5
and 300 political assassinations; 6 the relentless shuffling of numberless
economic proposals with no future; the two financial shock therapies (1923


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92 Conjuring Hitler


and 1931); the literal inexistence of the republic's statesmanship and the
puppeteering of the Anglo-American clubs; the violence; the allegedly
impotent cynicism of the Allies; the population's leaden pessimism; the
'hairsplittings and tortured compromises over [the reparations' imaginary]
millions and billions, [which] all seem scarcely worth studying today'; 7 all
these are pieces of a chronicle captioning the rise of Hitlerism.

The life-cycle of Germany's sham republic may be divided into three
periods: 8

1. a period of turmoil, 1918-23

2. a period of fulfillment, 1924-30

3. a period of disintegration, 1930-33.*

The Weimar republic was a laboratory for a social experiment: with the
clauses of Versailles, Britain was waiting to resurrect from the rubble
of the Wilhelmine Reich a political manifestation not unlike Prussian
militarized conservatism, yet far more 'pure' in its hostility: a German
reactionary movement, without the cloying accoutrements of regality. That
the operation was going to yield the hordes of the swastika, might not,
possibly, have been forecast by the majority of the Elder Statesmen of the
West. But the expectation of witnessing in post-war Germany the rebirth of
a grassroots front, wrathful and vengeful, was hotly entertained from the
outset. The Veblenian prophecy is proof of such anticipation. The Allies
were playing a most dangerous game.

In the helter-skelter aftermath of the failed revolution, the Germans,
already sundered by the failure of all those policies of social insurance that
Bismarck had introduced three decades earlier to pacify the proletarians,
began to cannibalize one another immediately. 'November 1918' proved
that Germany was incapable of revolution: the turmoil did not produce a
single charismatic leader of the working masses. 9 After the generals were given
carte blancheby the Socialist leaders to suppress the haphazard and hardly
menacing riots of 1919, few doubted that the warriors would wait long
before turning against the republic itself.

No sooner did the war end than the forces of reaction fomented at
home a clime of acrimonious antagonism. After the war, General Malcolm,
head of the British Mission in Germany, paid a visit to General Ludendorff
- the reckless soldier who had come to govern Germany during the last
three years of the war in the company of his elderly duumvir, General

The second and third periods will be dealt with in Chapter 4.


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Hindenburg, until he had been sacked by the Kaiser shortly before the
surrender.'And as they sipped tea, the German tried to convey to his guest
how deeply betrayed the General Staff had felt in 1918 by the weakness of
the domestic front and the sailors' mutinies; Malcolm, seeking clarification,
queried the ex-Quartermaster: 'Are you trying to tell me, General, that you
were stabbed in the back?' 'Ludendorff's prominent blue eyes lit up at the
phrase, 'That's it!" he shouted triumphantly. "They stabbed me in the back!
They stabbed me in the back!'" 10

During his testimony to the constitutional assembly's investigative
committee on the war in November 1919, the other half of Germany's
former military tandem, General Hindenburg, the hero of the East that had
smashed the Russian armies on the Masurian Lakes,^ would have coined
this construction into the abiding slogan of Reaction: '[because of] the
intentional mutilation of the fleet and the array.. .our operation necessarily
miscarried; the collapsewtas inevitable... An English general said with justice:
"The German army was stabbed in the back".' 11

A 'stab in the back': it seemed plausible at the time - after all, the German
army had not suffered a crushing rout. The Red agitation had been real
enough; the republic was Wilson's idea, and the Treaty of Versailles was to
all Germans a revolting disgrace. Therefore, many reasoned, Weimar was
but a travesty, and an odious one to boot, regarded with indifference, at
best, or contempt; Weimar could ask nothing else of Germany. The republic
became a politicians' affair - gray, tedious, and purposeless. Weimar's
interminable list of stewards was a triumph of anonymity - all obliterated
figures, middling brasseurs d'affaires who took brief turns at the helm of a
sinking ship swayed by external currents, which they could never resist.
History, however, remembers two names: Matthias Erzberger and Walter

Both men, though starkly different, were extraordinary expressions of
the possible: protean creatures of such skill and flexibility - intellectual and
worldly - as to believe by an enormous sin of vanity that they could bend
the world in whichever direction they listed. Each thought himself capable
of altering the course of Germany's tragic destiny, and more concretely, of
outwitting Britain at her own game by making Weimar a workable proposition:
that is why history should remember them. Theirs was a gratuitous sacrifice,
yet a revealing one as far as the Nazi gestation was concerned.

Matthias Erzberger, a parliamentarian for the Catholic Zentrum of
indomitable energy, began his career in the first decade of the twentieth

Chapter 2, p. 47.
t Chapter 1, p. 26.


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94 Conjuring Hitler


century by investigating aggressively the scandals of the empire's colonial
policies (embezzlement, mistreatment of natives, inflated bills for
government orders, and so on): his revelations in 1906 brought about
the downfall of the director of the colonial administration, and of his
young secretary, Karl Helfferich, who nonetheless would rise to great
heights in German political life, and subsequently swear undying hatred
for Erzberger. 12 Like most of his contemporaries, Erzberger appeared to
be an embodiment of Germany's jarring duality, which Veblen unveiled
at the time, namely the commixture of chauvinism and progressive
aspirations. In the name of the 'possible' Erzberger resigned himself to the
impossibility of winning the war: in 19 14 he had clamored for conflict and
demanded annexations; two years later he found himself seconding most
actively by innumerable missions abroad a peace proposal initiated by the
Vatican. When all efforts failed, undeterred, ever the partisan of feasibility,
he lent himself to the scapegoating tactic of the generals, and brokered,
as mentioned previously, both the Armistice (November 1918), and the
ratification of the Versailles Treaty (June 1919). The conservatives had so
far turned Erzberger's vanity to account by making use of his prodigious
art of the palliative, yet at heart they utterly despised his evolving appetite
for practicable solutions, especially as these were now encroaching upon
the 'national honor.' Thus, of the so-called 'November criminals' whom
German reactionaries accused of having stabbed the nation in the back,
Erzberger, blind to the consequences, had willingly and disingenuously
become the symbol. After Versailles, a Democrat warned him: 'Today we
still need you, but in a few months... we will get rid of you.' 13 This was an
omen, but Erzberger confidently flouted it.

Since June 1919 Erzberger was aboard Weimar's second Cabinet as Finance
Minister. In his first speech delivered the following month at the National
Assembly in that capacity, he outlined Germany's present financial burden.
By the end of the war, Germany had expended over 160 billion marks; this
sum amounted roughly to twice her annual income at the end of 1918.
The expense had been covered with long-term debentures to the extent of
over 98 billion marks - this was the hard core of the country's debt, the war
loan (die Kriegsanleihe) - and 47 billion marks of short-term government
bills, the paltry remainder having been paid for with taxes. 14

A war debt was a fair instance of the insanity of modern monetary systems:
in this case, the German public was indebted 'to itself for an amount twice
as large as its income, expended on resources entirely dissipated. Individuals
held portfolios of financial titles corresponding to property pulverized in


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a lost engagement, and they called it wealth - they expected to receive
interest on it for many years to come.

As to who owed what to whom, Erzberger provided the details. Over 90
percent of all subscriptions to the war loan* were for modest amounts; this
was the investment of the 'small people': they stood behind a quarter of
the Loan. This implied that the remaining 10 percent of the subscribers
(4 million out of 39 million investors), that is, the rich and super-rich,
accounted for the 75 million marks left over - not to mention their quota
of the short-term portion. 15 Of these 4 million affluent investors, about half
possessed another quarter of the Kriegsanleihe . Finally, this breakdown led
to the individuation of Germany's richest, the absentee owners: 5 percent
of the total claiming half the entire sum of the Loan. Thus, sampling the war
debt confirmed that there existed before and after the war an elite numbering
roughly 3 million individuals that commanded over half the country's resources. 1 ^
This was Germany's top out-of-sight class, which the architects of Versailles
had taken pains to shield, and expected therefrom, in time, the financial
encouragement of an anti-Bolshevik movement.

In defense of the petty investors, Erzberger vowed a financial crusade
aimed at safeguarding the regular remittance of interest, that is, the income
of the securities, to their legitimate owners. In sum, there were 160 billion
marks worth of securities, yielding a yearly burden of 10 billion marks per
annum weighing on the state's budget. Now, the question was, 'Who's going
to pay the interest?' As it customarily happened, it was out of the wages
of the laborers and, to a degree, of the middle class that the government
levied the taxes with which the country's rentiers - the coupon-clippers
-obtained their free stream of unearned income, what was otherwise called
'rent' (that is, something for nothing)^ The pernicious repercussions of such
a toll upon the German underclass prompted Veblen to recommend the
unconditional repudiation of the war debt in its entirety, so as to curtail the
sustenance of the German elite, and channel the amounts saved thereby
to the reconstruction of the war-devastated areas.

But the Allies, deliberately, would not touch the war loan, and Erzberger had
an unconventional idea. He declared his intention to overhaul drastically
the incumbent fiscal system, centralize it, and instead of sweating the
underclass for the benefit of the upper class, he left the underclass where
it stood, and guaranteed the Mittelstand (the middle class) its flow of rents,
at the expense of the absentees, which he prcposed to tax incisively. His plan
was, in fact, simple: single-handedly, he would have raised dramatically the

The subscribers to the loan numbered 39 million individuals,
t Today, the system remains the same.


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96 Conjuring Hitler


tax bill of the wealthy, and invited them to discharge their obligations by
paying, if they so wished, with the war loan certificates themselves. Once
in its hands, the Reich would have proceeded to destroy them instantly. It
was a roundabout scheme to force the absentees to surrender their paper
certificates almost for free. Thus Erzberger thought he could gradually
deflate the public debt - take the water out of the jar, so to speak, before
it flooded the markets...

In those days, neither such a paragon of the attainable as Erzberger,
nor anyone else had sufficient imagination to contrive ways with which
Weimar could service a debt of 160 billion marks, as well as transfer the
forthcoming reparations installments and pay for the republic's new social

From Berlin's Finance Ministry, the apex of a swiftly renovated and
most efficient reticulation of fiscal collection, Erzberger fired an arsenal
of newfangled levies at the elite. The absentees were now the target of
five different types of exaction: a two-pronged war profit tax on property
and income, a hefty inheritance tax, a luxury tax on consumption, and to
crown it all, a capital levy - the infamous Reichsnotcpfer, 'Sacrifice to the
Reich in its hour of need. 'The new directives were buttressed by additional
regulations designed to block capital flight, and the modern innovation
of tax 'payment from the source by deduction from wages.' 17 The Finance
Minister proclaimed then 'that in the future Germany the rich should be
no more. ' 1S In short, Erzberger had committed political suicide.

The tax-gathering had merely begun, when Karl Helfferich, conservative
stalwart, former imperial Vice-Chancellor and Finance Minister during
the war - indeed, the artificer of the giant war debt bubble - launched a
libelous campaign against his arch-enemy Erzberger charging the latter of
corruption, mendacity, and unlawful meddling in politics and personal
business. While the Right-wing press supported the scourging passionately,
and the Center-Left kept suspiciously mum, Helfferich bound his stack of
tirades in a pamphlet titled 'Fort mit Erzberger\' ('Let's get rid of Erzberger!').
Erzberger bit the bait and sued for libel. He was forsaken, and fought
alone. The trial began in January 1920. It nearly came to a premature
end when a 21 -year-old 'half-crazed demobilized officer candidate,' Oltwig
von Hirschfeld, attempted to assassinate Erzberger as he was leaving the
court a mere week after the beginning of the proceedings. The first bullet
pierced the minister's shoulder, whereas the second, the lethal one fired
at the lungs, was deflected by the chain of his gold watch. After a few
days, Erzberger was ready to resume the suit. Hirschfeld would claim in
court that 'Germany was injured every day that Erzberger continued in


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power.' He expressed no regret, but, yielding to counsel, he pleaded that
his intent was to wound, not kill, the politician. The female audience was
charmed, and the useful idiot was 'sentenced to a grand total of eighteen
months.' 19 In the meantime the Right did not spare itself in kindling the
slander against Erzberger, including the fledgling Nazis, who, within the
great choir of reaction, squealed from the nook of their taverns that the
'fat' Erzberger was a traitor for selling out the country to the victors at
Compiegne in November, and foisting the Treaty upon the people. Yet no
one dared to interject that both acts had been prompted by the military.
Hugenberg, former director at Krupp, Germany's steel temple, and presently
leader of the Nationalists and of a powerful media consortium, moved in,
too, to pillory 'Erzberger the traitor' and decry the minister's 'socialization
measures,' such as the 'expropriation, 'he clamored, 'of the middle class...' 2 ®
The denunciation did not lack in effect, though Hugenberg made his tongue
slip in uttering it, for the class Erzberger was seeking to expropriate was not
the middle, but the upper one.

In fact, the absentees scented the brew of trouble and started to export
hurriedly their liquid balances denominated in marks, which they converted,
beyond the border, into foreign currencies. At the end of 1919, the Neue
Ziircher Zeitung published the news that by June 35 billion marks had already
fled the country. 21 Between 1914 and 1918, because of the large injections
of paper money devoted to financing the war virtually without taxes, the
mark had lost half its purchasing power: so the inflation had already begun,
but by early 1920 it was accelerating. Erzberger's hope to defuse inflationary
outbursts turned out to be 'a poor prophecy.' Not only did the Reichsnotcpfer
fail to stem the mounting inflation, but it actually stimulated it. zz

The trial was stacked, yet the prosecution could not even pin a crumb
of malfeasant evidence on Erzberger. He was clean. His opponent, the tool
of the elites, Helfferich, was found 'guilty of both libel and making false
accusations' and ordered to pay the allegedly high cost of the trial, 23 and a
ludicrous fee, whose paucity the judge justified 'by the fact that Helfferich
had proved the substantial accuracy of his charges.' 24 In other words, the
calumnies of Helfferich were not judged unfounded, but merely fulsome.
The plaintiff paid the symbolic charge and carried the day. The tribunal's
deliberation ended the political career of the defendant: Erzberger had
defied the absentees, and, by plowing ever creative avenues of political
understanding between the Socialists and Germany's progressive bourgeoisie,
he had striven, in Weimar, for the achievable. 25 And thus, like Weimar, he
was condemned. After the trial Erzberger resigned from his ministerial post,
vowing to make a comeback as soon as the storm cleared up.


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98 Conjuring Hitler


The court delivered its verdict on March 12, 1920. The following day,
the republic experienced its first praetorian coup: the so-called Kapp-
Liittwitz putsch.

Hiring Trebitsch-Lincoln to foil the Kapp Putsch

After the stipulation of the peace, the supreme command of the German
army -the Hindenburg-Groener duo -stepped down. With the lapse of the
link connecting the army to the government, the troops found themselves
effectively without command from June to November 1919.

In the vacuum, the parties of Reaction, displaying uncommon resilience,
joined forces at once to recapture what they perceived legitimately as theirs. Z6
Naturally, Britain had contemplated such an eventuality. What the British
were observing in 1919, as they and their Allies waged the invisible war
against the Russian Whites, was a counter-movement of sizable chunks of
the German army seeking to reorganize themselves to reclaim their Middle-
European tenure. This somewhat confused but menacing stirring among
the German warriors assumed unmistakable shape and color in eastern
Prussia and portions of the Baltic states, where, many a month after the
war's end, a farrago of Freikorps and uniformed renegades had stubbornly
entrenched itself, fighting the Poles on one front and the Bolsheviks on
the other, while fraternizing with Russian White chiefs.

The post-war situation stabilized after the lines of demarcation between
Germany and Russia were made to encompass a cordon of brand new buffer
states - from Czechoslovakia to Estonia by way of Poland - which were
designed to keep the two states separated during the Versailles experiment.
Then, at the insistent request of the Allies, the recalcitrant German generals
were repatriated. Von der Goltz, the hero of the Latvian campaign,* and a
solid anti-Bolshevik, returned in August 1919, while his troops for the most
part stayed behind to rally round a White adventurer, Avalov-Bermondt.
Funded by Germany's heavy industry to spearhead the overthrow of the
Reds, Avalov's vanguard was on standby, serving through the winter of 1919
as a bridgehead to penetrate Russia's markets. 27 Over the ridge, Avalov and
the German divisions expected to make contact with Kolchak, Denikin,
Wrangel, and the other White chieftains.

From Tilsit in Eastern Prussia, on December 9, 1919, the British
representative of an international commission set up to deal with this
mutiny, General Turner, reported:

Chapter 2, p. 71.

t Now Sovetsk in the Kaliningrad area - Russia's carved-out dock on the Baltic Sea.


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Eastern Prussia does seem not aware that Germany has lost the war. The
military party is omnipotent and militarism flourishes in all its forms.
Personally I have no doubt that a plot is being hatched to overthrow
the government at this time, nor do I doubt that the army has sufficient
force to carry it out. 2S

From his temporary exile in Sweden, Ludendorff regained Germany
in February 1919. In October he patronized the Nationale Vereinigung
(National Association), which garnered the cream of reactionary Germany:
officers, bureaucrats, and industrialists, who since the Conciliar uprising
and its bloody suppression in the spring of 1919, were bent on wrecking

Indeed, the Germans had not been routed: they could still count, adding
to the army a vast constellation of subterranean paramilitary groupings, on
a fully-equipped strike force of approximately 2 million men. 29 If their coup
succeeded, with the Russian panorama still in a state of flux, the Sea Powers'
strategy of protracted encirclement would have suffered a disastrous setback.
If the coup succeeded, and likely it would, a consolidated front of Whites
-Germans, Russians, and Hungarians - jutting out into European Russia,
would have undermined, if not wiped out Russia's Bolshevik rule, which
was an Allied asset; and constituted the kernel of a Eurasian partnership,
which in turn would have immediately led to Germany's repudiation of
Versailles and afforded her immunity from a British blockade. The men of
the Nationale Vereinigung, monarchist Prussians of the old school, no less
anti-Bolshevik than Anglophobic, posed a clear threat to Britain's plans,
and therefore they had to be stopped. Or better, burnt.

How Britain effectively deepsixed the forthcoming coup of the German
Whites - another glorious masterpiece of intrigue of the history of the
twentieth century - remains something of a mystery to this day. But a
string of elements gleaned from the known chronicles may afford a partial
threading through this affair.

On July 5, 1919, Ludendorff sent his former aide-de-camp Colonel Bauer
to sound the British. Bauer, seemingly, laid out his cards on the table and
queried the chief of staff of the British military government in Koln, Colonel
Ryan, whether Britain would welcome a 'stronger' German government.
Not a dictatorship, Bauer specified, but a resolute republic, which would
brook no Socialist unrest, make the country 'work,' and thus honor its
international obligations with punctuality and thoroughness. A republic, he
concluded with a wink, which would find its most harmonious resolution
in a constitutional monarchy, British-style. 30


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100 Conjuring Hitler


Ryan sensed the bluff; he merely had to take Bauer for what he was:
the emissary of a faction of staunch monarchists, who did not harbor the
least inclination to bow to Versailles, and who had sworn revenge against
Britain by seeking some form of entente with White Russia. 31 But Ryan
played the game and invited Bauer to pursue his project; he guaranteed the
Allied blessing to the endeavor, provided that Bauer's boss, the conspicuous
Ludendorff, whom the Franco-British public still looked upon as a 'war
criminal,' confined himself to the background. 32

On the same day, 'a leading light' of the reactionary cabal, Wolfgang
Kapp, a former east Prussian officer in charge of agricultural affairs,
and at the time an exponent of the Nationalists, 33 felt the pulse of the
Armeekommando Nord (northern detachment of the Reichswehr), and ran by
its chief, General von Seeckt, the idea of tearing up the Treaty of Versailles,
and expelling by force the Poles from the Posen enclave.* Seeckt was no
friend of Poland, but he had no desire to plot, rashly, against the British.
Kapp was temporarily rebuffed. 34

Meantime, in August, 1919, officially discharged from a British prison a
month previously, Trebistch-Lincoln arrived in Berlin.

If there are, indeed, more things in heaven and earth than are dreamt of
in our sorry materialist philosophy, Ignatz Trebitsch -Lincoln is assuredly one
of them. Hungarian by birth, in 1879 in Paks on the Danube, he watched
his father, a petty merchant, go bankrupt at the end of the century. 35 He
then stole a gold watch, and fled family and jailers by seeking shelter in
the Barbican mission for Jewish converts in London. There he pilfered the
gold watch of his Anglican protector and returned to Hungary, which he
abandoned immediately, and forever, as he found he was still wanted for
the first theft. He was 19.

He then reached, by the skin of his teeth, Hamburg, where he converted
to Christianity (Presbyterian). Disliking the stern life of the seminary, and
finding no employ there, he embarked, with a German wife, en route to
the Jewish mission in Montreal. In Canada, he passed to the Anglican
camp, did not convert a soul, but was ordained a deacon nonetheless.
To anglicize his surname, he appended 'Lincoln' thereto. After two years,
monetary strictures forced him back to Europe: to London, via Hamburg.
In 1903, he found employment as a curate in Appledore, Kent, though he
failed to become a priest. Lloyd George was allegedly seen attending a few
of his sermons. 36

When Trebistch's father-in-law died, leaving the couple a small fortune,
he forsook his clerical post at once and hunted for an aperture into politics.

One of the portions of Germany ceded at Versailles to the new state of Poland.


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The Meltdown and Mein Kampf 101


Interviewed for a propagandist position in the temperance movement (anti-
alcohol campaign), he was turned down, but on the occasion he stumbled
upon the Cocoa King, chocolate entrepreneur Benjamin Rowntree, who was
charmed by Trebitsch and offered him employment as a private secretary.
From 1909 to 1916, as Rowntree's retainer, he conducted social empirical
research on the rural conditions of northern Europe. Possibly, he joined
a lodge at this time. 37 Boosted presumably by Lloyd George, 38 he then
ran as the Liberal nominee for the district of Darlington in York; Winston
Churchill, by letter, wished him success, so did Lloyd George. His frequent
travels to the Balkan area attracted the curiosity of consuls and attaches of
the Foreign Office. On a free trade platform, Trebitsch won, sensationally,
by 30 votes over the incumbent conservative opponent. The improbable
MP did not last beyond two speeches, as shady business left him insolvent
and without the Liberals' endorsement.

Like Parvus Helphand a decade earlier, he descended to the Balkans in
search of easy money: he promoted oil undertakings fitted with expensive
American equipment acquired heaven-knows-how, but unlike his brother in
conspiracy, Helphand, Trebistch failed his hand at business. At the outbreak
of World War I, he was back in London and offered to spy for British
intelligence 'as a censor of Hungarian and Rumanian correspondence at the
War Office and Post Office.' 39 At this juncture the record becomes misty: it
bifurcates into cautious yet terse archival collages on the one hand, and the
vibrant narratives of dazzled raconteurs on the other, which the scribes of
the former school dismiss altogether as 'entertaining absurdities.' 40

Between December 1914 and January 1915, Trebitsch was in Rotterdam,
the war's torrid crucible of espionage. What he cooked therein for a
fortnight was left unsaid. The masters of embroidery swore he was working
as a double agent, passing on to British intelligence information on the
positions of the German troops on the one hand, while studying with the
German Services, on the other, a plan to block the Suez Canal - England's
gate to India - by sinking in its midst one or two ocean liners replete
with cement. 41 Upon his return to London, he tendered to the intelli-
gence officers an envelope containing the Germans' draft of unrestricted
submarine warfare and the secret codes of Germany's intelligence in
America. 42 A gift, he said. His case was then referred to Captain Reginald
Hall, Director of Naval Intelligence, who gave him three days to disappear:
it was unclear whether the British services were allowing Trebitsch to pay
his way out of a death sentence for treason with the documents or setting
him up for an assignment elsewhere.


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102 Conjuring Hitler


In February he reached New York where he peddled sensationalist articles
on his espionage activity between Britain and Holland. At the instigation
of the British consul, he was arrested on charges of fraud: before the war,
in the dire straits of insolvency Trebitsch had falsified Rowntree's signature
on a series of promissory notes. While waiting for Scotland Yard to dock in
New York and extradite him to Britain, Trebitsch gained some reprieve by
offering the FBI his services as a decipherer of intricate German cables. The
Bureau accepted. Trebitsch was thereby granted a regime of semi-liberty
which he escaped altogether by running to a farm in New Jersey, where he
would be finally apprehended and shipped back to Britain to stand trial.
In July 1916 he was 'sentenced to three years' penal servitude' in a British
penitentiary. 43 In other words, he vanished from the official record for three
years - it is hard to believe that he stayed behind bars for so long. 44 Some
claim that in the interim he even sojourned in Russia. 45

On August 11, 1919, from Britain he sailed off to Holland. From Holland
he crossed over into Germany.

'Stalking the pavements of Berlin... unemployed, friendless and starved...
a penniless refugee, 46 'foreign-born, Jewish-born, ex-jailbird,' 47 Trebitsch,
a mere fortnight after his arrival, managed to hook up with journalists
gravitating in Right-wing circles and publish in their tendentious rags anti-
British articles of the genre he had hawked in Manhattan in 1915.

By mid September he had so comfortably penetrated the inner core of
Ludendorff 's Nationale Vereinigung that he was ready to lead a mission to
Holland to harness no less than the ex-Kaiser to the forthcoming coup.

The cool-headed biographers of Trebitsch, anxious to discount any
'conspiratorial fancies' that could arise from musing over such outlandish
happenings, are unsparing in their efforts to characterize Trebitsch's
trajectory merely as 'the empty pyrotechnic display. . .of a manic-depressive
scoundrel,' 48 which, patently, is the most entertaining of all absurdities
on this count.

Neither a spy 49 nor an impostor, Trebitsch in all likelihood was, like
Parvus, one of those 'specialists' fluent in the art of subversion, who were
part of a wider network of mercenaries fascinated in one form or another
by the ways of power.

In 1919, so it appeared, Trebitsch, after being cooped up for a time,
ransomed his freedom from Britain by carrying out one last assignment for
the Crown. From the outset, isolated voices within Germany's Right cried
wolf, denouncing Trebitsch as an agent provocateur of Britain, dispatched
to Berlin to sink the anti-republican enterprise. For instance, Helfferich,
Erzberger's foe, and allegedly former admiral Tirpitz, the father of the


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The Meltdown and Mein Kampf 1 03

submarine sink-at-sight program, walked out of the game as soon as they
were apprised of Trebitsch's involvement. 50 Yet by October, Trebitsch had
Colonel Bauer completely in his grasp, and would work thenceforth as his
closest collaborator.

The mission in Holland to lure the ex-Kaiser and the Crown Prince failed:
Wilhelm and his son, possibly advised by their residential councilors,
refused, so as not to compromise themselves more than they already had, to
see this strange adventurer who was inviting them to march at the front of
a monarchist coup. Apparently, they wanted no more truck with power.

Spun by the undaunted Trebitsch, the intrigues suddenly took a swerving
turn towards the East: Soviet Russia became involved. The adventurer from
Paks seemed to have talked the German conspirators into trucking with
the Bolsheviks, as an insurance policy in view of an eventual defeat of the
Russian Whites.

In November 1919, the Soviets had de facto two representatives in Berlin.
One was Karl Radek, former Polish Socialist and talented publicist, who
had thrown in his lot with the Bolsheviks, and had been thereafter selected
as one of the privileged few that had accompanied Lenin in the journey
through Germany scheduled by Parvus in April 1917. On December 8,
1919, Bauer met Radek. 51

Before Radek, Bauer adumbrated the possibility of an understanding
between officers and workers: he asked Radek whether Moscow could
placate the laborers via their German mouthpiece, the KPD, and thus
prevent them from striking and thus disrupting the smooth development
of the impending coup. Radek, non-committal, replied that such a decision
rested with Moscow. 52

The other Soviet official presence in Berlin, was that of Vigdor Kopp,
ambassador of sorts since November 1919, who, according to the memoirs
of Trebitsch, encountered Bauer several times. Again, Bauer asked Kopp to
exert pressure on the KPD not to hamper the coup with the proclamation
of a strike. 53 But while these fantastic negotiations were being woven, the
German monarchists secretly printed counterfeit money for the White
Army of Avalov. 54

In 1920 the pace of events accelerated. On January 10 the Versailles Treaty
went in force. The Allied note demanding that Germany hand over the 'war
criminals' (Articles 227-30 of the Peace Treaty) exploded Tike a bomb' on
February 3; it was accompanied by a list of 900 names, including those of
Kaiser Wilhelm, Ludendorff, Tirpitz (who pioneered the use of poison gas
on the Western Front) and Helfferich. Though France was not feigning,
Britain, of course, was: she had no desire to see Kaiser Wilhelm, one of


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104 Conjuring Hitler


Victoria's grandchildren, hang, but the news had sufficiently envenomed
the public spirit: the Reichswehr generals were ready to resume the war. 55
The German government tarried, and nothing would come of the Allied
requests - no 'patriot' would ever be surrendered.

On March 8, Colonel Bauer called on the British once again, but this
time, General Malcolm, Chief of the British Mission in Germany, responded
with a clear rebuff. 'The Entente,' he sentenced, 'refuses categorically any
counter-revolutionary coup.' 56 Such an action, Malcolm added, was 'sheer
madness.' 57

On March 10, the commander of the Berlin detachment of the Reichswehr,
General von Liittwitz, refusing to comply with the injunction to reduce
the army by 200,000 by April 10, 'aggressed' the Cabinet enjoining it to
resign, revoke the disbandment order, call for new elections, and allow
the formation of a cabinet of non-partisan technocrats. His demands were
rejected; President Ebert ordered Liittwitz to give way and go into retirement
at once.

On March 12, Erzberger was politically finished, and on March 13, the
Ehrhardtbrigade, the jewel in the crown of the Freikorps, marched into
Berlin - the coup had begun. It would last exactly 100 hours, from March
13 to March 17, 1920.

The ex-bureaucrat Wolfgang Kapp and the dastardly von Liittwitz fronted
the putsch. Trebitsch had taken over the post of Press Chief. All the while,
the meanest of the mean poured through the Schick arteries of the capital:
Freikorps troops mingled with the Baltikums - the veterans of the Baltic
fights, identifiable by the white gamma cross adorning their helmet. They
could be heard singing: 'Hakenkreuz am stahlhelm, schwarz weiss rotes Band,
die Brigade Ehrhardt werden wir gennant' ('Swastika on helmet, black, white,
and red brassard, the Ehrhardt brigade is what we are called'). 5S

They are young, green young for the most part. They display the
grimy countenance of men who have long campaigned. They are swift
and supple, drilled. Beautiful soldiers... They examine the riches and
occasionally the landmarks of the great city with a curiosity laced with
savage covetousness...The Gauls must have been like this on the first
hours of the conquest of Rome. 59

Germany was torn: East and North were with Kapp, whereas the South
and West, excepting Bavaria, seemed loyal to the republic, or resolved to
stay neutral. The army, however, was silent and on the lookout: von Seeckt,
since November 1919 Chief of the Army Command -the reconstituted and


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The Meltdown and Mein Kampf 1 OS


much reduced replica of the General Staff of yore - pressured by the Cabinet,
refused to intervene against Liittwitz: 'the army would sit on a fence until
the issue of this trial of strength could more clearly be discerned; it would
then descend. ..on the side of the winner... Whatever the outcome,. ..the
army would retain its position as the ultimate source of sovereign power.' 60
Which is to say that the success of the coup would not hinge on the will of
the army, no matter how favorable it was to the putsch.

In principle, three were the parties whose endorsement the putsch needed
to succeed: the army, labor, and banking. The first, as proven by Seeckt's
temporizing, had been virtually won over. The second, in spite of Colonel
Bauer's anxiety, was in fact irrelevant.

It has often been claimed that the Kapp putsch was muffled in the general
paralysis created by the unions' courageous call to strike in Berlin. But that
was not the case. The strike was set in train haltingly, as the coup was struck
on a Saturday. It was not proclaimed by the Cabinet exiled in Stuttgart, 61
but triggered by the Socialist unions, initially without the accolade of the
KPD's leadership, which, instead, diffused an appeal on the 13th not 'to lift
a single finger for a government engulfed in the shame of the murderers
of Karl Liebknecht and Rosa Luxemburg. ' 6Z Rhetorical reference was here
being made to the responsibility of the Socialist Minister Noske, who had
bargained with the Freikorps for suppressing the Berlin Council in January
1919.* This instance was of singular importance, for it proved that the
Russian representatives (Radek and Kopp) had kept their word, at least for
a day, and that the German Communist Party (the KPD) was indeed being
instructed by Moscow to refrain from thwarting the praetorians' putsch.

Only on the following day would the KPD join the strike, pulled by
the fervor of the rank and file eager to lend a hand to 'their trade-union
comrades.' 63 The initial abstention of the KPD was all the more striking
as the officer directly responsible for the assassination of Liebknecht and
Luxemburg in 1919, Captain Waldemar Pabst, was himself one ofKapp's

The strike gathered steam only after March 15, on Monday, when the
coup had already failed. In fact, the true protagonists of the putsch, the
soldiers, did not in the least suffer from the faltering interruption of public
services: shops and telephone lines were unaffected, while the strike was
indeed in risk of misfiring as distress was mostly felt in the working-
class neighborhoods, which could not avail themselves of any kind of
technical assistance. 64

See Chapter 2, p. 53.


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106 Conjuring Hitler


General van der Goltz, in putschist outfit, ordered to shoot at the picketers,
but his order was disobeyed for the match had been settled elsewhere, and
it was now over.

The fate of the putsch was decided in the halls of the Reichsbank. On
Sunday, March 14, Rudolf Havenstein, the governor of the central bank,
received emissaries of the putschists, who addressed him with a request
for money with which to pay the troops drafted on a mere piece of paper
undersigned by Kapp. Havenstein with protocolar punctiliousness responded
that withdrawals could only be effected by means of special checks, which
were in possession of the Chancellery. And, almost derisively, the governor
added that the bank did no business on Sundays. ..The envoys politely
retired, and reappeared the next morning with the checks regularly signed
by Kapp; the banker, cool as ever, replied that he knew of no Kapp. The
scene repeated itself the following day, as Havenstein refused to honor a
few more checks signed this time by Luttwitz. On the brink of desperation,
the cabal summoned Ehrhardt, the Kapitan himself, to seize by force the
reserves of the Reichsbank. Ehrhardt retorted that he was an officer, not
a safe-cracker. The Kapitan must have understood that cash could only
tide the coup over for a week, as banks were not chests bursting with
shimmering tokens, but lenders of 'keys' - keys to their network, which
in common parlance were referred to as Tines of credit.' And the lines of
credit, that is, the money, had been denied; the jig was up.

By the 17th, all had fled: Kapp had taken a plane to Sweden; Luttwitz
had gone into hiding in Hungary; Ehrhardt, Ludendorff, and several other
Freikorps commanders had run south, to Munich; Trebitsch was 'among
the last of the conspirators to leave the Reich Chancellery building.' 65

On March 17, an old war plane flown out of Munich by the former ace
Greim had just landed on a Berlin airfield, carrying Dietrich Eckart and
his assistant Adolf Hitler, who had been sent by Captain Mayr 'to instruct
Wolfgang Kapp on the situation in Bavaria.' 66 As Hitler alighted, a man
rushed in his direction and shouted at him: 'Beat it! Luttwitz is finished,
the Reds have taken over the city!' 67 Allegedly, the man was Trebitsch.
According to another source, in the disarray of the last hours, Eckart and
Hitler reached the Chancellery, where they caught a glimpse of Trebistch
climbing up the stairs. Eckart was supposed to have said: 'Come on, Adolf,
we have no further business here.' 6S

With false identification supplied by the legate of the Soviet embassy,
Vigdor Kopp, Trebitsch and Bauer abandoned Berlin. 69 The insurrections
sparked by the general strike across Germany (especially in the Ruhr), and
subsequently repressed by the Reichswehr battalions all through the spring,


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The Meltdown and Mein Kampf 107


caused about 3,000 deaths, and proved once again that proletarian uprisings
in Germany, however truculent, never posed a serious threat.

In Bavaria events had taken the opposite course. The local Reichswehr
commander, von Mohl, 'without supporting Kapp directly,' had taken the
'opportunity to remove the Hoffman (Social-Democratic) government from
office at to install Gustav von Kahr, a senior official with conservative-
monarchist leanings, as commissioner.' 70 Thus in Munich, unlike in Berlin,
the officers had managed not to alienate the party of finance and industry.
Had the Kappists proceeded likewise in Berlin, so thought historian
Arthur Rosenberg, the coup would have succeeded. 71 The British press
representative in Germany, Lord Riddell, confided to his diary in March
1920 that a successful royalist coup might 'change everything.' 72

What was Trebitsch attempting to achieve through this enterprise? After
the conspirators' escape from Berlin, rumors circulated in the press to the
effect that the coup 'could be blamed on a certain British agent - Trebitsch-
Lincoln, [who] had started the putsch and then had caused it to fail, "with
the object of winning the confidence of credulous officers and politicians,
and of keeping the British Government informed - naturally by indirect
channels - and receiving its instructions for every step".' 73 This surmise of
an 'imaginative journalist from Berlin,' otherwise discarded by Lincoln's
biographers as yet another 'absurd conjecture,' held, however, more promise
than the opposite contention, namely that Trebitsch had thrown himself
body and soul in the coup for the sake of his putative megalomaniacal

Though we may reasonably assume that Trebitsch was indeed hired
to make the putsch fail, we do not know exactly how he did it: 74 the
documentary evidence is too thin, although there is every warrant in the
presumption that the true paralysis created at the center of the Reich in mid
March 1920 issued not from the strikers, but from Trebitsch's improvised
Press Office. He disseminated, solo or in concert is impossible to tell, an
avalanche of false, incendiary, and contradictory information in a cross-
pattern of unfathomable complexity. At least three of such key messages
seemed to originate from him:

1. To the political Left. On April 18, 1920, the press organ of the KPD
(Die rote Fahne, the Red Flag) revealed that the adventurer Trebitsch-
Lincoln, 'the true political mind of the Ludendorff-Bauer consortium,'
had declared to a 'trustworthy source' that the Kappists were looking
forward to provoking the working classes to launch a putsch of their
own, which would be 'drowned in blood.' 75


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108 Conjuring Hitler


2. To the bourgeoisie. Starting on March 17, the Frankfurter Zeitung, the
voice of finance and heavy industry, which for the past three days had
in an odd turn of phrase called for open resistance against Kapp and
'foreign imperialism' 76 (who was the foreigner?), diffused a series of
communiques, according to which von Liittwitz himself, Colonel Bauer,
and Captain Pabst had conducted negotiations with the Independent
Socialists aimed at guaranteeing IheBaitikums' supportto the Communists
for the establishment of a Councils' Republic. 77

3. 'To the British.' At the putsch's inception Trebitsch told 'the foreign
correspondents that he had spoken with General Malcolm, who assured
him that the British government favored the new regime. ' 7S The British
Mission denied the canard so vehemently as to incommode Brockdorff-
Rantzau, Germany's former Foreign Secretary, beseeching him to disabuse
the Kappists of such dangerous fancies. Thereupon the diplomat stormed
into the Chancellery to inform the putschists Kapp and Ludendorff, who
swore to the friendship of the British, that the claim was a sacre mensonge
('a bloody lie'). 'That got the two gentlemen.' 79 The collapse ensued.

Two additional clues:

1. When one of Russia's chief envoys to Germany, the journalist Radek,
returned to Moscow in February 1920, he drafted a report for the People's
Commissars, in which he opposed the project of a military league with
Germany; the Soviets decided neither to accept or refuse. On March
3, however, Radek was heard on the radio conciliating: 'We think that
now capitalist countries can exist alongside a proletarian state.' 80 And
on March 14, the second day of the Kapp putsch, he wrote in the
mouthpiece of the Soviet regime, Isvestia: 'The military coup in Germany
is an event of world significance... By ousting Noske, General Liittwitz
has torn that rag called the Treaty of Versailles... As long as this regime
lasts we are ready to live in peace with it, though we expect its imminent
end...' 81

This was the identical line recited by the German KPD in summoning
the workers not to join the anti-Kapp strikes.

2. Trebitsch disclosed to the correspondent of the Daily News 'that his party
had the support of Winston Churchill, received through Cologne.' In
this regard, Britain's chief military representative in Germany, General
Malcolm, annotated in his diary on April 15, 1920, 'Except insofar as
Winston Churchill is concerned there is just the shadow of truth in it, and
this, no doubt is the foundation of all the stories of British support. ' sz


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The Meltdown and Mein Kampf 1 09

'Rumors of British involvement persisted for several weeks in spite of
further denials... by Malcolm, and even by Prime Minister Lloyd George,
in a statement at the House of Commons.' 83

So the chief of the British Mission in Germany did confirm that Winston
Churchill had indeed granted some sort of recommendation to Trebitsch. This
was an extraordinary confession. A confession that enables one to guess
with some ease the nature of the operation.

The Trebitsch mission filled a twofold role. First, it was a plan to flush from
the brush the German White guards and prevent them from consolidating
their not insignificant influence within industry and finance, by dragging
them to center stage in a premature coup that could only abort.

Trebitsch must have presented exceptional credentials to the generals
for being taken in so fast and so deeply within the conspiracy: amongst
these a 'solid connection' to the British - this was the link to Churchill, which
Malcolm authenticated, and which explained the stubborn conviction of
Kapp, Bauer, and Ludendorff that their position was always secure from
that angle. At this time, Churchill served officially as Air Minister, though
he acted, thought, and breathed for Britain's Secret Intelligence, with which
since 1909 he had sealed an indissoluble bond that would govern the rest
of his life. 84

The other, indispensable ace was, as previously emphasized, the connivance
of Soviet Russia, who pretended from the start to flirt with the German
generals, knowing as well as the British, whom the Russians informed of
every move, 85 that Ludendorff and company were bent on overthrowing
them: everyone was aware that it was with the Russian Whites, not the
Reds, that the German generals wanted to consort. When the putsch
began, the KPD stayed put. Soviet Russia's fake-up allowed Trebistch to
conjure a specter of enormous proportions, which would have appalled
the bourgeoisie and kept newspapers of all colors abuzz with speculation
for a long time thereafter: namely the fantastic bogus of a so-called 'National-
Bolshevik conspiracy'; that is, the rumored entente between German officers
and working-class leaders - which was an impossibility.^

In the KPD's rote Fahne, Trebitsch would be depicted as the 'deus ex
machina of National-Bolshevism.' General Ludendorff 's right-hand
man, Colonel Bauer, and a handful of officers were indeed seen in Berlin
confabulating with trade union leaders but not one of these showed any
desire to cooperate. The depth of the mystification was such that a paper
as informed as the Frankfurter Zeitung went as far as to contend,* absurdly,

See above, p. 108.


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110 Conjuring Hitler


that Freikorps commanders like, say, Pabst and Ehrhardt, who had truly
drowned in blood the Workers' Councils of Berlin and Munich in 1919,
were actually partaking in a National-Bolshevik coup seeking to resurrect
those very same Councils (!). These were all falsehoods manufactured and
artfully diffused by Trebitsch, thanks to the excellent and complicit stage
acting of Britain and the USSR.

Trebitsch played his cards all at once: (1) he foxed the generals with
the trump of his 'British connection'; (2) he terrified the Socialists and
led them to strike by fabricating the rumor that the Freikorps had come
to provoke, and thence terminate violently, a rebellion of the workers; (3)
and he estranged the parties of finance and industry with the bogey of the
resurrected Councils.

Second, the miscarriage of the Kapp putsch was a spectacular dress
rehearsal of the scheme performed 20 years later to deceive Hitler prior to
the attack against Russia,* which consisted in splitting the British power
base into two virtually opposed factions (that is, Churchill versus Malcolm),
and employing some means - in this case Trebitsch - to make the opponent
believe that the faction allegedly supporting him was the stronger one.

After the storm, Berlin's chief of police, Richter, was at a loss to read the
conspirators' mind: 'either they belong to the asylum,' he reflected, 'or
they have been deceived deceivers.' 87

But the European adventure of Trebitsch was not yet over. Undeterred,
the putsch survivors gathered in Munich to revive a drawn-out scheme 'for
monarchical cousin Austria, Hungary, Czechoslovakia and Germany, and
for a subsequent march on Russia by forces of these countries assisted by
White Russians and former prisoners of war.' ss By mid 1920, the rout of
the White Russians was all but complete, and such conspiracies had grown
somewhat threadbare, but Trebitsch 's task was not accomplished - not until,
that is, Middle Europe was rinsed clean of all Whites.

Of the inner clique of plotters, only Major Franz von Stephani, another
Freikorps chief, suspected the truth, and without mincing words he proposed
to Bauer and fellow Freikorps commander Ehrhardt to dispatch Trebitsch
on the spot. Bauer paid no heed to the murderous purposes of Stephani.
But Trebitsch found out. The juncture was propitious for exploding the
so-called 'White International,' once and for all.

Disguising it as the panicked counter-move of a man fearing for his life,
Trebitsch spirited a thick folder of the Whites' late conspiratorial designs,
which he sold to the Czechs in Vienna, who in turn handed it over to the
French and the British: as a result several secret military organizations

See Chapter S.


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The Meltdown and Mein Kampf 111


were disarmed and most Middle European White conspirators exposed and
burnt. Then, armed with six passports, Trebitsch disappeared in the Far
East. 'Nothing more is heard of him until September 4th, 1922, when he
called upon the United States Embassy in Tokyo. One report, never verified,
stated that at the time he carried a Soviet Russian passport,... and that he
was on his way to Tibet to help German officers organize an attack on
India'. Trebitsch would resurface in Shanghai as a Buddhist monk named
Chao-Kung ('Light on the Expanse'). 89

'A royalist coup,' as the British put it, would indeed have 'changed
everything.' Had the coup succeeded, the Versailles Treaty might have all
been for naught. True, Kolchak was already finished when the Kappists
invaded Berlin: thus a White, full-fledged Russo-German alliance could
hardly have come into being at the time of the putsch, but a revived
dynastic Reich, propped by a few satellites in Central Europe, would have
certainly conspired, and successfully so, to loosen completely the unsteady
grip of Bolshevism over Eurasia in the medium term by bolstering the armies
of the other Russian Whites - Denikin, Yudenitch, and the survivors of
the Siberian debacle. Second, though the sparse presence among the Kapp
conspirators of the Baltikums, with their be-swastikaed helmets and chilling
chants, might have made the putsch look like a precursor of Nazi awakening,
to interpret it as such would be a great mistake: this coup was a royalist, not
a Nazi, uprising. Kapp, Ludendorff, and associates had nothing to share with
the resurfaced racialist cult of underground Germany, which would later
rally round the 'gifted personality' of Hitler - the eventuality that Veblen
had scented in 1915. Had the generals had their way in 1920, they would
have re-established a pale copy of the Wilhelmine order, and this would
have thrown a wrench in the British works; it would have thrown the Nazi
incubation out of kilter. Thus, all in all, Trebitsch fulfilled his assignment
splendidly: he burnt the European Whites at the a critical time when these
could have helped to reverse the fate of the Russian civil war, and repudiated
Weimar, with its mock parliamentarism, reparations, chronic social strife,
and built-in devices for incubating 'the enemy of tomorrow.'

Trebitsch had been a midwife to Nazism.

On March 3 1, 1920, virtually on the morrow of the Kapp putsch, Hitler
was officially discharged from the army, and would from then on devote
himself exclusively to politics. He set out to rebuild the party, which
was so broke that it did not even have a rubber stamp, 90 by changing
its name to the 'National Socialist Workers' Party of Germany' (NSDAP).*

Nationalsozialistische deutsche Arbeiterpartei.


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112 Conjuring Hitler


By February of the following year he had eclipsed all other personalities
within his burgeoning movement, and risen as its leader and unchallenged
propagandist. In August 1921, preparing for the clash against Communist
and Socialist militias, he assembled the nucleus of the SA (Sturm Abteilung:
'shock division/ also known as the 'Brownshirts'), which he disguised under
the charter of an athletic association.

While the SA were being fitted, Matthias Erzberger spent a holiday in the
Black Forest of Baden before his return to politics, which he had announced
in June at a meeting of his party - the Catholic Center-party, the Zentrum.
He intimately trusted that he would become Chancellor soon.

On his walk up totheKneiben mountain on August 26, 1921, accompanied
by a friend, he was accosted by two youths, who crippled him with bullets
and finished him off at close range as he crawled to seek shelter behind a
pine tree.

The police had warned him repeatedly of a possible attack. No tears
were shed. The conservative press wrote that: 'A man like Erzberger... was a
standing menace so long as he was alive.' 91 The killers, two young officers
by the names of Heinrich Tillesen and Heinrich Schultz, fled to Hungary,
aided by certain nationalist elements within the Bavarian police.

Hitler's shock troops were put to the test in November 1921 in the first of
a lengthy sequence of bloody tavern brawls with Socialist and Communist
workers: SA commander Rudolf Hess proved his mettle.

In May 1921, the London schedule for the war reparations was finally
disclosed. Germany presently owed the Allies a total sum of 132 billion
marks ($34 billion). The Germans were, unsurprisingly, outraged.

In June, the country went to the election booths, and the vote swung
unmistakably to the Right - no less unsurprisingly, the SPD, and with
it the republic, had pleased no one. Now the leadership was made of a
coalition of the Center with the Democratic Party. There began the so-called
Erfiillungspolitik (the 'policy of fulfillment'): the government declared that
Germany would do its best to comply with Allied demands.

Walter Rathenau, the reluctant victim of the Russo-German pact

Walter Rathenau was, despite the progressive if not revolutionary nature
of his late social visions, one of those diehards of yesterday's world - a
late captain of industry longing to become a Utopian king. He came
to symbolize the spiritual disarray of Germany: a country unhinged by
the war, and incapable of mastering the consequences. Resolved after
the defeat to commit seriously to politics, Rathenau, as Reich Minister,


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The Meltdown and Mein Kampf 113


would try to reason with the Allies on the subject of reparations and
foreign policy - the keystones of the British conspiracy. Though honest
and well intentioned, he, like Erzberger before him, would do so with a
conceit and presumption such that all he would be able to procure for
Germany and himself was a death sentence from the Right-wing clans.
His was but one of many remarkable German tragedies of the era: an
exceptionally gifted individual who refused to acknowledge the devilish
entrapment into which the British had fitted Germany after the war;
he refused to own that he was in fact attempting to do politics 'in a
cage,' and that no amount of maneuvering, however brilliantly conceived,
could dissolve those constraints. Not even a man of his stature, in fact,
would be able to achieve a single task of all those he had set out to
accomplish; and his conspicuous political impotence culminated in the
reluctant acquiescence to the 1922 deal between Russia and Germany: a
semi-secret military cooperation that would pave the way for Germany's
martial rehabilitation, and would last, unbelievably, two decades - until
the very last days preceding Barbarossa, in June 1941.

By May 1921, Germany paid only 40 percent of the preliminary $5 million
slice it owed according to the Treaty of Versailles. When the final bill was
issued the grand bluff of the reparations reached a climax amidst a welter
of conferences, experts' opinions, and infinite accounting cryptograms
filling the pages of Europe's financial papers that rendered the matter all
the more impenetrable: of the $132 billion, $82 billion was packaged as
bond issues to be honored in the foreseeable future, which is to say that
they were set aside and forgotten - the extra ciphers had been thrown in
for mere sensational display.

That meant that Germany was to pay the other $50 billion at a rate of
$2.5 billion a year in interest and $0.5 billion a year to reduce the total
debt. 92 An annual tranche of the debt amounted to around 5.8 percent
of Germany's 1921 GDP, or about 40 percent of the country's foreign
cbligations per annum: 93 to remit that much in gold or foreign exchange
seemed unthinkable. 94

Could Germany pay? She could if (1) the Reich scored a perennial budget
surplus, or (2) if she sold abroad more than she bought from foreigners: a
surplus on the foreign accounts would afford pools of foreign currencies,
which would be then remitted to the enemies of yesterday. The scheme
would in fact amount to sending gifts abroad: exporting gratis. Because of
her immense war debt, and because of the Allies' steely resolve to impede
Germany's competing on the world markets, neither condition was
satisfied 95 As proven by the murder of Erzberger, German absentees resisted


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114 Conjuring Hitler


taxation; and the French, themselves indebted to Britain and America,
refused to be paid the reparations in the only form in which they could
have been remitted: that is, through acceptance of German goods and
services. To cap it all, Britain placed a 26 percent tax on all imports from
Germany. Thus everybody knew, as Veblen had presumed, that Germany
could not, and thus would not pay.

So, Germany found herself beholden to France (and Britain), France to
Britain, and Britain to America: the United States was therefore saddled
with the unattractive role of the soulless financial taskmaster. Not a single
encounter at the top on the subject of reparations would end without a
choral entreaty to the American representatives to cancel the inter-Allied
debt. And not one would end without their 'sadistic' refusal. 96

As all blamed the Americans for the deadlock, the latter bounced the
issue back to the British, who blamed the French, who again blamed
the Germans. And so on. In this unique script of the theatre de I'absurde,
Germany, as Minister for Reconstruction Walther Rathenau saw it, played
the part 'of a sane man taken and confined against his will in an insane
asylum during a long period with the result that he gradually assimilates
the mental traits of his associates.' 97 Menaced in the distance by America,
harassed by a hysterical France, listened to but profoundly deceived by the
British hypocrite and her pet Soviet sphinx, Germany did go insane.

In such an atmosphere, Walther Rathenau made himself the victim of
hopeless candor when, in March 1921, he approached the US negotiators
to suggest that Germany could perhaps put an end to the charade by
cutting the Gordian knot: she could shoulder the Allied debts in bulk, by
offering to pay America $11 billion in 41 installments of $1.95 million
each. 9S Thereby she would indebt herself directly to the United States, set
the Allies free, and deflate at once the bulging load of European grievances.
Upon hearing the proposition, Washington hissed, and the British Foreign
Office rebuked: 'no such compromises would be tolerated.' A recent study
found Rathenau's proposal 'bizarre': thus, even to this day, Rathenau has
not been pardoned for partially discerning in a moment of stillness the
purposeful perfidy of the reparations."

Diplomats... handled the important but alien field of economics with
the circumspection of men charged with the care of an unpredictable
elephant, while [Rathenau] treated it with the nonchalance of the native
speaker. 100


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The Meltdown and Mein Kampf 115


And though he grasped the technical details of the matter at hand,
Rathenau yielded to vanity: like Erzberger, this other Demiurge of the
'possible' belittled the chauvinistic hostility of the German environment,
and thought himself fully capable, alone, to redress the fate of Germany
and shape her in his image.

On August 31, 1921, Germany paid her first billion gold marks of
reparations. The transfer was a veritable ordeal: the money was raised by
pawning with the international banking network thousands of tons of
silver and gold, which were conveyed by caravans of railroad boxcars to
Switzerland, Denmark and Holland, and by a fleet of steamers to the United
States - a treasure trove epic from the Dark Ages. 101 This first remittance
caused an immediate drop of the mark vis-a-vis the dollar, from 60 to
100 (marks per dollar). 102 As Germany suffered the hemorrhage of gold,
which by law had to cover every paper note in a ratio of 1 to 3, the market
predicted a fall in the 'value' of the paper mark. Indeed, in May 1921,
the German central bank had suspended the gold convertibility: in other
words, it had proclaimed that its notes were no longer 'as good as gold'
-the hyperinflation was approaching.

Walther Rathenau was the crown heir of an economic empire inherited
from his father, Emil, who had built it with the sweat of his brow. With a
patent purchased from Edison, Rathenau senior founded AEG (Allgemeine
Elektrizitats Gesellschaft, the 'General Electric' of Germany), which
illuminated Berlin and Germany, and through interlocking stakes in a galaxy
of local companies and foreign banks, brightened Madrid, Lisbon, Genoa,
Naples, Christiania, Mexico City, Rio de Janeiro, Irkutsk, and Moscow. 103 A
brilliant scion of a great corporate dynasty, Walther was groomed, schooled
and raised like a prince; he juggled with polyvalent facility business
intricacies and technological detail, which he seasoned with Talmudic lore
and classical erudition. 'He talks about love and economics, chemistry and
trips in kayaks; he is a scholar, a landowner and a stockbroker, in short,
what the rest of us are separately, he is rolled into one.' 104

Rathenau's first political assignment, like Erzberger's, concerned the
colonies of the empire: in 1907 he had accompanied the colonial secretary
Dernburg on an inspection in Africa. During the war, Rathenau helped to
organize the home front by designing the mechanics of an imposing system
of resource mobilization (the so-called Kriegswirischaftsgesellschaften),* which,
via requisitions, foreign purchases, and the procurement of ersatz materials
(substitutes), fed the hungry war machine 105 - a tradition that would be

Consortium for the War Economy.


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116 Conjuring Hitler


resurrected in Goring's Four-Year Plan in preparation for World War II*
Then, sensing 'change' in the air, as the war had unleashed new spiritual
flows, he etched out a blueprint for tomorrow's society in a bestseller that
consecrated him as one of Germany's most popular authors.

Society, he averred without blushing, was governed by '300 individuals'
who knew one another, an odious oligarchy, 'arrogant in its wealth,'
exercising 'both secret and open influence,' which was trailed by a 'decaying
middle-class. ..[endeavoring] to save itself from being pushed down into
the proletariat,' all the while 'the real proletariat. ..silent, stands beneath;
a nation by itself, a dark sea.' 10& In Von kommenden Dingen (In Days to
Come), written in 1916, Rathenau prophesied that 'a will surging from the
depths of the folk soul' was bound to destroy capitalism; 'a responsible
lordship' made of 'intelligent dynasts' would cleanse Germany of the
encumbrances and injustices of inheritance rights and forever impeach
free trade in capital, so that the community's wealth might be shielded
and its lifeblood conserved. In October 1918, he could not bring himself to
digest the surrender of the Reich; from the columns of the Vossische Zeitung,
he summoned the German soldiers to put up a dogged resistance, while
haranguing the citizenry at the same time to take to the streets in a levee
en masse. Then, in 1921-22, he contributed the fruits of this kaleidoscopic
experience to the Erfullungspolitik - he too was now a modern champion
of the possible, as well as a compromised creature of the old order.

In April 1922, as Weimar's Foreign Minister (since October 1921), Rathenau,
despite himself, became at last the unwitting prey of the 'asylum tactics'
played against Germany on the international scene. The occasion was the
Genoa conference, which for the first time since Versailles, gathered 'both the
Russians and the Germans - the two bad boys of the European family. ' 107

At Genoa, the customary comedy was re-enacted: Britain encouraged
France by inviting it to draft, jointly, a memorandum on reparations, in
which emphasis was laid on Article 1 16 of the Treaty. Article 116 provided
that Russia could, whenever she wanted, be cut in on the German
reparations. 108 The gambit whetted France's appetite in that she believed
that she was offered yet another weapon with which Germany might be
further excruciated: and that was by offering Russia an economic partnership
to be funded not by France herself, but by an additional amputation of
Germany's wealth. The Soviets were then instructed to exploit this threat by
luring the Germans, who were fearful of Article 1 16, into ratifying a secret
alliance with them. The stratagem was orchestrated from Lloyd George's

See Chapter 5, p. 227.


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The Meltdown and Mein Kampf 117


residence, the Villa Alberti, where British, French, and Russian diplomats
held negotiations behind closed doors, while the Germans were left outside
to consume themselves with anxiety. Three times Rathenau demanded to
be received by the British Prime Minister while the poutparlers were under
way; three times he was ignored. Historians have lamented ever since Lloyd
George's 'discourtesy,' but the 'impoliteness' was merely the final ruse in
a critical sub-game of Versailles' ploy. Late in the evening of April 14, the
Russians sought out the Germans, and proposed to retreat like elopers to
the nearby resort of Rapallo where they would conclude a friendly compact.
The German diplomats held a session in their pajamas, and after much
deliberation, agreed - it was 'Rathenau who held out the longest.' 109 The
Treaty of Rapallo was signed on April 16, 1922. Rathenau signed somewhat
against his will. 110 He was attracted to the Bolshevik idea, but he then
confided to his entourage that he wished he could have undertaken such
a step with the official accolade of the Allies: he was not comprehending
the game in the least; he had lost all touch with political reality.

The treaty with the Russians acknowledged the intention of both countries
to resume commercial intercourse, and nullified any financial cross-claims
that existed before the war: in other words, Russia would not claim any
moneys from Germany. This move seemed a tiny step in the direction
of the Eurasian embrace. But was it? Did Britain appear worried? Hardly.
Naturally France screamed with disappointment, but Maltzan, the German
diplomat in charge of Russian affairs, was seen dancing at the conference's
ball with Mrs. Lloyd George, whose husband entertained no doubt that
Rapallo signified first and foremost a pact of military cooperation between
Russia and Germany. Not only did the British Prime Minister not disapprove
of the treaty, but he also justified it conveniently and diplomatically as a
beneficent counterweight to France's bullheaded pressure to extend the
French border to the Rhine and thus dissolve German national unity: British
'appeasement' towards Germany had already begun. 111 Thus Britain had altered
her tactics somewhat: now she openly declared that a rehabilitation of
Germany was necessary to counteract French arrogance; but behind this
ploy lay Britain's ultimate goal, and that was the gradual rearmament of
Germany. Here we may observe another standard British routine at work:
Britain used French hostility as a pretext to shield Germany, and relied on
the assistance of Russia to achieve the objective.

Twice so far the expectant recruits of the Freikorps had been let down:
after the liquidation of the Councils, and with the cacophonic coda to the
Kapp putsch. In the seedy rentals of Berlin, they talked politics, plotted,
and drew up lists. Lists filled with names of Erfullung politicians, artificers


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118 Conjuring Hitler


of the possible that were trying their best, by nurturing Weimar, to impede
the exhalation of 'mystical forces which the mind, with all its patterns,
cannot get to know.' 112 Weimar's new 'outlaws' -Cadets, Freikorps veterans,
and demobilized soldiers, the young crop of Germany's Conservative
Revolutionaries - were on the hunt: men like Rathenau stifled them - he
was on the list.

'One can't breathe!' panged ex-Naval officer of the Ehrhardtbrigade, Erwin
Kern, 24, as he painted his despair to his comrades Ernst von Salomon and
Hermann Fischer. 'We've got to pierce the crust to let in some air in our
cramped German spaces!' 113 Von Salomon would live to tell the tales of
these Geachteten (the Banished Ones) in a book by the same title that would
become one of the 'sacred texts' of Germany's New Right. 'On November
9,' Kern cried, 'I shot a bullet through my head. ..I am dead. ..the force
demands destruction, and I destroy...! have no choice but to devote myself
to my beautiful, implacable destiny.' 114 Rathenau?

Rathenau had begun an 'active policy' of fulfillment; he was 'a bridge': a
bridge between Jewry, which Rathenau depicted as 'the dark, pusillanimous
cerebral breed' of his ancestors, 115 and the blond heroic, mindless Aryans,
whom he adored; he was a corporate scion wishing for capital taxation
and the abolition of bequeaths; an economist yearning for theocracy, a
technician dreaming of the commune. Rathenau, von Salomon complained,
was too much, and too little, 'all rolled into one,' like his book, Of Days to
Come, which all the Geachteten had read and thought it lacked 'dynamite':
to them, he was attempting to lock Germany on a path that was not her
own. 116

The assassination was scheduled for June 24, 1922.

Von Salomon, not selected to turn the heat on Rathenau because of his 19
years of age, asked Kern what to tell the police if the rest of the commandos
were arrested. 'Say whatever you will,' he replied, 'say that Rathenau was
one of the Elders of Zion, or some such idiocy. . .They will never understand
what moves us.' 117

Meanwhile, on the political stage, Rathenau, like Erzberger, was thrown
to the wrath of the Right. The Nationalist partisan Helfferich, again, not
content with having driven Erzberger to his death, resumed the invectives
of yesteryear to lash out at Rathenau in the same fashion.

As the pan-Serbs did with Ferdinand, the Outlaws ambushed their victim's
limousine. As the car came into view, Kern sallied forth and squeezed
on Rathenau 'a nine-bullet burst point blank.' Fischer lobbed a grenade.
Rathenau was seen being catapulted in the air. His chauffeur sped him
home, where a doctor pronounced him dead. lis


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The Meltdown and Mein Kampf 119


The mark began to plummet: from 370 in June it fell to 1175 to the
dollar in August, 1922.

Barricaded, after a mad chase, in the top floor of the ramshackle castle
of Saaleck, the two young assassins, Kern and Fischer, made a last stand
against the siege of the police. In the ensuing shoot-out Kern was killed
by a bullet through the temple. Fischer laid his companion on a stretcher,
shouted out the window a last 'Hoch!' for his leader Ehrhardt, and blew
his brains out. 119 At the trial, Kern's accomplices perfunctorily rehashed
as the motive for their crime the 'idiocy' that Rathenau was indeed one of
the 300 Elders of Zion conspiring to dominate the world.

All these murderous youths were armed and financed, and all recent
political killings, including Erzberger's and Rathenau's, were systematically
traced back to the conspiratorial panel of an unidentified OC (Organization
Consul, Ehrhardt's informal crew of bodyguards). Speculation was rife, but
proof was scant; Freikorps commander Ehrhardt, for instance, denied that his
boys had anything to do with Erzberger's death, though he did not entirely
disown the kids that participated in the assassination of Rathenau.

Yet forensic certitude was never of the essence: everyone intuited that
the 'boys' were simply the longa manus of Germany's reactionary Right:
Erzberger, Rathenau, and many others, were but the collateral damage
of this horrid fratricidal feud, which Britain had caused by shoehorning
the dynastic Reich into a sham republic. She made the Germans play the
parliamentary game, while waiting for the Reaction to make a comeback
at the opportune time: these deaths, like the rest of the innumerable
catastrophes that would beset Germany throughout the interwar period,
were the effect of this perverse plan.

[Writer Ernst Jiinger] asked [von Salomon] in his drawling Lower Saxon
accent: 'Why didn't you have enough courage just to say that Rathenau
was killed because he was a Jew?'. ..[von Salomon] answered: 'Because
it wasn't so.' 130

Hitler, however, disapproved of the Outlaws' terroristic tactics: 'It is
laughably illogical to kill some [isolated] fellow,' he commented, 'while
nearby sit dogs who have two million dead on their conscience. [What we
need is] 100,000 fanatical fighters for our way of life.' lzl

The Treaty of Rapallo was the formal ratification of an entente that dated
back to late 1920, when the envoys of the Truppenamf chief, General von

'A camouflage for the General Staff, which Germany was forbidden, by the Versailles
Treaty, to maintain' (Carr, Bolshevik Revolution, p. 319).


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120 Conjuring Hitler


Seeckt, had established contact with Trotsky, Radek, and the commanders of
the Red Army for laying the groundwork of both countries' rearmament. 122
Already by January 1920, even before the Kapp putsch, Seeckt had accepted 'a
future political and economic agreement with soviet Russia as "an irreversible
purpose of our policy", while at the same time proclaiming that "we are
ready to form a wall against Bolshevism".' 123 Putatively, the cornerstone of
the new alliance was the destruction of Poland, their common enemy, yet
Poland for the time being was left alone while military collaboration on
the other hand was sizably scaled up. Facilitated since 1921 by the Soviet
factotum in Berlin, Vigdor Kopp, with the approval of Trostky, and the full
intelligence of the French, British, and Polish services, the promotion on
Russian soil of German drilling stations and factories of poison gas, planes,
and tanks, and an intense traffic of officers in both directions proceeded
most smoothly. 124 For the purpose 'General Kurt von Schleicher created
within the Defense Ministry the "Special Branch R", which in 1922 sent the
first officers to be trained in Russia. ..A number of Russian officers, among
them the future Chief of Staff of the Red Army, Tukhachevsky...came to
Berlin to study the way of the Truppenamt trained aspiring officers.' 125
Further plants for military production were built in Turkey, Sweden, the
Netherlands, and Switzerland. 126

The telegraph wires remained hot with news of German arms sales to
Russia, [and] German officers serving in the Russian army... Foreign Office
officials noted these violations of articles 170 and 179 of the treaty of
Versailles*, but nothing happened. At no time did the Foreign Office
visibly react to the incoming information. In reply to a parliamentary
question concerning German-Russian negotiations [Secretary] Curzon
simply evaded the issue by stating that His Majesty's Government had
no official information about the talks. 137

And so, if Germany had to rearm, she had to do it in a 'presentable'
fashion: namely by hiding the process behind a pact of outcasts, as it were,
sealed with the Soviets, which were engaged from the start in a double
deception: passing off as capitalism's enemy and Germany's friend. As for
France, Britain would never let her perform as anything other than the
perennial thorn in Germany's side.

With or without Seeckt, who resigned in 1926, or Rathenau, the so-
called Abmachungen - the 'special operations' of the Reichswehr in Russia

Article 1 70 forbade m Germany the production, import and export of 'war material,'
whereas Article 1 79 prohibited the promotion of German foreign military missions
and exchanges.


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The Meltdown and Mein Kampf 121


-would continue until March 1935, when Hitler abrogated the Treaty of
Versailles. 1ZS

Indeed, the only stable feature of the Weimar regime was the tenure
of Defense Minister Gessler, the army's nexus to the government, who
would hold on to his ministerial saddle through 13 Cabinets, from 1920 to
1928. The constancy denoted the permanence of the Reichswehr as 'a state
within the State, ' provisioned by a special budget out of the purview of the
Reichstag, which cascaded in a myriad of secret slush funds untraceable
even by the most seasoned of parliamentarians.

Since 1920, the German Republic always had a double government: that
of the Chancellor of the Reich with his ministers and that of the generals.
Whenever a disagreement arose, the army always won. All of this was
called 'German democracy.' 129

The hyperinflationary purge of 1923

The collapse of the German currency in the winter of 1923 is one of
the most famous economic disasters of the twentieth century. The great
German inflation concluded Weimar's preliminary period of turmoil;
and it was of tremendous significance for it projected the Nazis to the
forefront of international news. This episode was a spectacular illustration
of the way in which financial earthquakes might give birth to peculiar
political developments. There is no basis for claiming that the plotters of
Versailles could have aimed at provoking a Nazi coup by engineering a
financial landslide. But there remains the incriminating clue that the British
deliberately abstained from sequestering at Versailles the certificates of the
German war loan from their wealthy subscribers, who held the bulk of such
securities. Now, when the victors of World War I imposed the payment of
vast sums in foreign cash to Germany whose debt bubble was twice the size
of her income, it is somewhat difficult to believe that they could be unaware
of the serious repercussions of such a set-up. Therefore, considering how
deeply proficient the British stewards were in the matters of finance, we may
confidently assume that London fully anticipated a short-term financial
calamity in Germany. What Britain most likely sought to obtain therefrom
was a 'purge' of the Reich's accounts: as a gargantuan inflation has the
effect of annulling the government's debt, the Allies were possibly counting
on turning Germany into a tabula rasa for a massive foreign investment
campaign, which would indeed be organized from London with American
money in 1924 (see Chapter 4). In addition to this immediate and crucial


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122 Conjuring Hitler


economic result, the annihilation of the country's currency, clearly, might
also be expected to destabilize the nation greatly; and at the paroxysm
of Germany's monetary dissolution (November 1923), finally, the Nazi
movement irrupted onto center stage. It attempted, and bungled, a rash
coup in Munich, which recycled even a few Kappists. But, most important,
it introduced to the great audiences the 'gifted,' 'erratic' drummer of the
movement: the 34-year-old Fiihrer, Adolf Hitler.

Thus evolved the exchange rate of the paper mark to the dollar according
to the official statistics of the Reichsbank and the quotes of the Berlin
Exchange between 1918 and 1923 (Table 3.1): 130


Table 3. 1 Paper mark - dollar exchange rates, 1918-23


Exchange rate

1 October 1918


1 October 1919


1 March 1920


1 June 1920


2 January 1921


1 July 1921


2 January 1922


1 July 1922


2 January 1923


1 July 1923


1 August 1923


4 September 1923


1 October 1923


1 November 1923


30 November 1923



In this interval, the German currency traversed four phases. 131 In 1919,
with the lifting of the blockade, as imports of necessities far exceed exports,
the government relied on its depreciated currency to stimulate international
commerce. Foreign investors banked on it too, and from July to November
1920 the mark experienced a short spell of 'good health': unemployment
was virtually null and trade, domestic and foreign, was brisk (second
phase). Then, from May to November 1921 (third phase), when the London
schedule of reparations began to bite into the foreign reserves of Weimar,
the upswing of 1920 betrayed its artificial nature, and the public alienated
itself from the mark progressively: in other words, people started to get rid
of their marks either by jettisoning them on the exchanges or spending
them on tangible goods (Sachwerte). From late 1921, and especially since the
assassination of Rathenau (June 1922) until the end of the 1923, Germany


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The Meltdown and Mein Kampf 1 23

was in the clutches of hyperinflation - that regime of currency depreciation
whereby prices rise by a monthly rate greater than 50 percent. 132

Exasperated by America's veto to the cancellation of the inter-Allied debt,
France, in a fit of fury far exceeding the expectations of Britain, decided to
improvise: on January 9, 1923, she accused Germany of defaulting on her
obligations. Two days later, 17,000 French and Belgian troops, accompanied
by a corps of professional engineers, marched in the Ruhr - West Germany's
coal-rich industrial basin - to commandeer the deliveries of coal, which, by
the letter of the Treaty, were their due. Alluding to the intransigence of a
number of Midwestern congressmen behind the American veto to European
debt remission, a British journalist sneered: 'The secret of the Ruhr must
be sought into the Mississippi Valley.' 133

Britain publicly condemned the invasion, yet she did not budge to hinder
it. The area occupied was no more than 60 miles long by 30 miles wide, but
contained 10 percent of Germany's population and produced 80 percent of
Germany's coal, iron, and steel; its railway system was the most complex
in the world. 134

The 'policy of fulfillment' died with Rathenau: the Wirth Cabinet fell
in November 1922, to be replaced by Weimar's first uniform 'capitalist
government,' 135 headed by the director of a prominent shipping company
Wilhelm Cuno. When the French invaded, Cuno proclaimed Weimar's
new course, 'passive resistance' it was called: a general summons to resist
Allied prevarication by refusing to comply. The French raped, provoked,
and bullied. Special money was printed by the state to sustain the striking
miners. In 1923 an egg came to cost 8 million marks, and pasteboard shells
were substituted for wooden coffins. 1 36 Unemployment trebled, prostitution
was rampant, and malnutrition in the slums led to malformation: working-
class children, according to zealous Reich inquests, formed a miserable
lot in these days. The Nationalists were ablaze. For the first time since
1919, the people rallied solidly behind the Republic, though Hitler and the
Nazis roused them to boycott the general strike: 'Weimar is the proximate
enemy,' Hitler raged, 'not France!' All the while, countless acts of sabotage
by isolated and despaired patriots - 400 of whom would be executed,
300 by Germans - hardly made a dent in France's requisitions: the Ruhr
industrialists themselves, for fear of losing market share, guaranteed the
supply. At dawn the workers rose to extract the coal; they heaped it into
towering piles, which at dusk the invaders carted off to France. So much
for 'passive resistance,' which, with the complete collapse of the mark in
late 1923, marked the catastrophic conclusion of Cuno's Cabinet and of
Weimar's convulsed preamble. 137


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124 Conjuring Hitler

How could a single dollar reach a quotation of 4.2 trillion marks by
November 1923? Two broad explanations have since been advanced: an
inculpatory and an exculpatory one. The Anglo-American inculpatory thesis
held in brief that the Germans cheated their way out of the reparations
burden by printing money recklessly; whereas according to the German
exculpatory thesis, the reparations toll imposed at Versailles had sent the
Reich authorities scrambling for foreign cash, which they could only obtain
by depleting part of the country's stock of precious metals, and by selling
marks ever more cheaply. Such a drop of the Reichsmark abroad, so went
the German thesis, rendered imports more expensive, and therefore caused
a general rise in price levels: the general price increase spread to wages
and salaries, and forced the government to accommodate, by running
an exploding short-term debt, the growing requests for more means of
payment. In the words of Reichsbank governor Havenstein:

The fundamental cause... is the boundless growth of the floating [short-
term] debt and its transformation into the means of payment through
the discounting of the Reich Treasury bills and the Reichsbank. The root
of this growth, the enormous burden of reparations on the one hand, the lack of
sufficient sources of income for the ordinary budget of the Reich, on the other,
are known. . .For the Reich must live, and real renunciation of discounting
in the face of the tasks set by the budget. ..would have led to chaos. 13S

The British thesis, more specifically, ascribed every surge in domestic
prices and the international fall of the mark to the steadily swelling short-
term indebtedness of the Reich, which, indeed, as shown by the record,
suffered an irresistible expansion throughout the triennium 1920-23. What
additional money the public was not eager to lend to the state, the latter
procured from the central bank, which 'discounted,' that is, advanced
cash against the Treasury bills: to every such advance corresponded a net
injection of liquidity into the economy. Every time the central bank bought
government bonds, it 'transformed' these bonds into 'money': partly in
check money, which traveled on checking accounts, and partly in cash
-bills and coins, which the state printed and minted upon orders from
the central bank. Up until mid 1922, the public and the Reichsbank each
covered half the Reich's expenditures.

This was how the British ambassador in Berlin, Lord d'Abernon,
characterized the Reichsbank policy:


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The Meltdown and Mein Kampf 1 25


[Reichsbank governor] Havenstein... although honest and straightforward,
is ignorant and obstinate. ..Havenstein apparently considers that the fall in
German exchange is quite unconnected with the gigantic increases of German
note issues, and he goes on merely turning the handle of the printing
press, completely unconscious of its disastrous effect. 139

Despite the state of disrepair that still characterizes the debate on the
German hyperinflation, the British thesis seems to have won the day and
acquired in time the veneer of dogma: in fact, it is simple, plausible, self-
righteous and, despite d'Abernon, completely false, whereas the German
argument, instead, is ashamedly elliptical, and thus only half true.

German wealth was rated at 300 billion marks in 19 13. 140 Approximately
a third of this wealth had been shot into the air during the war, which left
Matthias Erzberger in 1919 with the implausible task of taxing, especially
by means of his capital levy, about half the country's patrimony to redeem
the 98 billion marks of the war loan: he failed, and paid with his life for
having tried.

But Erzberger's attempt triggered a fundamental reaction that has been
egregiously undocumented by the Reich statistics and the vast literature
on the subject: capital flight. In the absence of reliable figures, many a
'scholar' 141 has hastened to belittle the significance of the capital escapades
through the 'the hole in the West' (das Loch im Westen), that is, all those
avenues afforded by complacent banks for the export of capital out of
Germany and into the marketplaces of the West. Yet there is no ground
to impeach the supposition that after 1919 the net transfer of German
wealth abroad was immense. In 1923, the New York Times, in an attempt to
assess the magnitude of German deposits in the United States, arrived by
guesswork at a figure of nearly $2 billion, 142 that is, approximately a quarter
of Germany's GDP in 1923: that in the United States alone. 143 But the
largest recipient of Germany's capital flight was reputedly Holland, though
Switzerland, Norway, Sweden, Denmark, and Spain were the repositories of
much additional fleeing money. Innumerable steel and industrial potentates
literally dismantled the factories at home and re-erected them across the
border. From the Netherlands, the re-established corporations proceeded
by mergers to acquire in Germany insolvent concerns, which were used to
camouflage profitable ventures abroad: these German branches supplied the
holding company headquartered in Holland for amounts denominated in
paper marks, and well below the true value of the consignments to defraud
the German fisc, while the mother firm stored abroad the precious foreign
exchange earned through her international sales. 144


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126 Conjuring Hitler


After 1923 the [Dutch] economy began to grow at an unprecedented
rate... The large deficits on the balance of trade disappeared... Shipment
of goods through Dutch harbors that were dominated by transit trade
with the German hinterland grew at the staggering rate of 16% p. a.
between 1920 and 1929. ..The Dutch economy had never seen anything
like this before, and these rates still compare favorably with the 1950s
and 1960s. 145

Goodwill. Holland would not show herself an ingrate 20 years later: in the
first months of World War II, when fighting in France was still in progress,
Dutch arms manufacturers already accepted German orders, and the railway
system was put at the disposal of the German authorities so that trains
could run directly to the French border. 146

Large patrimonial possessions in Germany were seldom caught in the nets
of the fiscal authorities, which unavoidably ended up collecting (depreciated)
money mostly from the middle class: Erzberger's financial crusade, run
aground by the inflation, boomeranged and ended up harming his very
proteges. By 1921, the Right would have wrecked in the Reichstag every
project designed to confiscate the money of the wealthy investors. 147

So capital flight, as mentioned earlier, was already in motion by the end of
1919; what quota of Germany's wealth the absentees managed to lay away
in foreign countries is unknown. The transfer of such funds in marks, and their
subsequent conversion into other currencies, exerted a tremendous pressure on the
exchange value of the mark, and on the Reich's budget, which was deprived to a
large extent of its taxable base.

Contra the British thesis, the advocates of the German explanation have
repeatedly and justifiably called attention to the Reich statistics, which
reveal: (1) that the public debt rose as the inflation regressed, and vice versa
(lack of systematic correlation); (2) that the drop in the exchange value of the
mark was always far steeper than the increase in paper money circulation; 148
and (3) that the so-called 'external' depreciation of the mark always preceded
the domestic rise in prices, the 'internal' depreciation: 149 that is, it was only
afterthe mark lost points abroad that the currency's growing weakness was
revealed at home by rising prices - which led Havenstein to arraign the
reparations payments for such a loss and its pernicious consequences. But
the (external) depreciation was truly driven by the capital flight, and only
at a second remove by the tribute of Versailles.

The fact that in 1920 the fall of the mark was not as dramatic as a massive
outflow of capital would cause it to be was due to a counterbalancing of
foreign capital, which began earnestly in 1920. Between 1919 and 1921,


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The Meltdown and Mein Kampf 127


foreigners acquired more than 40 percent of all German liquid balances (that is,
cash and checking accounts). Theirs was a purely speculative bet: as soon
as Germany began to disappoint the investors' gluttonous anticipation, a
scramble to convert these balances should have followed. 150 Thus what
the German absentees withdrew, the rich 'tourists' - British, American and
French - provisionally and partly poured back in the course of an unedifying
razzia, whereby they also looted with their 'strong' currencies Germany's
'dirt-cheap' property, goods, and services.

The German thesis provided only a partial explanation of the phenomenon;
aside from glossing over capital flight, it made no mention of the kernel
round which the hyperinflation snowballed.

The seed of the meltdown lay, quite naturally, in the war loan. 151 In this
connection, British press representative Lord Riddell noted in his diary
during his stay at Versailles:

We talked of the indemnity. [Lloyd George] read me [a] memorandum
suggesting seizure of the German War Loan, which would place the
Allies in possession of eight million pounds. I said: 'That is a ridiculous
scheme. It begs the whole question.' Lloyd George: 'Yes. A pretentious
foolish proposal.' 152

It is not at all clear why Lloyd George should have thought that the
seizure of the German war loan for the purpose of indemnification was
a 'pretentious, foolish proposal.' In fact, the opposite was true: it did not
beg the question,' it would have actually solved it, provided 'the question'
remained indeed how to exact from the Germans a tribute with which the
devastated areas could have been rebuilt.* Therefore the only remaining
explanation accounting for the astounding 'negligence' on the part of the
British was that they intentionally left the bomb ticking. The ultimate
cbjective being, as mentioned above, to purge the Reich of its war debt,
and proceed to bail Germany out with foreign capital in the second half
of the 1920s (see the following chapter).

Simple ratios afford some interesting considerations: between 1919 and
1920, the money allotted to pay interest on the war loan and redeem (in cash) the
certificates not renewed by the subscribers amounted approximately to 30 percent

Which could have been effected by seizing the War Loan, freezing the principal,
reducing the amount of the annual interest payment, extending the diminished
payments over two or three decades, and allowing Germany at all times to discharge
her obligation by paying in kind. But in the light of the game that was being played
by Britain, which was to impoverish the ordinary people and strengthen the German
elite, these considerations are by the way.


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128 Conjuring Hitler


of the Reich's comprehensive expenditure - that is, a figure roughly equivalent
to 60 percent of all money (cash and check money) created in Germany during
that biennium. 153

In fact, as they exported the country's wealth abroad while the mark
depreciated, the wealthy Germans also cashed in their war loan certificates:
between 1920 and early 1922, 50 percent of the war debt had been
refunded by the state. The other half stayed in the hands of the petty
investors, who clung to their certificates till the end, when they would be
worth nothing.

The interest payments, on short- and long-term state bonds, plus the redemption
of the war loan certificates into cash, contributed a net addition of monetary
signs on the markets, with no physical counterpart whatsoever, it was pure 'air,'
pure inflation.

The public conveyed this net shot of liquidity along two avenues. They
converted them either into foreign currencies or tangible goods, and thus
depressed the mark further. Alternatively, or in conjunction, they reinvested
them in short-term Reich bills, which were, until late 1921, still considered
'safe': needless to say, such recycling imposed an ever growing layer of
interest dues on the books of the Reich.

It was this second channel that precipitated the herd movement in late
1922. In 1920 the foreigners followed suit and bought the Reich's bills: the
meltdown was briefly postponed. The decline of the mark was irreversible,
however: after Rathenau was killed, and the Ruhr invaded, the debacle
triggered a stampede of conversions of Reich bills into cash, which led to the
frantic issues of late 1923, when the state, impotent before the innumerable
requests for redemption, activated the country's provincial mints to print
notes around the clock. Such was the meltdown: a wholesale conversion
of government bonds into paper money.

Havenstein was not 'playing the victim' when he lamented that 'his
hands were tied.' 'The quantity of notes issued every year. ..depended
exclusively (then as much as today) on the number of Treasury bills that
the public was willing to renew, subscribe, or not renew.' 154 Thus Hitler,
in a private conversation, condensed in 1941 the other half of the work of
inflationary dynamics - to which, in spite of all, he owed his grand debut
on the political stage:

The inflation could have been overcome. The decisive thing was a home
war-debt: in other words, the yearly payments of 10,000 millions in
interest a year on a debt of 166 thousand millions... To pay the interest the
people were compelled to walk the plank with paper money - hence the


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The Meltdown and Mein Kampf 1 29


depreciation of the currency. The just thing would have been... to suspend
payment of interest on the debt... I'd have forced the war-profiteers to
buy with good... coin of the realm, various securities which I would
have frozen for a period of twenty, thirty or forty years... Inflation is not
caused by increasing the fiduciary circulation. It begins on the day when
the purchaser is obligated to pay, for the same goods, a higher sum than
asked the day before. 155

In sum, the causal sequence: (1) to pay interest on the enormous war
loan, the Reich commissioned to the Reichsbank a vast amount of cash and
check money, which was shot in the system, causing domestic prices to
climb steadily; (2) when the rich perceived that the inflation was eroding
their wealth and fearing Erzberger's draconian tax reform, they began to
cash in their war loan certificates and send their capital abroad; (3) the
evaded capital denominated in marks was converted beyond the border
into dollars, guilders, pounds and francs: thus the mark depreciated steeply
against these (the 'external depreciation'); (4) the tax shortfall at home
forced the Reich to run further into short-term debt: it printed more bonds,
half of which until 1922 were converted into cash by the central bank,
the other half being bought by private savers; (5) to pay for reparations,
Germany purchased foreign cash, pawning gold and spending marks, and
thus weakened even more the Reichsmark vis-a-vis the other currencies; (6)
this reinforced external depreciation affected the price of imports, which
in turn affected the cost of living, and so prices kept soaring; (7) the Reich
sank ever more deeply into debt, but for about two years (1920-22) the
foreign and domestic subscriptions of government bonds prevented the
inflation from detonating the meltdown; (8) after the invasion of the Ruhr
in early 1923, the final repudiation of the floating (short-term) debt left the
government and the Reichsbank no choice but to reimburse in cash, mark
for mark, all the certificates that the investors, foreign and otherwise, were
no longer willing to renew; from then on all new bond issues, which the
Reich emitted to pay for its expenditures, were shouldered by the central
bank alone: it sucked in all the bonds and converted them into (by now
worthless) bank notes - the mark accordingly plunged.

In the avalanche, the Reichsbank suffered the drain of half of its gold, and
Governor Havenstein died of a heart attack in November 1923. The farmers
weathered the storm and kept their granaries bursting while the people
went hungry, the proletarians had nothing to lose, and the absentee owners,
their wealth being sheltered abroad, were better off than they were at the
end of the war. But the petty bourgeoisie (die Kleinbiirgertum), which lived


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130 Conjuring Hitler


and saved off a fixed income, was literally wiped out. The hyperinflation
effaced the savings of the middle class: from the mid 1920s this pauperized
cohort would merge into the Nazi mass following.

The Weimar hyperinflation was a story of foreign conspiracy and
domestic betrayal, hence the dishonesty of the British thesis and the
contrite incompleteness of the German apologia: contrary to what the
German defense held, the reparations did not set off the meltdown; they
merely speeded it up. Between 1919 and 1922, Germany would surrender
under that head around 10 percent of her income, 156 this was all Germany
would ever pay as war tribute to the Allies until the advent of Hitler. 157

Within the 'cage' of Weimar, the German elite savaged the mark by
exporting to nearby fiscal havens a considerable, though never assessed,
portion of the wealth of the country. The Reich palliated by running a
massive floating debt, which by 1923 had been all but redeemed in an
ocean of paper. It was rather the German absentees that had relentlessly
stabbed their own country in the back, allowing thereafter, unconcerned,
the bitterly resentful middle class to fall prey to the slogans of the Nazis,
who would frequently speak of the merits of Radikalisierung. Such was
precisely the development that Veblen foresaw when he uncannily presaged
that the reparations would foment 'radicalism at home.'*

In the end, the Reich was 'purged' of the war loan. Germany's entire
war debt, which had amounted to over a third of the entire wealth of the
Kaiserland at its apogee, was worth $1.23 (almost nothing) in November

Now that Germany was cleansed of her imperial debt, America suddenly
manifested the desire to reappear on European shores to meddle directly
in the monetary overhauling of her former enemy: Weimar was at the
threshold of her 'golden' quinquennium (1924-29).

The maiden storm of the Nazi fundamentalists

Right when the Reichsmark was about to hit bottom, they finally arrived,
the Nazis. At first, no one but a fistful of Bavarians showed any awareness
of this splinter group. They seemed to cut the figure of yet another bunch
of rowdy homeboys wanting to go back to the pre-war days of national
glory. But the Nazis, as the Germans would come to learn in time, formed
something altogether alien to the general patriotic nostalgia, which was
presently putting up a truculent resistance to the Weimar republic. Whereas
most veterans' and Nationalists' associations fluttered a variety of insignia
borrowed from their recent imperial past - eagles, crosses, and the black,

See Chapter 2, p. 86.


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The Meltdown and Mein Kampf 131


white, and red of the Prussian Reich - it was only the swastika that defined
the Nazis; it was as though the Hitlerites, riding German nationalism like a
Trojan horse, had come to diffuse a foreign creed in a common language - the
reactionary idiom understandable by the disheartened folk. The particular
cosmology symbolized by the dextrogyrate* swastika - all that lore treasured
behind the closed doors of the Thule lodged - never figured, not even
allusively in the speeches of Hitler and his followers; that was the exclusive
privilege of the initiates. Unlike the Nationalists of the old guard, the Nazis
were, instead, a religious sect fronted by a political outfit, the NSDAP, and
shielded by a private militia, the SA (later reinforced by the praetorian squad
of the SS). For the time being, however, with the conspicuous exception of
their emblem, the Nazis deported themselves like the vast majority of Right-
wing reactionaries: they fought their political battle against Weimar with
invectives, obstructionism, rabble-rousing, and continual clashes against
the 'proletarian battalions' of the regimented Left.

For the USSR, whose every move towards Germany seemed to complement
perfectly Britain's agenda, the disaster of the inflation presented a unique
opportunity to taunt the German Right with political subversion: on the
one hand the Soviets helped the Reichswehr rearm (as officially sanctioned
by the Treaty of Rapallo), while on the other they purposely enframed
the Nationalists. As later revealed in the memoirs of Krivitsky, the Soviet
intelligence chief in charge of German destabilization at this time, acts
of terror, sabotage and violence designed to spread fear in the German
community were carried out by Bolshevik agents through secrets cells,
called 'T-units.' These were funded and trained by Moscow 'to demoralize
the Reichswehr and the police [especially by means of] assassinations.' 158
The Red Terror was not intended to have durable effects, but sought only to
shock the country and provoke riots by instigating cohorts of patsies, young
German Communists for the most part, in gratuitous deeds of defiance:
tavern and street brawls, strikes, intimidation, and so on. It was on such
Soviet-inspired 'insurrections' that the Right-wing activists, and the Nazis,
would feed. Everything seemed to conspire in favor of the Hitlerites; they could
count on London for the political and financial strangulation of the German
people, and they could thank Moscow for causing all this Communist inferno,
which made them stand tall as the Fatherland's defenders.

It was thus hardly a shock to see the Hitlerites mature into political
adolescence in the fall of 1923, when Germany came to be torn by a
mayhem of strikes, street battles, and runaway inflation. During the Franco-
Spinning to the right,
t Chapter 2, pp. 59-60.


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132 Conjuring Hitler


Belgian invasion of the Ruhr, Hitler cried 'Let us have misery!' from the
columns of the Nazi organ, the Volkischer Beobachter. 159

Disgraced by the hyperinflation, the Cuno Cabinet fell in August 1923
and was replaced by a new one, led by the bourgeois Stresemann, which
featured the heartily unwelcome reappearance of Socialist ministers.

On September 25, owing to Nazism's rising popularity, Hitler was
nominated political chief of the Kampfbund, the encompassing 'Fighting
League' of the southern Right. But on September 26, 1923, the Bavarian
government, hell-bent on opposing the re-emergence of Socialist politics
and Hitler's takeover as Reaction's populist leader, declared a state of
emergency and delegated dictatorial powers to the former Bavarian Premier
von Kahr.ln Berlin, as a sensational counter-measure, the new Chancellor
Stresemann devolved power to the chief of the army, von Seeckt. The
head of the Bavarian Reichswehr, General von Lossow, resolved not to
pledge allegiance to his chief in Berlin von Seeckt, and put his armies at
the disposal of the seditious von Kahr. There ensued between Munich and
Berlin a confrontation that might have ushered in civil war.

In October, two states (Saxony and Thuringia) swept a coalition of
Communists and Socialists into power. Again, the German Right shuddered
with horror.

Attentively, Hitler studied the standoff between the Bavarian Nationalists
and the Berlin central. He understood that the forces of Reaction centered
in Munich were gearing up to replay a royalist putsch a la Kapp: this junta
of army generals and colluded administrators was ready to conquer Munich,
restore the Bavarian king to his throne, march against these newly elected
Red constituencies in Saxony and Thuringia, topple them, and eventually
storm Berlin. If this plan got off the ground, the royalists would be strong
enough to rally all Reactionary protesters to their banner and muffle in the
process the slightly discordant voice of the Nazis.

The Hitlerites had to act fast, and insinuate themselves onto the
monarchist bandwagon, so as to impede the latter to mastermind entirely
the forthcoming 'National Revolution.' Hitler chose the anniversary of the
Revolution, November 9, to stage an uprising, but upon being informed that
von Kahr was scheduled to address on the 8 a crowd at a large beerhall, the
Bugerbraukeller, by a day he shortened the wait. To snatch the revolution
from the royalists, the Nazis irrupted in the tavern. Hitler, interrupting
von Kahr, hopped on a table, unsheathed a gun and fired a shot at the
ceiling. He proclaimed the National Revolution and received an ovation.

Von Kahr, who had risen to power on the occasion of the Kapp putsch, stepped down
in 1921.


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The Meltdown and Mein Kampf 133


The monarchist triumvirate - Kahr, Lossow, and the commander of the
Bavarian state police, Seisser, present at the occasion under duress, vowed
its support.

But as soon as Hitler and his boyish neo-pagans turned their backs to
let Kahr go home, the latter proceeded to cross them at once by signing
with the approval of the army a decree promulgating the disbanding of the
NSDAP. When Hitler and his troopers discovered the treachery the following
morning, accompanied by Ludendorff, they improvised a desperate
cortege through the streets of downtown Munich, until they reached the
Odeonplatz, where files of policemen were waiting for them, poised to take
aim. The Nazis marched on. Fourteen were shot dead - the first martyrs
of Nazism. Hitler was thrust to the floor by a wounded companion, and
bruised his shoulder.

In fact, the previous night, Bavaria and Berlin had already made peace
behind the back of the Nazis: to pacify Munich's royalists, the armies of
General von Seeckt had marched from Berlin to overthrow the Leftist
governments of Saxony and Thuringia; afterwards, the Bavarians had given
up their plans for revolt. The Beerhall putsch was finished before it began.
Again, Seeckt's army prevailed: the General would rather see Germany the
captive of Weimar than surrendering her 'to those sinister forces which the
distracted masses had produced and which were aiming at power'. 160

The recidivist General Ludendorff, who had taken part in this putsch as
well, strode past the bullets with frosty indifference; he was taken in by
the police and promptly released. Hitler was arrested; he was arraigned for
high treason and turned his defense into a mesmerizing ventriloquy of
the nation's lament: his time was yet to come, but the turbulence of the
hyperinflation had made a German sensation out of him. Hitler stated: 'You
may pronounce us guilty a thousand times, but the Goddess who presides
over the Eternal Court of History. ..acquits us.' 161 He was sentenced to
five years' imprisonment in the state prison of Landsberg. The detention
would be commuted to nine months. Hitler's teacher, Dietrich Eckart, the
guru of the Thule lodge that had pulled a few strings in this putsch, was
also incarcerated; the shock of detainment rattled his heart, which failed
shortly after his acquittance.

In Landsberg, with the ghost-hand of his faithful Hess, Hitler composed
MeinKampf (My Struggle). To his master, the recently defunct Dietrich Eckart,
'who devoted his life to the awakening of his... people,' 162 he dedicated
the opus. The first volume would be published in July 1925, the second
in December 1926.


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134 Conjuring Hitler


Mein Kampf was the exploded scheme for the creation of an Aztec-
like empire in the plains of Central Asia. As a political program, whose
dispositions the Third Reich would enact with unfaltering rigor, Mein
Kampfwas a fusion of Gnosticism with a compatible strategic appendage.
As hinted in an earlier section, the religious fervor of the movement fed
off the lore of the Thule society. According to this peculiar cosmology,
'the body of light', that is, the German people as a collective 'folk spirit',
was encrusted in the corrupting darkness of matter, whose 'affirmers' were
believed to issue from the antagonistic clan of the Jews. Salvation for the
Germans could only be achieved by separation- separation from the fetters
of materiality. For the Germans, existence perforce signified struggle - the
two were inseparable. 163 The missionary elan was coupled with the political
imperative, as Bolshevism and Judaism were made to coincide. The enemy -
a Soviet International fraught with Jewish leaders - had nested in Russia.

'Germany awake!': such was the last verse of a strophe reworked by Eckart
in 1922, which his pupil Alfred Rosenberg, the future race ideologue of
the Third Reich, selected as the motto underlining the swastika on the red
standards of Nazism. 164

Sturm, Sturm, Sturm!
Lautetdie Glocken von Turm zu TurmL..
Judas erscheint, das Reich zu gewinnen,
Lautet, dafs blutigdie Seile sich roten...
Wehe dem Volk, das heute noch trdumt,
Deutschland erwache!

[Storm, Storm, Storm!

Toll the bells from tower to tower!...

Judas has come to conquer the Reich,

So may the bell ropes be crimsoned with blood...

Woe to those that are still adream,

Germany awake!]

In Chapters IV, XIII and XIV of Mein Kampf, Hitler detailed the geopolitics
of Nazism. Ovetpcpulation, always an oligarchic byword veiling genocidal
intent, marked the point of departure of the Hitlerite discourse. There
are four ways, he wrote, to tackle the hypothetical strain of human
reproduction upon Nature's powers of sustenance: (1) artificial reduction
of births, (2) internal colonization, that is, increase the yield of domestic


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The Meltdown and Mein Kampf 135


acreage, (3) acquisition of new soil, (4) engage in active world trade to
procure vital imports.

To limit birth, Hitler contended, was to shield at all costs the life one
saved: it was thus the avowed fostering of weaklings, who would enfeeble
the hardy fiber of the race. To colonize internally was but a prorogation of
the problem, and a disastrous one at that, as it afforded rival races a decisive
territorial advantage in the struggle for life. To acquire protectorates and
play the colonial game versus Britain, as the Second Reich had foolishly
done, had borne the catastrophic fruits now before the eyes of the world.
Therefore, the Fiihrer concluded, the only workable alternative was the
third one: conquest.


If land was desired in Europe, it could be obtained by and large
only at the expense of Russia... For such a policy there was but one ally:
England... No sacrifice should have been too great for winning England's
willingness... Only an absolutely clear orientation could lead to such a
goal: renunciation of world trade and colonies. . .Concentration of all the
State's instruments of power on the land army. 165

This was in synthesis the foreign policy of Nazism; nothing more and
nothing less than a profession of passionate admiration for Britain, whose
folklore and tradition Hitler revered, 166 and whose partnership he desired
above all else; a passion for Britain and a promised carnage in the East to
create the great Nazi empire of the Herrenvolk - the Chosen Race.

The heedlessness of the testament of Mackinder was all the more
astonishing as Hitler was on several occasions during the reclusion at
Landsberg, mentored by an expert strategist, by no less a figure than the
founder of the German school of Gecpolitik, General Karl Haushofer, who
was fluently conversant with these themes. As the derivation of Hitler's
anti-Semitism was easily traceable to Eckart, the formation of the Fiihrer's
geopolitical outlook was, instead, hazy. Hitler's 1920 allocutions made no
room for the staples of his mature oratory, namely the preoccupation with
overpopulation and the emphasis upon the notion of Lebensraum ('living
space'). Indeed, in August 1920, he jotted 'among the notes of one of
his speeches "brotherhood toward the East (Verbriiderung nach Osterc),"' 167
which attested to the shapelessness of his politics at the beginning of
his career. However, by 1922 Hitler was growing increasingly deaf to any
score of Eurasian harmony: conservative ideologue Moeller van den Bruck,
who longed to witness a blending of the Occident with 'the great human


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136 Conjuring Hitler


poetry of the Orient', 16S encountered the Nazi leader and engaged him in
a long discussion, at the end of which, exhausted, he confided to a friend:
'The fellow never comprehends.' 169 Ernst Hanfstaengl, a sophisticated
art dealer and early haut-bourgeois maecenas of the gruff lance corporal,
remembered Hitler rehearsing in early 1923 one of his customary lines:
'The most important thing in the next war will be to make sure we control
the grain and food supply of Western Russia.' 170 Hanfstaengl chalked up
Hitler's anti-Slav fixation to the influence of Alfred Rosenberg, who, indeed,
envisioned the reconfiguration of the Eurasian living spaces under the joint
rule of Germany, and her Nordic racial sisterhood: Baits, Scandinavians,
and Britons. 171

The point has been disputed, 172 yet there should be no reason to doubt
that Hitler perfected his geopolitical outlook with the mysterious Haushofer,
who was also Rudolf Hess's Professor of geopolitics at the University of
Munich, as well as an initiate into many secrets of the Orient. While it is
true that Haushofer did not voice in his voluminous scholarly production
a radical opposition to Soviet Russia, he nonetheless left the choice open
between 'the pan-Asiatic movement of the Soviets' and 'the pan-Pacific
alliance of the Anglo-Americans,' on the one hand, 173 and encouraged an
active geopolitical partnership with Britain, on the other. 174 Such a position
hardly entailed a choice, in fact; it was very much in keeping with late Nazi
diplomacy, which planned to sign a truce with Russia, only to smash her
later with the hopeful support of Britain.*

In the concluding section of the book, the geopolitical agenda of the
Third Reich was clearly exposed: 'The aim of German foreign policy,'
announced Hitler, 'must be the preparation for the reconquest of freedom
for tomorrow. ' ] 75 Britain, indeed, was bent upon 'world dominion, ' but she
had no further interest, he added, 'in the complete effacement of Germany,'
which would bring about 'French hegemony on the continent. 'Therefore,
he concluded, since: (1) 'Britain's desire is and remains the prevention of the
rise of a continental power to political importance'; (2) 'French diplomacy
will always stand in conflict with. ..British statesmanship'; and (3) 'the
inexorable mortal enemy of the German people is and remains France';
the initial conclusion was reaffirmed: Germany's priority was an alliance with
Britain. 17 ^ The foregoing argument, which failed to consider that the first
proposition best applied to Germany, was a reiteration of the fallacious
hope that Britain could be lured with such a shoddy bait as the hostility
towards France, when in fact the fate of the British empire had always been

See Chapter 5.


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The Meltdown and Mein Kampf 137

staked on the prevention of the Eurasian embrace. No amount of coaxing
could induce Britain to conceive her dominion otherwise.

During World War I, Hitler conceded, 'we could have propped ourselves
on Russia and turned against Britain.' But 'today conditions are different.' 177
Today, 'Fate itself,' insisted the Fiihrer, 'seems desirous to give us a sign':
Fate had handed Russia to Bolshevism. Germany would march to the East,
and in the East loomed the true, archetypal, enemy. To dispel the doubts
of his British readership, Hitler envisioned for an instant the possible
consequences of a German alliance with Russia: if it were consummated,
he averred, France and Britain would pounce upon Germany 'with the
speed of light.' The conflict upon German soil would degenerate into a
catastrophic devastation, against which the irremediably retarded industrial
base of Russia would afford no defense worth the name. Hitler's simulation
of the embrace with Russia was a mere abstraction, however, as no alliance
whatever was possible with the Bolsheviks, the 'scum of humanity' for
whom Germany was 'the next great war aim.' 17S Thus the embrace was
being contemplated, analysed, and unconditionally rejected.

A final admonishment from the 'Political Testament of the German
Nation' achieved the Nazi manifesto:

Never suffer the rise of two continental powers in Europe. Never forget
that the most sacred right on this earth is a man's right to till with his
own hands, and the most sacred sacrifice the blood that a man sheds
for this earth. 179

So here was a German 'drummer,' a hater of Weimar, a herald of bloody
crusades in the East, enamored of Britain, and haunted by nightmares of
breeds exceeding the 'natural limits'; a veteran of the Great War turned
hierofant of a cult disguised as a political party; and a charmer of Germany's
patriotic elite, who was also prone to crush France.

Admittedly for Britain, here was a dark horse that was truly worth playing.


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4 'Death on the Installment Plan'


Whereby Governor Norman Came to Pace the
Damnation of Europe, 1924-33


'Twas I did not yet know men. Never more will I believe what they say
what they think. It is of men and of men alone that one must be afraid,

How long will it take for their delirium to end, how long before they just
stop exhausted at last, these monsters?

Louis-Ferdinand Celine, Voyage au bout de la nuit 1

They gorge on God and the world. They do not sow. They just reap. They
are the sorcerers in the flesh [who] make gold over the phone...

Erich Kastner, Hymn to the Bankers 2,

T was sitting in a great waiting-room and its name was Europe. The train
was due to leave in a week. I knew that. But no one could tell me where it
was going or what would become of me. And now we are again seated in
the waiting-room, and again its name is Europe! And again we do not know
what will happen! We live provisionally, the crisis goes on without end!'

Erich Kastner, Fabian 3

The banking 'grid' and the rules of the gold game

Germany had to be resurrected, that is, rearmed and renovated: the
Veblenian prophecy had foretold this much. As seen in the previous chapter,
the date marking Germany's military reawakening was April 1922, when
the Treaty of Rapallo sealed that seemingly bizarre entente between the
generals behind Weimar and Russia's Red Army. Then one had to see to it
that the industrial basis of Germany was restructured as well. Before the
German economy might be overhauled, the drafters of Versailles waited
until the hyperinflation annihilated the old mark. That crash had been a
facile presumption on the part of the British experts: forcing the German
government, which was mired in a (war) debt that was twice as large as
the country's income, to pay reparations (in foreign cash or gold) without



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'Death on the Installment Plan' 139


confiscating that debt, had driven the Reich into a corner. In the strictures
of that corner - capital flight, depreciation of the mark, and tax evasion
- the standard action of the Reich-Reichsbank duo could not but lead to an
inflationary meltdown; there had been no mystery to it, no mistake about
it. The only uncertainty had lain in assessing the time lag required for the
completion of this financial burnout. It would have taken roughly three
years to wipe Weimar clean of the old debt incurred to fight the Great War:
that is, from 1920 to 1923.

In the meantime, the Bank of England found a suitable Governor
possessing the ability to direct the forthcoming German bailout from
London with American cash. A most strange and intriguing character by
the name of Montagu Norman was the chosen custodian: Norman would
be Governor for the extraordinary duration of 24 years (1920-44); a case
unique in the entire history of the Bank. During the last stages of the German
inflation, Norman initiated the process that would re-anchor Britain and
most industrialized countries to the so-called gold exchange standard. This
operation - grossly misunderstood by contemporary scholarship - was by
no means a sorry attempt bungled by a few nostalgic gentlemen of leisure to
resuscitate the monetary system of yore (pre-World War I). Rather, it was the
peculiar creation of the Governor, whereby he enveloped, so to speak, for
the length of six years (1925-1931) the banking networks of the West into
a single, highly leveraged and palpably unstable web of payments, which
was in fact designed to self-disintegrate. This too was a game, in which all
participating central banks 'chipped in' a given quota in gold. To amass
and protect the gold base of his bank, Montagu Norman in 1920 tested two
fundamental techniques, which he would employ a decade later to achieve
the Empire's objectives: (1) the pauperization of India by restricting her
money supply (that is, deliberate deflation) with a view to attracting Indian
gold hoards to London, and (2) the encouragement of massive monetary
expansion (that is, inflation) in America as a means to lure gold away from
New York, and convey it to sustain a steady flow of investment in Europe. By
the mid 1920s, Austria (1922) and Germany (1924) were the first countries
bailed out in this fashion, and the infrastructure of the latter was turned into
a technological jewel. The modernization of Germany was consummated by
unleashing speculative fury in America, whose public rushed to subscribe
en masse reams of German securities between 1924 and 1929. Norman
interrupted this speculative frenzy with the Great Crash of October 1929
to retain control of the last stages of the German incubation and the
anticipated agony of Weimar. When, in March 1931, Austria and Germany
announced their common desire to form a customs union, and thereby


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140 Conjuring Hitler

a political condominium of sorts which de facto attempted to overcome
the overall state of provisional fragmentation established at Versailles,
Norman's new Gold Standard suddenly imploded. By having prearranged
in the late 1920s the constitution of a so-called 'sterling block/ in which
London would have drawn the colonies closer to itself to trade in a compact,
self-sufficient core, the Governor readied Britain and her Dominions in
the summer of 1931 to sever themselves financially from the rest of the
world. Following a monumental charade, during which the Bank of England
feigned to be the victim of endemic financial fragility, Britain abandoned
the Gold Standard in September 1931; thus she deliberately wrecked the
international system of payments, and financial oxygen was definitively cut
off from the Weimar Republic. Thereafter, while the republic was easily torn
apart by mounting unemployment, street violence, and social dissolution,
the British clubs awaited the tempestuous rise of Germany's reactionary
and radicalized movement: this was National Socialism, whose leaders had
indeed begun since the fall of 1931 to circle around the president of the
Reich, Hindenburg, bidding for power. But the civil and humanist forcers
of Germany resisted, and refused to give Hitler an electoral majority for the
length of two additional years, at the cost of unspeakable suffering, until,
on January 4, 1933, the London-New York axis of high finance, abetted by
(1) the duplicitous yet cryptically pro-British posturing and meddling of the
USSR, (2) the ignoble panic of the Vatican, and (3) the blind numbness of
the SPD (German Social Democrats), cut to the chase by coming out into
the open to pay for Hitler's accession to the Chancellery of the Reich.

1924-33: this period witnessed the transition of Nazism from a state of
quasi-irrelevance to that of champion of the long awaited German Recovery.
Until 1929 it seemed that Veblen's forecast was given the lie, and then,
suddenly, the dark horse of Mein Kampf was thrown onto the main stage
- thanks to social disorder.

And there is the difficulty. In standard textbooks, the economics behind
the rise of Nazism suffers a dreadful treatment at best, or, most often, is
not treated at all, and the reader is customarily defrauded by being hastily
assured that Hitler came 'because of the crisis,' no further explanation
being forthcoming. What of the crisis? Unless an effort is made to unveil
the mechanics of this spectral collapse, Hitler remains an effect of chance,
the social by-product of a silly financial season gone awry. And such a
view is absurd.

For the student, these are difficult years since the phenomenology of this
peculiar phase, which encompasses first and foremost the complexities of
(1) the Wall Street Crash, (2) the banking crises of Austria, Germany, and


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'Death on the Installment Plan' 141


Britain, (3) the severance from gold of the British pound, or (4) the open
intervention of Anglo-American finance to bring Hitler to power on January
4, 1933, has been meagerly documented, and the chain of co-responsibility
among the political and economic circles involved in these events has
remained in most instances most carefully hidden to this day. Nonetheless,
the known facts are by themselves amply sufficient to incorporate seamlessly
into the main narrative of the Nazi incubation a reinterpretation of the
disquieting intermission of 1930-32. A reinterpretation that still points to
the direct and conscious manipulation of financial aggregates on the part
of Britain to obtain specific results in Europe, and especially in Germany.

From 1924 until 1933, British financiers led by the Bank of England
became the absolute protagonists of the incubation. Diplomacy took the
back seat, and banking artistry came in to play the lead in an astonishing
performance begun in an atmosphere of deluded hopefulness (1924-25)
and ended in utter catastrophe (1930-33). Montagu Norman was the soloist
of this complex and crucial interlude.

Without properly comprehending the functioning of traditional banking
systems and the nature of money, the key to Hitler's rise to power may
never be held. And it is the lack of such comprehension that is chiefly to
blame for discarding the decisive passage in the promotion of Nazism as the
fruit of bad luck in times of crisis. Yet in history there is no such thing as
luck - good or bad - and 'the crisis' does not belong to the order of natural
catastrophes, but is the mere trough of a cyclical pattern that is generated
by the relatively simple dynamics of money. And to this essential problem
we now turn. What follows is here presented as a necessary introduction
to the policies and monetary vicissitudes that stand in the background of
Hitler's accession to power.


The world is divided between those that create money and those that don't.

It all began with gold. Precious metals have a virtue, a property above
all others, and that is their imperishability. 4 ' So the blond metal became a
medium of exchange, recognized by all - a token for transactions, which
could also be hoarded in uncertain times, and promptly regain the markets
as soon as the skies cleared. A disc of metal that was a barter unit and means
of saving at the same time. Because men would not trust other men, gold
they resolved to call money: it allowed them to petrify wealth into a ware
that transcended the bonds of their community, which they felt was always
prone to collapse. They could bury the coins in the yard.


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142 Conjuring Hitler

Then a group of individuals gradually came to be entrusted with the
deposit of such gold stashes and the bankers were born; these realized that
the owners of the gold stashes would claim for their weekly business only
a small fraction of the amounts deposited, which fact enabled the bankers
to loan the gold to others, while their legitimate proprietors assumed it
still rested in the vaults of the banks. And soon the bankers distributed
notes instead of shifting the cumbrous metal, and the concept of cover
emerged: so much gold for so much more bank paper; in other words, the
gold on deposit at the bank would always be a fraction of the paper notes
distributed - the smaller the proportion of gold to the notes, the riskier
the banking policy. Against gold the bank would offer its clients drafts and
checkbooks with which to purchase goods and services. The banker that
lent improvidently would suffer the infamous 'run' when rumors about
his insolvency spread amongst the depositors: these would all rush to the
bank to withdraw their moneys in gold, because it was always suspected
that the bank never had sufficient cash at hand to pay everyone. All of this
was known: it was known that traditional banking was erected upon an
enormous fraud. For bankers, the trick was (1) to make people accept the
bank notes as if they were gold, (2) to possess the metal itself, (3) to hide
it in vaults, and (4) to withdraw it gradually from circulation.

But banking was never reformed, nor were traditional banks shut down.
Instead they ramified, fast. And it could not have been otherwise, for once
money was turned into a ware, that is, gold, and was appropriated, it was
capable of wielding an archetypal force, unlike any other, which found its
immediate manifestation in the rate of interest.

This mere percent, which came to rule the lives of empires - what is
it? An insurance fee, a commission? Neither: both of these the banks are
wont to charge their customers separately. The rate of interest is the story
itself. It is the price of the gold money, it is the expression of that particular
virtue which gold possesses and which its owner, as a rule, employs to
embarrass others. It is the power of those (the bankers) that 'sell' a medium
that does not perish (money) to take advantage of the rest of economy, which is
made of producers eager to offer for sale goods that decay - from vegetables to
housing, and machinery.

Thereafter, the name of the game was to corner the supply of gold and
monopolize the circulation of money. He who controlled the money,
controlled the system itself: its activity, its politics, its arts, and its sciences.
Everything. And so the race began, a fierce one, which coincided with
the constitution of the 'Grid', the banking network. The Grid came to be
made of a series of nodes located in the heart of economic activity, where


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'Death on the Installment Plan' 143


the accounts were managed by their secretive custodians, the bankers, and
linked by couriers.

Gold, for the most part, disappeared from circulation: it was hidden in
the underground cellars of reserve banks, which gave the economy their
paper instead. And so it was done: the gold had been relegated to whence
it came, beneath the earth, and money assumed the form it should always
have taken, that bespeaking its nature: an intangible symbol. Money began
to travel in the form of ciphers through numbered accounts, while the gold,
dense and cumbersome, was duly stowed underground. But this money,
these balances on numbered bank accounts, was never public money. The
money was owned from the start. One could look at it as from behind a
screen: but to lay hold of the cash the banker's permission was required. If
granted, one could employ those filigreed checkbooks as special passes for
navigating what had by the nineteenth century become an extraordinary
tangle of commercial relationships. Therefore, the rate of interest was (and
still is) the price paid (1) for employing a means that was imperishable,
when money, like everything else, should have an expiry date, and (2) for
gaining access to the proprietary Grid of the bankers.

This was merely the beginning. Then the bankers proceeded to amass
the gold, expand paper notes bearing their name by a multiple of the gold
hoard, charge usurious rates thereon, and impose their private, corporate
monopoly to the national constituencies.

How did the Grid interact with the economic organism? The underlying
principle was simple: whoever wished to gain access to the Grid - that is,
whoever needed cash - presented the banker with a promise, a piece of paper,
that is, an IOU upon which he signed his freedom away to the extent of the
amount of dollars requested plus the interest. These were the producers'
(commercial) 'bills,' debts secured on the producer's capital (house, tools,
land, future income...), or even the state's Treasury bills, debts based on
its power to tax the citizens - for the collectivity as a whole was the Grid's
client; both citizens and state had to pay if they demanded money for daily
exchanges. The banker put money into the economy by mortgaging the life
and goods of the economy - it was as if the banks, by dint of their control
of a scarce, imperishable medium of exchange, were the pawnbrokers of
citizens and state.

The promises (IOUs, debts) of parties, public and private, whose credentials
and name passed muster were then ranged carefully in a large portfolio,
which held the bank's assets. The banker's operation was called discount he
took a debt worth 100, discounted it by, say, 10 (interest), and surrendered
90 in cash. The money market was nothing but the sum total of the Grid's


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144 Conjuring Hitler

appetite for the economy's paper, domestic or national stocks, short-term or
long-term bonds, public and private debentures of the most diverse sorts.
The more paper-promises the banks purchased from the people and the
municipalities by discount, the more sanguine their expectations of the
economy's vigor, and the more cheaply they sold their money: the interest
tates decreased.

Decreasing rates, coupled with steady injections of bank cash, set off
the boom, and a boom was accompanied by rising prices: this was a credit
inflation. If the boom was strong, the going rate of interest would climb to
match the price rise - this was the phenomenon of the hausse: it was an
automatic mechanism implemented by banks for sharing in the windfall
profits of abundant money, and for keeping the price rise under relative
control; it also boiled down to rationing credit away from the least profitable
concerns. 5 The boom lasted until the earning capacity of the borrowers
covered the interest; but when, owing to abundance, prices after a while
began to decrease, this differential (rate of profit minus rate of interest) shrank
rapidly. Suddenly the economy recalled that the money it had been given
stemmed from debts.

When producers could no longer pay interest, it was the end: the banks
said 'enough,' they recalled the loan, the concerns went bankrupt, workers
worked no more, and the cash retreated in canals of the Grid. The crisis,
the misery, the strangulation of society.

This sort of pervasive paralysis had become a defining trait of modern
financial systems after the several banking oligarchies, each in control
of its particular node along the network, had been prompted to erect a
representative body - the central bank - to watch the gold and to fix the
rate of interest (that is, the price of money); in such a bank the private
concerns partook through shareholding, and to its Court or Directorate
they would send a councilor in order to handle the delicate interaction
between the Grid, the state, and the underlying economy.

And the great societies of the West fell one by one: by the end of the
nineteenth century, each country suffered a Grid of her own, which
culminated in a central organ presiding over a credit structure arranged
like an inverted pyramid, the inverted summit being its hoarded gold. Upon
this hoard (that is, the 'gold cover'), along with the mortgaged property
of the world, were piled the reserves of the member banks held on deposit
at the mother institute, and upon this cover the member banks carried on
their extortionary business. The money of the big banks itself furnished
a cover to lesser banks until such leveraged expansion of check money
reached the peripheral banking branches, which delimited the base of the
pyramid whereon the economy itself was perched most precariously.


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'Death on the Installment Plan' 1 45


A vein of ochre metal thus led to the creation of a monumental

By the second half of the nineteenth century, under the famed 'Gold
Standard,' all industrialized powers had a currency expressed in gold - a
mark, a franc, or a pound was decreed to be worth so many grams of gold,
and notes were declared by law to be convertible into gold at the given
ratio, called the parity. National currencies were anchored to gold, and the
parity linked the several currencies in a grid of cross-exchange rates. For
instance, in Britain, under the regime of the Gold Standard, which prevailed
before the Great War, 77s. 10 l /sd equaled a standard ounce (II 1 Viz pure
gold),* whereas in the United States, $20.67 equaled a fine ounce (12 l2 Az
pure gold), so that the exchange rate between the two currencies pegged
to gold was £1= $4.86. We shall bear this particular 'parity' in mind.

To compete in this game, governments, supported by their central banks,
had to manage their commercial affairs and financial ventures with a view
to protecting, if not steadily augmenting, their gold stock, which to a
degree was a fair indicator of a power's mercantile accomplishment. The
valve which regulated a country's inflows and outflows of gold was her
balance of payments.

A balance of payments was a compound prospectus, which comprised a
current account and a capital balance. The current account was a synopsis
of the country's overall trade achievements; it looked into the mismatch,
if any, between imports and exports of tangible merchandise (that is, the
trade balance), and of the so-called 'invisibles': shipping leases, insurance
premiums, and interest payments. Indeed, the invisibles had always been the
British empire's forte. The capital balance, instead, measured the difference
between the influx and efflux of funds into and out of the nation's financial
center. The chief instrument for the regulation of such flows of money was the
bank rate. The bank might raise it significantly and thus attract foreign
moneys to her banks; 7-10 percent, they said, could 'pull money out of the
moon.' Conversely, low rates at home would prompt domestic go Id -owners
to seek higher returns on their idle funds abroad.

The obvious drawback of a policy of 'high rates' at home, however, was
that it strangled the domestic economy: it might bring plentiful financial
gains to the financial firms, the banking grid and the absentee owners, but
it harmed everyone else. And therefore as a policy tool it was safe to use it
only sparingly, and never for prolonged intervals. When money was dear,
investment was costly, and thus work was scarce.

That is, 77s lOVzd, which was equivalent to £3 (20 shillings in a pound) and 1 7s lOWd.


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146 Conjuring Hitler

As far as the movement of gold was concerned, the action on the bank
rate was the one relied upon to bring about the desired effects in the most
rapid manner. It was invoked, unfailingly, as the capital principle of 'sound
finance' in times of crisis, that is, when a central bank's cover was imperiled
because herds of speculators sought to jettison the domestic currency and
exchange it for gold: a 'run' on the bank's reserves.

If a currency fell, and monetary authorities remained passive, speculators
were inclined to borrow additional amounts of that currency, convert
it into gold, wait for the currency to fall further, reconvert the gold in
that currency, and gain from the extent of the fall. And so on. A most
pronounced raise (for example, from 3 to 8 percent) of the interest rate
by the bank could be counted on to inhibit such a practice (by making
the speculators' loans much more expensive), and, most importantly, it
functioned as an instantaneous summons for additional funds from external
investors, with which to replenish the bank's reserves and for which the
bank stood ready to pay 'extra', that is, the rate differential (5 percent in
the above example).

When a country ran a deficit on her balance of payments vis-a-vis another,
either because she was buying from abroad far more than she was selling,
or because capital had been fleeing for some time, or both, she had to settle
the balance in gold with her trading partner. When a country lost gold,
the 'cover' of the central bank was accordingly diminished: she would
thus have to restrict the amount of credit money in circulation in order
to maintain a given, workable ratio (of gold to bank money). And what
did she do? She raised the rate to signal that cash availability was reduced,
because of the gold hemorrhage. As a result, the exporters of capitals - all
those absentees that had been investing against the national currency by
converting it into gold, and shipping the gold wherever it might found a
more remunerative yield - were discouraged, while foreign investors found
renewed interest in the domestic capital market in light of the heightened
interest. Thus gold could be expected to flow back home, and equilibrium
could be re-established. 6 Conversely, a country that found herself fattened
by an excessive inflow of gold, which had been streaming in on the wake of
a persistent surplus on her balance of payments (owing to successful exports
of goods, and/or to the offer of enticing investing opportunities), could
afford to lower her rate and be expected to trigger a massive expansion of
liquidity on her markets as a consequence of a swelling base of gold. This
is what America would do in the 1920s. An important consideration.

These were the so-called 'rules of the game' of the pre-war Gold


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'Death on the Installment Plan' 147


With the outbreak of World War I, all players, with the exception of the
United States, abandoned the gold anchor. When the European governments
resolved upon waging war, they pressed the Grid for permission to print
much paper money with which they might outbid all the required resources
away from their former employment, and devote them to the war effort. In
view of such massive inflation, which would have made gold convertibility
impossible, the gold figment was given up, but the privilege of the Grid to
sell cash and checks to the war ministries certainly was not. And thus the
patriotic communities of the world came in for another historical round
of that prodigious swindle known as 'public finance': the Treasury of each
fighting nation printed many a bond, the Grid discounted them against
the provision of credit lines for the purchase of munitions, the public
debt billowed, and the commoners paid taxes to the warring states, which
in turn employed these funds to pay the interest to the absentee clients
and proprietors of the Grid that had loaned them the bank money in the
first place.

On the vestiges of this awesomely savage cult Britain terminated the
incubation of Nazism.

Montagu Norman and the 'nationalization of the bank'

Montagu Collet Norman was born in 1871 to a family of bankers. His
father, Frederick, was a barrister in a banking house of the City. His
paternal grandfather had long sat on the Court of directors of the Bank of
England, and cunningly avoided the promotion to Governor for the sake
of aristocratic phlegm, whereas his maternal grandfather, Sir Mark Collet,
had accepted the same post (1887-89), and earned a modicum of glory in
the process. Montagu was sent to Eton, whose regimen he came to dislike
much. And when he reached Cambridge, he found himself out of sorts,
and dropped out of school, not knowing whither to turn. The young man
needed advice. Grandfather Collet was happy to oblige, and directed him at
once to his own parish, the respectable acceptance house of Brown Shipley.
Brown Shipley was the London Branch of the prestigious American bank,
Brown Brothers & Co., which had carried on its ships 'fully 75 percent of
the slave cotton from the American South over to British mill owners.' 7

Thus in 1895 Montagu Norman was inducted into the banking brethren
of the Grid. The rest followed: he was brought up to love imperial Britain,
and her bard, Kipling, whose Soldiers Threehe knew by rote. But the family
soon discovered that there was something wrong with him. Something that
had to do with his nerves. Norman would frequently be preyed upon by


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148 Conjuring Hitler


sudden fits of harrowing melancholy, seizures of despondency so unbearable
that his nerves would snap and his delicate frame would swoosh to the
floor like ballast from a shredded pouch. In the darkness of interminable
convalescences he would nurse his nerves and a 'raging head' s back to life,
and resume his activities thereafter. Often, hapless physicians would send
him on exotic cruises to the sunny areas of the world. And these recurrent
fugues from madness to faraway havens would from early on punctuate
his tireless ministry for half a century.

At Brown Shipley he cut the figure of a 'lonely queer man'; he was
unhappy there. 9 He found the atmosphere slow and fusty, and disagreement
with the partners over the firm's management often led to nasty altercations,
for which he soon ceased to be forgiven. Clearly, he had been conceiving
a vision of some sort, and whatever it was, Brown Shipley was too tight an
outfit for giving it expression. In 1913, for desperate lack of a manageable
diagnosis, he paid C. G. Jung a visit and offered the illustrious psychiatrist
his 'raging head' for observation. The diagnosis was issued, and it was so
terrible that Norman would never confide it to anyone. To his acquaintances
he delivered the version that 'his brain had been found to "work wrong in
a mechanical way" and that there was "an erratic corner in it in which it
makes all the trouble".' 10

By 1915, he had spent 20 years with Brown Shipley, cut his teeth with
the company, learned about the Grid - its labyrinthine sub-alleys, its keys,
and its many doors and traps - everything there was to learn, and felt, at
44, over-ripe for taking his leave. And the partners, who could no longer
tolerate his presence, somewhat hastened Norman's departure in a mood
of relieved expectancy. If finally came. The war raged then, in earnest.

By that time, some of his distinguishing traits were fully formed and
appreciable to an outsider: a 'restless energy,' 1 1 a 'secretiveness, sometime of
a quite absurd kind,' lz 'a formidable memory, for places, names and facts,' 13
'a knack for dissimulation and acting,' 14 'a tendency to over-dramatize...
beguile, and bamboozle the whole world,' 15 which he could commingle
with a fair dose of effusive charm that most could not resist; and a patent,
if intermittent, insanity.

For a time he took almost every job that offered; he consulted and advised
in matters related to postal censorship and aircraft insurance, until Brian
Cockayne, Deputy Governor of the Bank of England, took pity and brought
him to the Court as some kind of posh secretary without official status.
Cockayne lost no time in disabusing Norman of any hope the latter might
have placed on such an invitation, which 'would not in any way imply
that [he] would be nominated as the next Deputy Governor.' 16


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'Death on the Installment Plan' 149


How the majority of the directors of the Bank of England really come
to be on the Court... must, except to a few, remain a mystery... There
is an inner cabinet called the Treasury Committee which deals with
general policy and the Bank's relations with the Government. It is this
Committee which really governs the Bank. It consists of the Governor,
Deputy-Governor, and seven other directors. Who those other directors
are is not disclosed. The Bank is really directed by a Secret Council. 17

But then it is not known precisely how - possibly owing to his keen
understanding of the American financial realities, which the war had
brought on a path naturally convergent to Britain's interests - Norman so
put his knowledge and experience to good use that he managed to make
himself 'indispensable.' The custom at the Bank was to select among the
directors a Deputy Governor for two years and then to elect him Governor
for the ensuing two years. The circumstances of the Great War caused an
exception to be made and Walter Cunliffe, who was Governor when the
war broke out, retained that office for five years, from 1913 to 1918. 1S
And when Cunliffe bowed out, Cockayne succeeded him, with Norman
as his Deputy in 1918. Cunliffe, a difficult man who had by no means left
amongst the colleagues a pleasant memory of his tenure, began nonetheless
to voice to close relations a deep fear of his that had taken on the guise of
an obsession.

■Montagu Norman' he said, 'is far and away the best person they have
at the Bank. He'll be the next Governor. There's nobody else in sight.
But his brilliant neurotic personality is certain to cause trouble. I feel my
responsibility now for having put him and the Bank in a very dangerous
position'... 'He needs the power just to keep going and he won't give up
until it's too late... What I'm really afraid of is that the Bank of England
will be nationalised in Norman's lifetime, and my only consolation is
that I shan't be here to see it.' 19

Virtually nothing is known of the important dialogue that must have
intensified among the bank, the clubs and the Foreign Office at the war's
end, especially in view of the financial action that needed to be taken
in post-war Europe. Considering the monetary complexity of the process
that had been set afoot at Versailles, it could have no longer been a matter
of semi-indifference to the empire what sort of professional the banking
dynasty of London was going to crown Governor. Cunliffe had spoken
intriguing words. He had confusedly sensed that what he and most of


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ISO Conjuring Hitler

his predecessors had always viewed as the representative collegium of an
exclusive guild could, in the capable hands of another banking priest,
more imaginative than they, be imperceptibly rearranged so as to fulfill
aims and duties, which were not going to be those selectively dictated
by the inner circle of such a guild. Not only was the empire, because of
the war, enjoining the bank to stand firm behind it, but it also seemed to
look favorably upon the selection of a Governor who could successfully
harness the banking network of the commonwealth to Britain's new, far
more intrusive imperial directives, without bringing excessive disruption
to the daily business of the banking community. This was most probably
what Cunliffe intended by 'nationalization.'

On March 31, 1920, what Cunliffe dreaded came to pass: Montagu Norman
was elected Governor of the Bank of England. 'For no more than two years, '
they immediately captioned, 'just as prescribed by the old statute.'

With sufficiency, the doges of the Court had let him in from the back
door. And he stayed on. In five years he was consecrated pontiff of the
Bank. And acclaimed, biennium after biennium, he would perform his
duties as Governor for the length of 24 years. The oak had found its druid,
and vice versa.

And though, at first, he was resisted - certain quarters of the City
complained that they 'didn't know the man' 20 - he proceeded without
wasting an instant to refit the ship in keeping with the exigencies of the
post-war era.

Allies: above all Norman cultivated the connection to the mandarinate
of the American Grid: J. P. Morgan & Co. Of that clan, first and foremost
of his trumps was the Governor of the Federal Reserve Bank of New York
(FRBNY), Benjamin Strong, whom Norman had come to know and like in
the last two years of the war. zl Strong, who became Governor in 19 14 'as
the joint nominee of J. R Morgan and Kuhn, Loeb and Company, ' zz was
allegedly the first of a long series of preys that surrendered to the charisma
of Norman, so much so that the American banker would later be accused
by US President Herbert Hoover of being a 'mental annex' of Europe and

Style and mystique:

The reputation for mysterious god-like aloofness and for tantalizing
omniscience, which transformed the name of Montagu Norman into
a legend well before the end of the nineteen-twenties, was one which
the Governor deliberately and carefully sought... Open conflicts... even
private disagreements, were crude methods which he abhorred... Norman


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'Death on the Installment Plan' 1 S 1


developed refined techniques of his own to impose on the City of London,
[which] as a whole quickly succumbed to the almost superstitious awe
inspired by the uncanny reputation he acquired for simultaneously
knowing his own mind and everyone else's intentions. His first and
greatest talent lay in bending to his own ideas and purposes those friends
and colleagues who had already fallen under the spell of his personal
charm... Like a human spider, he chose to spin a finely meshed web of private
contacts radiating from his office into every nook and cranny of the City. . .
Nothing new or significant could happen without Norman's coming to
hear of it at once. ..He would then. ..approve or disapprove,.
or condemn. His sources of information were unrivalled and usually
accurate. He was... astoundingly well-informed.

And with a remarkable display of condescending apologia, Norman's
biographer achieved this esquisse of the 'human spider' with a bold
reflection, which is a fair instance of a long 'scholarly' tradition of omission
and complicit muddling surrounding the record of Norman and the Bank
of England in the interwar period:

And what was Norman if not a long-frustrated understudy destined at
last to play a major part in the drama of public life? Sure enough of his
lines, he was less sure of the plot. 33

One may wonder: how can a consummate arch-priest of the Grid endure
a 24-year long pontificate as the treasurer of the world's empire, which
coincided with the most critical juncture of Western history, without being
'sure of the plot?'

The plot, in fact, had begun to unfold at Versailles, and Veblen's prophecy
concluded the first act. The second act, set in Germany, was a crescendo of
putschist shenanigans that culminated through the apotheosis of national
bankruptcy in Hitler's Beerhall coup. Presently the action had shifted to the
world markets, while the German experiment was left to simmer in a pool
of unknowns. And the Bank of England had not lain idle in the meanwhile.
Norman had watched everything studiously, and paid especial heed for
some time to the deeds of his friend Ben Strong across the Atlantic.

Right at the time of Versailles, in June 1919, the United States was
experiencing her first post-war boom, an extraordinary credit inflation
that had been sparked throughout the world conflict by the massive orders
for foodstuffs and supplies on the part of the Allies. Given a plentiful gold
reserve, a swelling credit base, surging prices, and low unemployment,


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152 Conjuring Hitler


America's additional credit-money had set off a feverish stock exchange
and real estate speculation, which reached its height in November 19 19. 34
The gambling mania on the exchanges drove the rates for 'money on
call'* to phenomenal heights - 20 percent and higher. In London, as in
other financial centers, no sooner were such quotes available than balances
were drawn from the City, and conveyed along the banking network to
Wall Street, to fetch the higher rates. In other words, capital was exported
at once, and as the transfer persisted (British investors selling pounds to
purchase dollars), the pound sterling weakened vis-a-vis the dollar, which
was the only currency anchored to gold in 1919: to lose versus the dollar
was to lose versus gold.

Considering that the chief objective of Britain after the 'return to
normalcy' was indeed to re-anchor her currency to gold, such an escape of
capital and the consequential drop of the exchange posed a serious problem.
Why was it imperative to re-anchor the currency to gold? 'Prestige!,' replied
the constables. But that was a lie, and a big one.

The bank was in fact readying herself to plan a game of strategy so
complex and potentially so dangerous that it required the greatest prudence
on the part of the clubs privy to its nature. And these knew what mien to
deport when it came to avoiding impudent enquiries from the public into
their activities: they simply would 'never explain, never excuse.' A maxim
of which 'Norman was inordinately fond.' 35

To go back on gold, Britain gave herself five years - till the end of 1925. 36
But first, she had to tackle a few problems in her colonies.

India, whose Grid was rather rudimentary, had a proverbial hunger for
noble metals, with which debts were settled on an ordinary basis. Her
contribution to Britain's war exertion had been such that, from September
1919 to February 1920, she demanded to be satisfied in gold for her
conspicuous trade surplus vis-a-vis the imperial center, thus bringing
tremendous pressure to bear upon London. And that, what with the pull
from the speculative craze in Wall Street, further enfeebled sterling. India
had tried to secure gold during the war, but had been sourly rebuffed. She
thus had to content herself with either silver or sterling balances. 37 Of
the latter India wanted no more, and so since gold could not be had from
London, she drew on her sterling balances in London to purchase silver
from the Americans. But that too, lamented the British Treasury, weakened
the pound (versus the dollar). It was time for the financial stewards of the
empire to intervene; and here is what they did.

Loans repayable at the option of the lender or the borrower with 24 hours' notice.


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'Death on the Installment Plan' 1 S3


They conducted a two-pronged maneuver against their Indian colony.
First they struck at the silver market. They unilaterally decreed in 1920 that
the silver coinage of Britain was going to be reduced from a standard of
0.925 fine to a basic fineness of 0.500, which is to say that the alloy content
of each silver coin was about to become double what it used to be. 'Australia,
New Zealand and later most of the principal countries of Europe and South
America followed suit.' zs So Britain withdrew her good (fine) silver coins
from circulation and sold them on the markets at the stellar quotes of 1920.
The movement brought about immediately a precipitous fall in the price of
silver. Thus the steep depreciation of the white metal alleviated the strain
exerted on sterling,* and in the long run would altogether dispose of one
channel through which India imperiled Britain's restocking of gold.

Simultaneously the stewards assailed the gold front. On February 1920,
they decreed unilaterally that the rupee was to be pegged at 2s, two gold
shillings. In other words, the British financial officers rendered the rupee
enormously expensive in terms of gold, deliberately. The semi-coercive
measure was introduced by blandishing India with the deceptive prospect of
her buying silver, or anything else she wished around the world, at bargain
prices. And so Indian imports, boosted by an artificially strong currency,
did boom, while naturally her exports suffered a disastrous decline, which
abruptly reversed the trade balance with Britain. 29 Farmers dependent
upon exports suffered as they witnessed their prices plummet to match
the world level, and as a consequence their income sagged. The final blow
was struck by way of the capital account: those absentees in India who
could afford to do so, realizing the blatant overvaluation of the rupee and
its inevitable fall, moved at once to convert their rupees into pounds, and
then convert the pounds into gold. Such capital flight (towards Britain
to buy gold) automatically diminished the Gold Standard reserve, which
the Indian government maintained in London. To restore this reserve,
sterling securities (the standard form of banking collateral), which formed
the 'cover' of the Indian paper money circulation, had to be withdrawn
from Bombay and remitted to London, and thus, to compensate for the
transfer, credit in India had to be restricted. 30

Smitten once with an overvalued currency, which by depressing prices
struck at their livelihood, and smitten twice with a credit crunch, Indians
were at last bereft of any means wherewith to demand gold. Not only
that: the empire's stewards were also shockingly pleased to notice that
their scheme had prodded a vast segment of the colony's population to

For far fewer pounds were now needed to purchase silver with dollars on the American
market; thus sterling was relieved.


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154 Conjuring Hitler


unearth its silver and gold hoards to pay for a debt burden exacerbated by
the artificial dearness of the rupee. Indeed, it had caused some gold to come
out of the Indian soil, reach the government offices, and ultimately find
its way to London in repayment of the adverse balance of payments. 31 By
October 1920, India emerged as a net exporter of gold and remained one
until the last quarter of 1921. It has been lamented that the government
of India 'was, at best, a mute witness in this sordid affair.' 32

Rather devilish than sordid, the tactic succeeded splendidly. The solution
was yet provisional, and Norman had had no central part in it, though he
must have known every inside detail of the operation, which had begun
shortly before he took over at the bank, and of which, given that India was
one of his 'most important financial interests,' 33 he impressed a capillary
image in his vast memory. Norman certainly had a part, however, and the
chief one at that, in the resolution of the first post-war American boom,
which truly marked the beginning of his financial regency and stood as
the initial, crucial instance of the stratagems he would employ a decade
later to achieve his and the Empire's far-reaching goals.

From Figure 4.1, which depicts the evolution of the cost of money in
Britain and the United States, it can be seen that as soon as Norman was
elected Governor, the rate in London jumped from a high level of 6 percent
to a heady 7 percent - one full point above New York. This was the gambit
of a policy coordinated in tandem with the Federal Reserve in New York,
which would be replicated in 1929.

When Norman smothered Britain with a rate of 7 percent, 'sending
unemployment above the one million mark,' 34 Strong followed suit, and
the rates were kept at that level for an entire year, so that by the spring of
1921 both countries had come to live through one of their all-time severest
depressions: in the 1920-21 biennium, unemployment in the United States
increased by 6.5 percent; industrial production, agricultural production,
and GNP decreased respectively by 19.3, 6.1, and 2.3 percent, 35 while a
vertiginous drop in prices of 44 percent inscribed itself as the sharpest price
decline in the entire history of the country.

Norman justified his move by stating in his first official speech of 15
July, 1920: 'We are striving to return to. ..the gold standard. A debtor
nation cannot expect lower rates than those of a creditor nation, and
our rates are now below those in America.' 36 So, the swiftest means by
which gold might be recaptured and preserved was to up a bank rate that
was already high above the rate prevailing in the 'competing' marketplace
of New York. 'The unemployed,' Norman would argue in general, 'were


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'Death on the Installment Plan' 1 SS




30 July:
Ratf ST4 l /?,


21 Sehi. 31
britain off


n \° J rift? *ffi n^> "P -V 1 <& ^

^ ^ ^ ^ V 5 ^ ^ ^ ^ ^ ^ ^



Rate of Discount of the Bank of Fngi and

Rate of Discount of the Federal reserve: Bank or New York (frbny)


Figure 4. 1 The London/New York tandem discount policy, 1919-32

unemployable.' 37 In Britain, under Norman, one out of ten workers would
remain idle throughout the interwar years. 38

Norman always affirmed quite rightly that joblessness was not his affair,
but that of the government; his task was to attend to the financial welfare
of the empire, and he did: with the collusion of Strong, he killed the
stock market boom in Wall Street, shattered America's real estate prices and
bankrupted her farmsteads, and all that, indeed, to check the dispersion of
British money to Wall Street. The important question that remained was
why would the American banking elite go along with this British policy of
economic strangulation?

When the two governors met in December, 1920, they were pleased
to concur that the policy of making money dearer, though somewhat
precipitate, had been 'wonderfully successful.' 39 What they meant by
'successful' can be seen in Figure 4.2, which portrays the rate of exchange
between sterling and dollar. It is clearly visible that since the accession of
Norman (March 1920), Britain was attempting tenaciously to regain the


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156 Conjuring Hitler

Gold Standard at the old pre-war parity of $4.86 to the pound. Governor
Strong at the Federal Reserve was not only looking forward to that event,
but he was also satisfied to have terminated the abnormal growth of the US
money supply which had been increasing since June 1919 and had been
allowed in 1920 to reach unprecedented levels. 40 Many have wondered why
the Federal Reserve, which had been incorporated at the end of 1913 with
the avowed goal to dampen the wild fluctuations of the cycle and prevent a
generalized state of insolvency of the domestic economy, failed so miserably
its first serious test as America's financial watchdog in the aftermath of the
war: the 1920-21 recession appeared abrupt, brutal, inexplicable. Again,
why had the rate been kept so high, so long? In 1920 as well as in 1929,
and indeed throughout the interwar years, American monetary policy is
incomprehensible if taken out of the context of European politics, and
specifically of Britain's agenda.

The truth was that after 1920, Strong, the American Governor, consciously
restricted credit at home to reduce significantly the volume of cheap credit to
Europe. Indeed, the stewards at the Fed coordinated with London a rate
increase to 7 percent, which allowed both countries to pile up gold: it was
in fact between 1921 and 1924 that America underwent one of its great

5.5 -i ■ .




pound-Dollar Exchange: Rate


Figure 4.2 Sterling-dollar exchange rate, 1919-33


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'Death on the Installment Plan' 1 S 7


waves of gold accumulation, and of all European nations Britain was the
only one that accumulated gold after 1920 41 So then, why did the Federal
Reserve decide to store up gold at this time? What was it anticipating?

For years it had been a commonplace of monetary discussion in the
United States that the gold which came in just after the war would return
to Europe when it was again needed to support gold-standard currencies
in Europe... 42

The interest rate hike in the VS was a clear indication that the time to invest in
Germany and surrounding states had not yet arrived and had thus been postponed.
Norman and Strong were preparing the terrain for the great German bailout,
and the concurrent return to gold by Britain, which were going to take a
few years to engineer. Figure 4.1 illustrates this pantomimed chase of the
rates, in which each governor feigned in public to saddle on the other the
responsibility for the tightening. And whatever the bankers did, which the
public never comprehended, these punctually justified their actions by
blaming 'the fear of inflation': oracular nonsense that was seldom, if ever
questioned. And so it went: Norman upped the rate in April 1920, Strong
followed in May, and after a year of 'wonderful success' in attracting gold to
their respective cellars, Norman again took the lead in 'easing the markets'
by pulling the cost of money downwards, and New York followed.

Thus far the experience of Norman had been to relive one of the
fundamental teachings of the old Gold Standard, namely, that Britain
always had to strengthen herself to govern between India and the United
States, 43 her two gold-hungry 'colonies'; and that, when it came to protecting
and adding to the gold treasure of the Bank of England, the most incisive impact
might be achieved by causing 'money famine' in India (deflation ), and monetary
abundance in the United States (inflation):^ that is, by forcing the ryots to
unload their gold, and encouraging a boom in America while keeping London's
rate above New York's.

When Germany was cleared of her war debt, this policy would be
implemented to the full as London would succeed in staying above New
York for a protracted period of time (that is, the duration of the five-year
bailout; see Figure 4.1).

Thus, between 1919 and 1920, the Bank of England managed to shield
the sterling exchange rate and increase her gold stocks by £50 million,
reaching a total figure of £128 million (around 865 metric tons). 45 This
amount was slightly less than what would become the statutory cover of the
bank upon her return to gold in April 1925: £150 million (8 percent of the


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158 Conjuring Hitler


total world reserves). 46 In short, by late 1920 Britain's gold hoard had been
reconstituted. Where were these additional ingots, presently in Norman's
vaults, being shipped from? Stenographic sources mentioned South Africa,
and Russia. 117 Were they then a chunk of Kolchak's treasure trove?

From this time on, the markets expected the pound sterling to become
convertible into gold. The anticipation is discernible in the ascending path
of the sterling/dollar exchange, whose initial point (the first quarter of 1920),
coincides with Norman's appointment to the governorship (Figure 4.2). The
ascent of the pound was interrupted three times: in the second half of 1920,
in mid 1 92 1, and throughout the controversy on reparations and the Ruhr
crisis, from the summer of 1922 till the end of 1923. The war between Russia
and Poland, and a sizable reparations payment remitted in dollars through
London, accounted for the first two troughs in the curve, 4S thereafter the
fate of the pound appeared to hinge on that of Germany: unless the latter
was cleansed of her war debt, Britain's plan could not be set in train.

Therefore, between 1922 and 1924, the Bank of England adopted a 'policy
of waiting': 49 trade was stagnant, and hiding behind a bank rate of 3 percent
- up to l y A percentage points below New York (Figure 4.1) - which did
not rock the British economy, Norman kept an eye on the Reich. He let
America swallow more gold, confident that in time he would be able to lure
the Americans into expanding credit, lowering their rates, and therefore
relinquishing some of their copious gold. Because in these years, though
Norman's grip on Strong was potent, the latter, acting as the Anglophile
mediator between Britain's imperatives and Wall Street, had been incapable
of prodding US bankers to launch another inflationary boom for the sake of
'international cooperation': 50 at this time the American financiers failed to
see what they would stand to gain from pumping in new money to invest
in Europe's uncertain environment.

Germany, as Norman well knew, was the key with which he would unlock
the stalemate.

So, in the meantime, while in 1922 the American Grid momentarily
recoiled, Norman, the 'human spider, 'ventured in a peripheral experiment
around the German unknown: using all his persuasiveness on Dutch, Swiss,
and American bankers, he secured a jumbo loan for Austria. Thanks to this,
inflation was halted, the currency stabilized, and the economy of a former
enemy country was restored with exemplary rapidity.

The Chancellor of Austria... dropped a remark, which reached his ears
in due course: 'I'd like to erect a statue of gold to the remarkable Mr.
Norman.' 51


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Norman thus established a precedent that he would later apply to the piece
de resistance of the plan: Germany.

By the end of 1923, three of Britain's chief financial stratagems had been
rewardingly rehearsed under Norman's direction: (1) a concerted (with the
FRBNY), stepwise tightening of bank rates to deflate a speculative bubble
and swallow gold, followed by acute depression; (2) the overvaluation of the
rupee coupled with mass sales of silver, by means of which the scourging
of Indian peasant-farmers might be relied upon to suck into London their
gold hoards; (3) a small-scale bailout, with which a former hostile country,
Austria, was shored up with foreign credits, and was thus rendered prone
to crashing violently upon the withdrawal of such Allied financial props.

In November 1923, the Reich was being purged of its debt; diplomatic
prisoner, cosmopolitan whorehouse, financial hostage, and Nazi hothouse,
the Weimar Republic was presently scheduled for a great jamboree, a five-
year blowout at the American manger, catered by the Governor of the Bank
of England. This would be the most spectacular bailout of the twentieth
century, followed by the bitterest harvest of history: the Dawes Plan of 1924
-generally recognized as Montagu Norman's 'masterpiece.' 52

Credits lines would be shot out from the Allied Grid to hook onto
Germany's brand new monetary network like grappling irons. And before
the transfusion might begin, a native adjutant issued from the great banking
brethren would be specially ordained to oversee the plan.

The Dawes bailout and the Hierodule Schacht

Hjalmar Horace Greeley Schacht was born in 1877 in Schleswig-Holstein.
His father William harbored a passion for America. One year before Hjalmar
was born, William Schacht had returned from Manhattan to Schleswig-
Holstein with a basket of failures, a membership to a Masonic Lodge and the
acquaintance of the New York Tribune's powerful editor, whom he revered,
Horace Greeley - a vocal anti-slavery advocate in Lincoln's era. Of these
three meager spoils, Hjalmar bore the mark of the third (in his name),
inherited the seed of the second (freemasonry), and would want to have
nothing of the first (failures).

As a youth Hjalmar felt called on to 'great things' and his attraction to
the mysteries of the Grid, which in Germany had developed by the late
nineteenth century into a voluptuous embrace between heavy industry
and cosmopolitan merchant banking, was immediate and intense. His
apprenticeship, which lasted 13 years (1903-15), was completed within
the halls of the Dresdner Bank, one of the great Berlin banks, where, like
Norman at Brown Shipley, he acquainted himself with every aspect of the


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160 Conjuring Hitler


business. Then the war came, and he served briefly (October 1914-July 1915)
as a steward of the banking administration in occupied Belgium. 53

The problem he was hired to solve was how to induce the Belgians
to remit the occupation costs in cash. 54 The method Schacht applied in
Belgium was a standard banking routine, which he would systematically
perform in the course of his professional career, in Weimar as well as under
the Third Reich, to squeeze money out of the Grid.

Schacht suggested using a loan. He proposed that the Belgian municipalities
issued bonds. Bonds which would be purchased by the wealthy Belgians.
The cash thus collected would go to the German soldiers via the occupied
municipalities, and the Belgian people would be counted on to 'sell' goods
to the German armies and pay taxes with which the Belgian authorities
were to repay the Belgian rich. The scheme, which was clever, would not
work, however, because the Prussian generals, rapacious as ever, had no
patience, and decided to print money instead, crassly. The Belgian stint
did not have a graceful ending for Schacht: upon his return to Berlin, the
banker was accused of favoritism and embezzlement for having provided
his employer, the Dresdner Bank, with a great deal of those 'Belgian notes
of occupation' at a significant discount. He defended himself, lying his way
out of the snag, with the complicity of many highly-placed others. Case
closed: 'a la guerre comme a la guerre.'

At the war's end, along with Rathenau, he was one of the founders
of the German Democratic Party, but unlike Rathenau, he was not too
discriminating in finding the proper vehicle for his inhuman pride -
provided it was the winning number, anything would do, be it Weimar's,
the Allies' or, later, the Nazis' bandwagon.

And so, under Weimar, he discreetly added to his 'interests' that of 'a minor
official of the Allied-created German banking authority.' 55 On 22 March
1922, he submitted a memorandum to John Foster Dulles, the resourceful
lawyer of the Wall Street firm Sullivan 6c Cromwell that had fashioned
at Versailles the cavil thanks to which the cost for defraying Allied war
pensions had been most dishonorably added to the final reparations bill.
A midwife of the German 'reawakening' all along, Dulles presently oversaw
in Berlin, among many other things, the overhaul of the German Grid.

In his proposal, Schacht envisaged 'a solution of the reparations problem'
- a visionary draft whereby the Allies, rather than loaning money to the
profligate ministries of Weimar, would extend it to a cluster of giant
conglomerates specially created for the purpose. Schacht contemplated the
formation of giant industrial cartels, which would become the recipients
of American cash credits, as well as of special exporting licenses from the


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'Death on the Installment Plan' 161


Weimar authorities that would enable them in, say, a decade to repay the
original loan, and relaunch the German economy.

It was science fiction: a plausible scenario (the cartels) constructed on
unripe fantasies (the concreteness of the reparations). And it made Dulles
jubilant: it seemed as if the Anglo-American clubs had finally found 'their
man.' Dulles forwarded the memo instantly to Thomas Lamont, a top
fiduciary of J. P. Morgan & Co. with his plaudits: 'Dr. Schacht is one of the
ablest and most progressive of the young German bankers, and it seems to
me that his plan may contain some thoughts which may have some merit.' And
two weeks later Dulles responded enthusiastically to Schacht's proposal: 'If
a period of political stability could be assured, I have no doubt that bonds
issued by such monopolistic corporations as you mention would command
the confidence of the investing public.' 56

Now that Germany had blasted her currency, Schacht might be brought
in to lead the 'reconstruction.' Out of thin air and five days after Hitler's
putsch, on November 13, 1923, he was catapulted on the public stage as
Germany's new Commissioner for the National Currency. His task was to
bridge Weimar over the transition from the old, murdered Reichmark to
the new, captive one.

Sitting behind a bare desk with only a telephone, he called around his
brethren of the Grid day and night for a week. Finally, by refusing to grant
credits to speculators in a provisional currency devised for the transition, he
signed the death certificate of the old mark, fixing its final purchase price at
4.2 trillion for a dollar. Thus the mark came to be stabilized at that fateful
gold peg, $1 =4.2 gold marks, with a net erasure of twelve zeroes. 'The
20th of November,' said Schacht, 'contributed a milestone in the history
of the stabilization of the mark...' 57

On that very day Reichsbank president Rudolf Havenstein, the governor
that had spurned the Kappists, lost half the bank's gold to inflation and
succumbed miserably before the rout of his currency, died of a heart attack.
Norman had met him earlier that year, when the German Governor had
come crawling to him for compassion, and the human spider had found
him 'a very attractive man: but so sad.' 5S

But the directorate of the Reichsbank, an inbred and 'malicious fronde
of moth-eaten pashas,' 59 were hardly bedazzled by Schacht's financial
hokey-pokey, and had taken no liking to him. They wanted good old
Helfferich, the Nationalist stalwart, former Imperial Vice-Chancellor and
Finance Minister, and chief Reichstag slanderer of Erzberger and Rathenau:
a true, perfidiously impenitent column of the old order. Yet in Weimar it
was not the Germans that decided but the Anglo-American clubs. Dulles


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162 Conjuring Hitler


recommended Schacht to Morgan & Co., Morgan & Co. to Norman, and
Norman to Weimar's incumbent figureheads. 'During the summer and
autumn of [1923, Norman] had first heard of Dr. Hjalmar Schacht as a rising
German financier with a paradoxical mind and a will of his own.' 60

On December 22, 1923, Hjalmar Schacht was elected governor of
Germany's Central Bank. And Helfferich had, by the bye, only a handful
of moons left to enjoy: he would die in a train crash in April of the following
year. Decidedly, even the gods were for Dr. Schacht. Norman could not
wait to meet him; he confided to his entourage: 'I wantto get on well with
him.' 61 So well, that on New Year's Eve, 1923, he summoned the German
without ado to call at his office in the bank on the following day, at 11:00
am; 'I hope we shall be friends, 'he told Schacht before hanging up. 6Z They
met and became more than friends; they became and came to be referred
to as 'twins.'

...Schacht was only a useful instrument, the means to a greater end, yet
one so necessary that Norman went out of his way to cultivate him for
the good points he might possess. 63

The November 1923 stabilization at 4.2 was merely the preface to the great
Weimar bailout that would bestow upon German five years of 'synthetic
prosperity,' 64 her so-called 'Golden Years' (1924-29). John Foster Dulles
had mentioned in 1922 the need for 'political stability' And that presently
signified putting an end to 'French madness', for that was how Norman
viewed the French occupation of the Ruhr. 65

In March 1924, the clubs, via Morgan & Co., launched a massive
speculative attack against the French currency. The clubs' agents, posted
in the several nodes of the European Grid, gathered francs and, coordinating
the tempo with one another, dumped them on the exchanges. 66 The franc
plummeted; the Bank of France found herself impotent before the raid:
she did not possess sufficient means (foreign cash) with which to absorb
the dumped francs and prop up their value. After having dealt the blow,
Morgan & Co. came forthwith the medicament: they offered France a $100
million credit for six months gauged on the French gold. In late April, the
US Ambassador to Berlin, Alanson Houghton, wrote in his diary: 'England
and America have the franc in their control and can probably do with it
what they want.' 67

On April 9 the Dawes Plan was announced. It bore the name of yet another
one of those American 'great nobodies' of the Morgan era: replaceable,
mediocre souls with average talents and a hard frame, itching to give


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history a nervous bite. Banker, Comptroller of the Currency under President
McKinley, and former chief intendant of the American Expeditionary forces
during World War I (a post he owed to his old-time buddy, Commander-in-
Chief General John J. Pershing), Charles G. Dawes offered, in the capacity
of American representative of the Reparations Commission, a foretaste of
what was coming on January 15, 1924, at a meeting in Paris.

The first step which we should take, it seems to me, is to devise a system
for stabilizing Germany's currency, so that we can get some water to run
through the budget's mill. Let us build the mill after we find the stream
to turn its wheels. 68

It bore Dawes' name, but it wasn't his plan - it actually 'made him sick,'
out of modesty, to hear it said afterwards that he did it alone. 69 No, in
fact, the Dawes Plan was 'largely a J. P. Morgan production,' 70 directed by
Norman, who proceeded at this critical stage, by the proxy of his American
colleagues, to blackmail the French. If the French wished to see their $100
million loan renewed, Morgan & Co. warned them, they had better adopt
a 'peaceful foreign policy' peremptorily. Which meant that France had to
accede to: (1) the hollowing out of the Reparations Commissions of any
power; (2) the transfer of all such power to a special Reparations Agent, a
role soon to be assumed by S. Parker Gilbert, a graying bureaucrat parked
at the US Treasury, subsequently risen to better fortune under the wing of
Morgan & Co.; and (3) the immediate evacuation of the Ruhr. 71

In spite of its gratuitous brutality, the French impromptu in the Ruhr
would be Europe's last semiconscious revolt against the encirclement by
the Sea Powers. When in 1924, France gave in, it was definitively over for
Europe: Britain finally held the continent solidly in her grip. 72

As to the 'building of the mill,' the 'new' Reichsbank was entrusted to
a General Council of 14 members, half of whom were drawn from Allied
countries. And by limiting, statutorily, the bank's advances to the Reich to
100 million marks,* the mechanism for transforming the state's bills into
worthless cash was dismantled. 73 Next time, if fall she would, Germany
was bound to suffer the penury, rather than the depreciation of money
-which was even worse.

The gold hoard. Norman's cherished hope was to fill the German cash
box with pounds sterling, which would afford him the complete and
exclusive control of the country, but the Americans demurred: this was

Raised by law to 400 million marks in 1926.


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164 Conjuring Hitler


their 'deal.' And Norman acquiesced benevolently; he would explain in a
letter to his mother:

The Dawes machine, while nominally international, is in practice
dominated by Americans. This suits me well.. .Europe is the 'promised
land' to America; to be possessed even without competition! 74

In the end, it was agreed, Schacht's hoard would consist of a loan of
$190 million; half to be floated in New York, the other half, for the most
part, in London. For that, Germany agreed to pay 7.75 percent - two points
above the world average. Of the Wall Street syndicate appointed to float
the American tranche of the Dawes loan, Morgan & Co. realized $865,000
in mere commissions (53 percent of the total). 75 A quarter of the money
thus raised was distilled into pounds sterling, and gold for the remaining
three-quarters, that is, US dollars, thus reflecting the financial power ratio
between the two powers in control of the German prey. This borrowed
money would 'cover' the forthcoming issues of new, post-inflation marks
to the extent of 40 percent. In August 1924, the old mark was replaced by
the new Reichsmark, 2,790 of which might buy 1 kg of fine gold - this was
the old parity - and all capital controls were removed. 76

The United States, who had not even signed the Treaty of Versailles,
then unleashed packs of accountants to appraise the value of the creeks,
industries, forests, and meadows of Germany before mortgaging the whole
country: all her bounties had at last become collateral for the jumbo
Morgan loan. 77

And the reparations. The keystone of the Dawes bailout, ratified on August
30, 1924, was the new agreement on the reparation payments. The plan
lightened considerably the obligations of Germany. Without determining
their number, the annuities were established as moderate in the beginning
and becoming fixed, in 1928-29, at a figure that was susceptible to increase
later, according to a certain indicator of prosperity. 78 This plan did not
supersede the German reparation obligations as established in 1921, and
the difference between the Dawes payments and the payments due on the
London schedule were added to the total reparations debt. Thus Germany
would pay reparations for five years (1924-29), ending up owing more at
the end than she did at the beginning. 79

The pivot of the entire contraption was the role of the Agent General,
who could at all times invoke from Berlin the so-called 'transfer clause,'
whereby the annual reparation installment might be suspended if the strain
against the mark should become too strong. The clause thus worked as a 'breaker


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'Death on the Installment Plan' 1 65


switch/ 80 which was designed to protect a steady flow of foreign investment
into Germany from any interference that might be caused by the cash
transfers of the reparations. If the Agent deemed that any such transfer
might have weakened the mark, he might stop the payment: clearly, the
clubs had engineered a system which minimized the risk of capital flight
internally, and thus ensured for a number of years the remittance of the
American funds earmarked for Germany's preliminary rearmament and
industrial renovation.

The final touch. To crown it all, 25 percent of Germany's public employees
were sacked in 1924 (the number unemployed would reach 2 million in
1926), the absentees were invited with little success to repatriate their
exported capitals, and the rest of the economy was inevitably subjected
to a Kreditstcpp.

The truth was that $190 million scarcely sufficed to jump-start the German
economy; ten years earlier, in 19 13, the gold reserves of the Reichsbank had
amounted to $280 million. On April 7, 1924, not to endanger his hoard
and the 'cover,' Schacht had no choice but to turn off the taps. He wished
he could have raised the rate of discount, but having the latter being put
out of commission because of the hyperinflation - it stood at 100 percent
- he could only distribute the new bank notes by rationing them on a
discretionary basis. So he gave them to the sound concerns and let the
unsound ones, along with a hefty slice of the population, go bankrupt: in
the spring of 1924, business failures increased by 450 percent. 81 But the
stringency was not imposed for the sake of harshness: there just was not
enough borrowed money to re-start the economy. So, where was the rest
going to come from? The Kreditstcppwas indeed decisive for it opened 'the
door to the internationalization of the German monetary supply': whatever
was not provided in the first installment would come by way of additional
foreign loans. sz Not a single drop of Germany's circulatory system was to
be hers; throughout the 'golden bailout' she would breathe on borrowed
blood. Now that the mill was achieved, Germany would live off 'the stream,'
as Dawes had metaphorized in his Parisian allocution.

In 1925, as a token of gratitude for his financial embassy, the clubs elected
Charles Gates Dawes Vice President of the United States.

I. G. Farben and Germany's first Five-Year Plan

And then the American blood came gushing in.

The experts found the ship itself to be quite sound, and so reported. All
that was necessary was to float it again on a tide of confidence. Once


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166 Conjuring Hitler


afloat it could bear a reparations debt burden of $625 million a year... That
was the Dawes Plan, and on the undertaking to make it work the German
government borrowed $200 million gold from Great Britain, France and
the United States to begin a policy of fulfillment. 83

Swarms of brokers, soliciting on behalf of the American banks, were
suddenly seen buzzing in every nook of the German establishment. Rates
in Berlin were high - 9 percent on average throughout the 'golden years';
Morgan & Co. with their mouth watering, packed bundles of German bonds
with a view to selling them to the 'American public' And these cohorts of
middle-class gulls, avidly wishing to see their money 'work for them' in the
bank, parted with their savings to buy the German paper-promises.

It was to the American public that the bulk of the German reparations
were to be sold, and to accomplish this purpose a systematic falsification
of historical, financial, and economic fact was necessary in order to
create in America a state of mind that would make the sale of the bonds
successful. 84


Up until 1930, some $28 billion flowed into Germany, 50 percent as
short-term credits; the Unites States accounted for half the total. Only
$10.3 billion was used for reparations; the rest went into many different,
and interesting, directions. Which is to say that after 1923 Germany never
paid a cent for reparations out of her own pocket? 5

Finally, when Germany resumed paying France the reparations, pacifying
her, as it were, with an American-bred bone to gnaw at, the Franco-Belgian
troops abandoned the Ruhr.* This initiated Weimar's absurd cycle of the
'golden years': the gold that Germany had paid as tribute after the war,
sold, pawned, and lost during the inflation to the United States, was sent in
the form of Dawes loans back to Germany, who then remitted it to France
and Britain, who shipped it as payment for the war debts to the United
States, who channeled it once again, burdened with an additional layer of
interest, to Germany, and so on. 86

In Germany, everyone and everything borrowed: the Reich, banks,
municipalities, counties, businesses, and households. The money was
spent on housing, industrial machines, and public works. Weimar erected
cathedrals of steel and glass, planetariums, stadiums, velodromes, fancy
aerodromes, amusement parks, modernistic morgues, skyscrapers, titanic
swimming pools, and suspended bridges. Yet the world, and even the

The last troops left in July 1 925.


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'Death on the Installment Plan' 167


lenders at home, enquired of their politicians: 'Why is Germany being
boosted thus?' 'She is our ally against Communism,' they replied, and the
Weimar clerks hastened to toe the party line. 87 It is difficult to guess who
must have been more nauseated by the telling of this lie, whether the
Allies, or the Germans themselves. Be all this as it may, the money kept
pouring in, and no one anywhere did anything to stop it. Germany was
being turned into a veritable colony of Wall Street. 88

It did not take much to realize that the arrangement was a house of cards:
the moment Wall Street decided to recall its loans, Germany would plunge
into complete, irremediable bankruptcy. What next? Nobody wished to
give the prospect a careful thought. Only the fall was certain. It was just
a matter of time.

The whole country, politically and economically is falling more and more
into the hands of foreigners... A pin prick and the whole thing will blow
up. If once the money is recalled in large quantities, we shall go broke -the
banks, the municipalities, the joint-stock companies, and the Reich. 89

But there was no tomorrow in 'Golden Weimar': as it gave bread and work,
money was good, wherever it came from; the SPD and the trade unions, all
led by solid Marxists, were enthusiastic supporters of the Dawes loans. 90
As for the 'interesting' uses of the foreign money, a substantial quantum
of it was sold by the Reichsbank in exchange for gold to the Russian
Communists themselves, with whom the secret rearmament plans were
proceeding apace, thus affording the Soviets access to the Western market
for purchases. 91

But far more significant at this time was the reorganization of the I. G.
Farben concern into one of those giant conglomerates imagined by Schacht
in his draft to John Foster Dulles in 1922.

The story of I. G. had begun, in the early 1900s, with colors (Farben,
in German). The dyestuff industry had consisted then of a nucleus of
venturesome combines that had invested heavily in the quest for color
and pigment. BASF, the boldest of the group, and 'a trademark surrounded
by awe in the corporate realm, mastered early on reds and yellows. But
unlocking the secret of synthetic blues was more troublesome.' 92 Eventually,
after the mystery of synthetic indigoes had been solved, and added to a long
list of ground-breaking discoveries, the so-called Big Three, BASF, Bayer,
and Hoechst, joined by a few other satellites of Germany's intimidating
chemical pole, had merged into a cartel in 1916. They had formed thus
a loose but sweeping amalgamation congruent with Rathenau's office for


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168 Conjuring Hitler


war resources, from which it drew its leading assistants. 9J 'The structure
came to be known simply as I. G.': Interessen Gemeinschaft (community of
interests). 94 It stood as 'an industrial colossus... that dominated the chemical
business of the wo rid... Few universities could match the profusion of Nobel
Prizes earned by its scientists.' 95

At the war's end the drafters of Versailles had instructed the Allied
inspectors to leave I. G. in peace.

Unlike the French, the Americans and the British were careful not unduly
to upset the I. G. officials. Assurances were given that the investigators
would not 'pry into the secrets of commercial value in times of peace'.
No technology would have to be revealed nor questions answered unless
they concerned weapons or military applications. 'This reassurance',
reported a U. S. Chemical Warfare Service officer, 'established a more or
less cordial relationship between us'. 96

Indeed, when the questions touched on military patents, not only did
the Anglo-Americans not reveal anything either, but they even actively
collaborated with the German princes of alchemy.

Thanks to the bailout and the 'capital liberalization' of the Dawes
intermission, the six concerns of the I. G. cartel, desirous to increase world
market share, finally resolved to coalesce into a single pool of know-how and
financial might. 'The fusion took place on December 9, 1925. The companies
were merged to become Internationale Gesellschaft Farbenindustrie A. G.
-or I. G. Farben, for short.' 97 The monstrous consolidation followed from
the dream of its leader, Carl Bosch, to liberate Germany from depending
on foreign oil wells.

Were these not the days when the great cannon-maker, Krupp, whose
assembly lines in the Urals and near Leningrad were clangoring at full
throttle, discreetly rented a suite in Berlin around the corner from the Defense
Ministry? A suite where his best engineers might design in tranquility the
weapons of mass destruction of the future, while the top brass living next
door drafted mobilization plans that called for a 63-division army? 9S It was
thus a certainty: 'in the mechanized war of the future the need for liquid
fuel was going to be astronomical.' 99

For the purpose, the alchemists of I. G. concocted a marvelous process
called hydrogenation, whereby coal, of which Germany held abundant
supplies, might be mutated into oil. At that time BASF has performed the
transformation up to half the weight in coal. Therefor Bosch would be
awarded the Nobel Prize, 'the first engineer so honored.' 100


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'Death on the Installment Plan' 169


The only way to make the dream come true, Bosch reasoned, was to draw
America's top petroleum trust, Standard Oil, into some type of alliance, with
which the great corporation from New Jersey might be made to shoulder
the cost of Farben 's research and development of synthetic fuel. After
years of mutually fascinated cooperation, especially on the part of the
Americans, the accord with Standard Oil was sealed in 1929. In exchange
for the world rights for the hydrogenation process, with the exception of
Germany, Standard transferred to I. G. $35 billion in Standard Oil stock.
December 1929 witnessed the creation of a joint venture subscribed by I.
G. and Standard Oil, for the mutual exploitation of precious patents and
the manufacture of synthetic oil, named American I. G. Company, on
whose board sat a few of America's great captains of industry and business:
Edsel Ford of Ford Motor Company; Walter Teagle, head of Standard, and
Director of the FRBNY; C. E. Mitchell, chief of National City Bank, and
Director of the FRBNY; and Paul Warburg, first member and creator of the
Federal Reserve Board, and Chairman of Manhattan Bank. 101

'The full story of I. G. Farben and its world-wide activities before World
War II can never be known, as key German records were destroyed in
anticipation of Allied victory,' 102 but there are sufficient testimonies to
suggest that German-American technical and military collaboration,
shielded by complex corporate contracts, hosted in the 'neutral' nodes of
the Grid (such as Holland and Switzerland), went on throughout the 1930s
and well into the duration of the second world conflict:


Standard Oil [will keep] its cartel with I. G. Farben alive, war or no war... A
Standard official said:. .."Technology has to carry on..." 103

During World War II, I. G. would provision and supply the Nazi regime
with the bulk, if not the entirety, of the following essential staples: synthetic
rubber (100 percent), dyestuffs (100 percent), poison gas (95 percent), plastics
(90 percent), explosives (84 percent), gunpowder (70 percent), aviation
gasoline (46 percent), synthetic gasoline (33 percent), not to mention the
manufacture of Zyklon B, the canned cyanide employed to annihilate the
inmates of concentration camps, which was produced by I. G. Leverkusen
and sold from the Bayer sales office through an outfit called Degesch. 104

An American post-war committee, drawn from the Senate and chaired
by HarleyM. Kilgore, a Democrat from West Virginia, after gaining a fairly
deep insight into the ramifications of American collusion with the enemy,
and not without edulcorating to the point of distortion the obscenities


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170 Conjuring Hitler


found therein, framed its conclusion according to what has since Versailles
become the customary apologetic template of the Allies:

The United States accidentally played an important role in the technical
arming of Germany. . .Neither the military economists nor the corporations
seem to have realized to the full extent what that meant. ..Germans were
brought to Detroit to learn the techniques of specialized production of
components... The techniques learned in Detroit were eventually used
to construct the dive-bombing Stukas... 105

Thus the meager evidence accessible suggests by itself that the American
collaboration with the German military-industrial complex, through
Weimar and the Nazi regime, was indeed intense and pervasive. The
'Dawes machine' inaugurated this determining phase of the incubation,
in 1924, when the dynasts of the American Grid, egged on by Norman,
set out to divide amongst themselves in a rational fashion the bond sales
of Germany's giant industrial axes.

Morgan & Co. and Rockefeller, via Chase National, promoted I. G. Farben
and the German chemicals on Wall Street. Dillon & Read placed $70 million
worth of debentures on behalf of the coal and steel concerns, such as
Alfred Thyssen's Vereinigte Stahlwerke, which would serve as a Nazi slush
fund,* and one of the prime founts of pig iron and heavy plate for the
Third Reich. V. A. Harriman & Co., which merged with Brown Brothers in
1931, sponsored the electro-technical conglomerates. 10& As shall be seen,
the revision of the Dawes Plan, the so-called Young Plan of 1929, would
be named after a General Electric Co. officer, Owen Young. Young would
be appointed thereafter as one of AEG's foreign directors. AEG, Germany's
General Electric, the great Konzern founded by Rathenau's father, received
under the Dawes Plan at least $35 million worth of loans. By 1933, at which
time there was irrefutable evidence that it financed Hitler, AEG was owned
by its American counterpart GE to the tune of 30 percent. 107

No accident: Germany was being gradually, but steadily, rearmed, in
keeping with the dictates of Versailles. Since 1924, the Anglo-Americans
equipped what would become Hitler's war machine through well over 150
foreign long-term loans contracted in less than seven years: 10S the more
thorough and elaborate the fitting, the more devastating the German army,
the bloodier the war, the more resounding the foregone victory of the Allies
(and the defeat of Germans, who were being set up), and the more sweeping

See below, p. 198.


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'Death on the Installment Plan' 1 71


and permanent the Anglo-American conquest. There was neither greed
nor treason behind the Dawes bailout, but solely the long-term objective
of fitting a prospective enemy with a view to bringing him down in a fiery
confrontation - a confrontation to be orchestrated at a later stage.

With these American loans Germany was able to rebuild her industrial
system to make it the second best in the world by a wide margin... and to
pay reparations without either a balanced budget or a favorable balance
of trade. 109

The great German machine, having been raised on borrowed capital
to be the most powerful and the most efficient in Europe, was running
on borrowed gas... Why were the Germans putting their own gas out of
Germany for safe-keeping, in the banks of foreign countries? 110

The Dawes bailout was in fact Germany's first Five- Year Plan (1924-29) in
view of the forthcoming world war.

Throughout this critical quinquennium, Norman had been busily at
work: to sustain at such a pace the flux of American money into Weimar
had required of the Bank of England such financial acrobatics that only
he, in the world, could have performed. For Norman brought the foreign
money in, and, when it was time to alter the political physiognomy of
Germany, he took it out.

Britain's grand charade to crash the new Gold Standard

Much underwater paddling had gone into opening the gates of the American
feeder to Germany, and most of it conceived, organized, and effected by
Montagu Norman. The succession of his maneuvers punctuated each salient
date of the interwar period: he was the uncontested and unrivaled architect
of Europe's downfall; the priest that expedited and turned to account the
obscene degeneration of European civilization. With World War II, the
Anglo-Americans came, saw, and conquered, but before they did all that,
Montagu Norman schemed - and his peculiar doings, unjustly misreckoned,
remained so far the most astonishing feat of the great Anglo-American siege
of the landmass, which had begun with World War I.

As Germany underwent the Dawes transfusion, the path for the Allies was
cleared: the mark was being made fully convertible into gold, and sterling
might presently resume its ascent towards the old parity of $4.86.


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So in April 1924, the Dawes Plan, which in fact postponed the gravamen
of the reparations transfers for some years, was announced, and from that
moment onward, the pound rose without ever wavering again (Figure 4.2).
In May, J. P. Morgan & Co. and the FRBNY communicated to Norman and
associates that they were ready to grant their British counterpart generous
lines of credit for defending the gold convertibility of sterling when it came,
which, they all anticipated, would be in early 1925. The British Treasury
haggled a bit, and in the end they all agreed, reassured and confident. And
then the Norman/Strong tandem resumed its favorite game, that of the
bank rates.

In July 1923 Norman had raised his rate from 3 to 4 percent, thus sending
the signal to New York that London was ready - ready to pull gold (Figure
4.1). It took some time to allow the German debacle to run its course
and set up Schacht for the bailout, but finally New York responded by
lowering its rate by three half-point reductions from 4.5 percent in May
1924 to 3 percent in August. The positions were inverted; New York was
then below London. The plan, of course, was to attract lenders in London,
the expensive money market, and borrowers in New York, the affordable
one. The switch was of decisive importance. New York initiated thereby
a policy of 'easy money': she swallowed at once conspicuous amounts of
private and public paper-promises and injected cash into the economy,
which was magnified by the lax credit routine of the commercial banks . ] 1 1
America was flush with cash, and London, the tighter market, pulled gold
like a magnet. Thus America's phenomenal stock exchange mania of the Roaring
Twenties was sparked: it started in the late summer of 1924 to give Norman a
hand in attracting gold to London. 112

But it was not until the great Dawes loan was floated in October that
sterling began its final and decisive convergence to parity. The unbroken
improvement from October (4.43 dollars to the pound) to April (4.86)
was made 'in the face of formidable adverse conditions': buttressed by the
American Grid, the pound reached the yearned gold parity on 28 April
1925, even with a 'strongly negative merchandise balance.' It was in fact the
invisible balance (capital imports) that did all the work in lifting the pound
to the gold plateau. 113 Norman had had his way; there were no 'rules of
the game' other than the particular ways of bending the Grid.

And so it was finally done: Britain returned to gold, at £1 = $4.86. Over
30 countries followed her example; the City of London was once more the
clearing center of the world.

Upon closer inspection, however, a few attentive scholars came to notice
that Britain's new 'Gold Standard' was rather peculiar. First of all, gold


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'Death on the Installment Plan' 1 73


virtually disappeared from circulation: 114 : the note-holder could notundei
the terms of the new act convert his Bank of England note into gold at
the bank. And the latter was obliged to sell gold only in amounts of 400
fine ounces, that is, 'for. ..not less than $8268 worth at a time': 115 gold
was quietly dropped out from the public traffic, and confined to a special
inner circuit accessible only to 'the big players.' What was Norman after?
By excluding the possibility for the economy to transact in gold, and, most
importantly, hoard it in times of crisis, he was removing from the system
a buffer, which could have rendered its actions and reactions much more
sluggish. Norman was calibrating the system to play a fast game.

Second, he leveraged this new gold circuit greatly by imposing upon all
central banks presently tied to it to keep part of their reserves in pounds
sterling, which was presently anchored to gold, and which London would
proceed to invest on their behalf. 116

On the one hand, this device of the gold exchange diluted enormously the
'cover' for the standard as a whole, and thus predisposed the world system
to an unprecedented inflationary swelling; and on the other, it preset the
game for a catastrophic chain reaction, which should have started as soon
as either of the two gold currencies, the pound or the dollar, should have
suffered a run for having been overextended: if, for instance, London were
to lose much gold, the pound would collapse, and if the pound collapsed,
as most satellites were forced to hold large amounts of sterling as 'cover,'
the entire circuit would disintegrate.

Norman was playing for high stakes: he demanded a swift and momentous
response from the set-up; he was literally assembling a time bomb, and the
world, unawares, looked distractedly the other way.

The banking structure of the modern world with its huge pyramid of
deposits nominally convertible into gold on demand, and actually
represented by assets that cannot be liquidated, is full of dynamite. 111

Third, the parity itself. No doubt, the pound at $4.86 was expensive. And
Norman knew that well. Sterling at such a level was obviously not likely
to pull British exports through, though it might certainly be counted on
to strengthen Britain's vital produce imports and, far more important, her
invisibles: overseas investment, shipping freight, and financial services,
all of which were denominated in sterling. Having conquered anew the
position of world clearing center, London and the empire might confidently
expect to derive a rich source of revenue from the forthcoming magnified


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174 Conjuring Hitler


flux of foreign moneys in search of high interest - hence the importance
of keeping the interest rate in London above that of New York.

At last, in 1925, after a full decade in the temple, Norman was on top
of his game; most of the industrialized world was on gold now, and the
great financial carousel, strapped with dynamite, might be spun in motion.
Truly, Norman had impressed the world; building against all odds this new,
formidable machine that seemed to have brought the chances for world
prosperity and cooperation to levels hitherto unimaginable. And he was

His persona, as the events, corridor rumors, and legends had come by this
time to incise it in the public fantasy, was a fair match to the enigma of his
nature. Completely wedded to the empire and the adored bank - 'his sole
mistress,' as he said - 11 s he led a veritable monastic life, without company
and friends worthy of the name.

He had some fundamental dislikes... The French, Roman Catholics, Jews...
An innate ruler with a profound distaste for so-called democracy... 119

Norman was a strange man whose mental look was one of suppressed
hysteria... When he rebuilt the Bank of England, he constructed it as a
fortress prepared to defend itself against popular revolt, with the sacred
gold reserves hidden in deep vaults below the level of underground
waters which could be released to cover them by pressing a button on the
governor's desk. For much of his life Norma rushed around the world in
steamship, covering thousands of miles each years traveling incognito...
under the assumed name of 'Professor Skinner'... 120

This was the individual that the French had to reckon with in 1926. Because
he had laid eyes on them. Presently the achievement of his plans had to pass
through the French tangle. France was, in fact, the last of the big players,
and was still not hooked onto the newly assembled Gold Standard.

Like Germany, France after the war was shaken by a violent inflation
and an extraordinary flight of capital. In the early 1920s, because of the
perennial uncertainty surrounding the German reparations, and the
organized speculation against the franc at the time of the Ruhr invasion, the
French absentees exported en masse a fabulous treasure, which they remitted
for custody to New York, and especially London. Statistics measuring the
magnitude of the outflow are as usual unavailable, but what seemed a
certitude among bankers in the know, was that it was far more significant
than the German export of capital had been a few years previously. 121 Now,


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'Death on the Installment Plan' 1 75


realizing what fugitive wealth had done to Germany in 1923, a few experts,
lucid enough to appraise the situation for what it was, took fright and found
the time to fire warnings to the outside world. On September 10, 1926, one
of such dispirited omen-mongers, Swiss banker Felix Somary, put two and
two together in a public lecture hosted by the University of Vienna.

We now find ourselves at a provisional state of rest. Yet this is the calm
before the tempest. How can we Europeans cope with a power such as
the United States, who wields a surplus both on her trade and capital
account? The only way out is for America to keep on extending short-
term-credits. Never has an economic cycle initiated under such hazardous
conditions as the bailouts of Austria and Germany. Beware, America is
the strongest protectionist of the world. She will bolt her door when
Europe will come knocking with her wares for export. And if today the
United States must lend to keep the system afloat, this cheap money
policy cannot but usher in a Gargantuan stock exchange bubble. What
if all the French refugee capital, which is now being invested from New
York by its American custodians, is suddenly repatriated? That will set off
the collapse. Therefore, only the immediate withdrawal of French funds
from their foreign shelters and the peremptory abolition of the new gold
standard can prevent a stock exchange boom from developing. For if
both movements were to unravel during an upswing, or in the midst of
an American crisis, the dimension of the catastrophe that would befall
Europe would be unimaginable. 1ZZ

The great 1929 Wall Street Crash was thus fully anticipated by a common
practitioner of the Grid in 1926. Which is to say that Norman could by
no means have failed to envision the eventuality himself, especially in the
light of the 1920 crunch, which he had wrought.

As for the French expatriated capitals, timing, as Somary intuited, was
of the essence. Norman, who was keenly alert to the potential of such
funds, could scarcely afford to yield to France any form of control, albeit a
tangential one, over the fate of Germany, which was now fed vital money
from America. A mass recall of French gold from London and New York,
on terms other than Norman's, might indeed have wrecked the new Gold
Standard and swept the momentum from under the Wall Street lending
bonanza. So the money had to be repatriated to France immediately, but
through London, and in ways congruent with the Governor's plans.

At once, in the summer of 1926, the empire dispatched its human spiders
to spin the web round France.


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176 Conjuring Hitler


On July 29, 1926, at 11:00 am sharp, Norman crept in the Banque de
France to face his opposite, Emile Moreau. The Frenchman was somewhat
uneasy; he had been told that Norman was 'tres dur en affaires et tres ruse':
Moreau knew he was coming face to face with the 'best governor in the
world.' 123

Not before speaking ill of the Jews, yet passionately of his bank and Great
Britain, to whom he wished the domination of the world, Norman urged
Moreau to join the 'Bankers' club' by readying himself as quickly as possible
to convert the franc at a fixed rate under the new Gold Standard. 134

A few weeks later, in August, the Agent General for the reparations,
Parker Gilbert, met the French President, Raymond Poincare, and the two
cut a deal. For the first three years, the installments which France owed
to America for the war credits would be subtracted from the larger Dawes
payments which Germany presently owed to France. Britain and America
nodded. On the sly the three parties had thus revised the Dawes Plan to link
war debts and reparations. 125 Poincare was triumphant - the accord would
keep him in power: he had made France safe for the investors again. 126
The Banque de France was advised to prepare itself for a major absorption
of francs from abroad.

All of a sudden, in the second half of 1926, a wave of capital returned
to the French motherland. The Banque de France swallowed these foreign
moneys and printed francs galore, in exchange. Its foreign reserves swelled
to extraordinary heights. The franc left the doldrums behind, appreciated
rapidly, and became the object of a frantic, international speculation, which
was systematically organized from London. The latest rumor was that
'speculators from Berlin' borrowed pounds in London, and sold the pounds
in Paris for francs. Paris deposited these pounds in London, where they were
lent anew, and so on. 127 But the truth was that the chief speculators on the
franc were British financiers. 128 Which leads one to infer that Norman, 'the
trusted confidant of the whole City,' 139 was, in fact, allowing the London
market to feed the French with oodles of sterling... Feeding the French, until
in May 1927, with their mouths full, and fearing a disruptive appreciation
of their currency, they demanded to convert some of their enormous sterling
reserves in gold. And that was exactly what Norman was waiting for.

Though his biographers were always fond of recounting that there
was 'calculation in the face. ..[this] character with a thousand and one
disguises... chose to wear,' 130 the reader, however, is never told on which
occasions Norman was supposed to have performed these extraordinary
theatrical shows. There is reason to surmise that May 1927 was one such
remarkable instance.


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'Death on the Installment Plan' 177


Feigning unspeakable distress at the French conversion of £1.5 million
into gold on 19 May, 1927, Norman rushed a week later to Paris with an
adjutant to confront Moreau. The latter rehashed peevishly his argument
against speculation, and defiantly dug his heels in by telling Norman that
France was playing by the book, and that such a conversion (of sterling
into gold) was the least Britain should expect since her imperial return to
gold two years ago: London, sentenced Moreau, should now raise its rate
to defend its gold. Norman retorted that there would be a public outcry
if he did that. 131 The British Governor then proceeded to explain that
London's monetary market was a high precision mechanism, perfectly
gauged to lubricate the British economy; any abnormal tampering with
this device would be insufferable; an unwarranted and disproportionate
withdrawal of gold from London would topple the entire system. Moreover,
Norman went on, it was impossible to spot the source of the speculation;
speculators were faceless: Paris had power over London, Norman declared,
but London had none over third parties. Finally, with such high rates
in Paris and the continual allurement of an appreciating franc, capital
affluence to France was simply unstoppable. Paris, Norman concluded,
should lower her rate. 132

Framed to inflate the French Governor's self-importance and corroborate
France's newfound feeling of financial allure, the lines of Norman were
cleverly crafted and effective. He had told Moreau that Britain was at France's
mercy. Which was not true; nor was a single word of his entire act.

Officially France and Britain had reached a stalemate in May; neither
party agreed to alter its rate, though they signed a truce of sorts whereby
Moreau, sufficiently cajoled, forbore for the time being from withdrawing
more gold from London, and directed his requirements to New York,
whereas Norman willingly tweaked upwards by an eighth of a percentage
point some rather insignificant short-term rate in London: T shouldn't
want to throw the pound sterling in the dirt,' Moreau signed off on his
diary, gloating and diligent, 'that would earn us the justified reproach of
Ben Strong and the Americans.' 133 He had been completely fooled.

From the start, Norman operated deliberately with a 'very slender gold
reserve', that is, with a cover rarely larger than 2-3 percent of the country's
total money supply. 134 With a gold base spread so thin, any incoming
monetary mass of substantial magnitude, such as the repatriation of French
capitals, likely to be satisfied, at least in part, in gold might be assuredly
counted on to rattle the system. Which was precisely the effect Norman
sought from the sudden reversal of French money transiting in London.
He was the one encouraging the speculation against the franc; besides, he


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178 Conjuring Hitler


felt neither awkwardness in cohabiting with 1.2 million unemployed, nor
inhibition in raising the rate to 7 percent when necessary: he was afraid of
no riot. All of which bespoke, instead, his intention to obtain something
altogether different from this maneuver.

He somehow managed to get a great number and a great variety of people
to do just what he wanted them to do, although very often they did not
want to do it... He could mobilise, in effect, an army out of the ground,
and he did so, time and again. 135

And that was to persuade his companion Benjamin Strong in New York to
postpone the tightening that was in the offing, the measure being necessary
in the United States to cool the bustling activity on the stock exchange,
which of late had become too audacious. Norman presented the stalemate
with Paris as a question of life and death for the new Gold Standard, and
begged Strong to come to his aid. A conference was immediately arranged
in July 1927 in Long Island; Norman, Schacht, Strong, and Charles Rist,
former law professor and second-in-command at the Banque de France,
attended. The result was, at first glance, a rather inconspicuous dip in the
Federal Reserve's rate from 4 to 3.5 percent in August of 1927. New York
was one full point below London (Figure 4.1).

But this apparently innocuous cheapening of money in New York,
coupled with more paper-swallowing on the part of the Federal Reserve, was
the turning point of the interwar period. This second boost, compounded
with the much ampler and still effective inflationary push of late 1924, 136
would trigger Wall Street's infamous wild ride to the Faustian heights of
September 1929. Thus 'the Federal Reserve Board permitted a speculative
spree, which was already out of hand by August 1928, to grow progressively
worse until July 1929. ' 137

To help Britain temporarily 'survive' the contrived 'French shock,'
America, through cash injections and the mechanism of the interest
differential, released excess gold reserves (overall around 17 percent) from
her enormous coffers once more.

In the first half of 1925 [the United States] lost 140 million dollars worth
of gold, and in the 14 months which ended in May 1928, lost nearly 540
million dollars. The first outflow furnished much of the basis for the new
gold currency of Germany and the second for that of France. 138


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'Death on the Installment Plan' 1 79


The aim of this British game of ricochet was always the same: namely, to
keep the 'Dawes machine' running. The American policy of cheap money
renewed in August 1927 went in fact to sustain the continuous flotation of
German securities in New York, and thereby strengthen the Reichsmark in
terms of the dollar. 139 Another brilliant move deftly executed.

And so the Anglo-Americans replayed what they had done in 1924: the
borrowers borrowed money in New York, the cheaper market, and wired
the proceeds to London to earn the higher rate. US private short-term funds
moved to London in considerable volume. Norman's gold reserves were
plenteous again, and until June 1928, the sterling-dollar exchange averaged
the highest for any of the years 1924-31. 140 American gold had started to
flow in since the previous December. And certain interests in the United
States, including the Federal Reserve Bank of Chicago, protested: they did
not understand why New York had to overheat the American economy
for the sake of Norman - for no amount of mystification, anywhere,
succeeded in convincing anyone that it was otherwise. 141 It was at this
time that Benjamin Strong earned that semi-insult of being the 'mental
annex' of the British Governor. 142 Yet for all of the hue and cry, the step
was not reversed.

The relief brought to London, however, was merely temporary. Already
in July the tide began to turn. It so happened that, because of the revamped
speculation, short-time money on Wall Street was shooting to levels so
recklessly high (20 percent) that the funds that had hitherto been flowing
from New York to London and the rest of Europe, were being recalled in
New York by the fatter baits. And the dismal news for Norman was that
money was therefore being pulled out of Germany as well.

In brief, the world economy was back to the late 1919 scenario, yet
encumbered by a mass of credit several orders of magnitude greater; it
barreled along like a file of overloaded wagons, pulled by the Anglo-
American locomotive along a roller-coaster without any safeguards.

The Federal Reserve had a mind to kill the euphoria softly, by
accompanying it, as it were. The American bankers set out to ration credit
gradually, hoping that the bubble would eventually run out of steam. Thus,
in July, the Federal Reserve in New York raised the rate to 5 percent, half a
point above London, but well below the market rates prevailing on Wall
Street. With this move, the game changed radically; the June 1924 switch
between London and New York was reversed (Figure 4.1). As in 1920, this
was for Norman the summons to intervene peremptorily: the crash had to
come as soon as possible, or else sterling, and the empire's policies, would
be weakened to the point of impotence: Norman could not watch Wall


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ISO Conjuring Hitler


Street send Britain into a spin by sucking out of her all the gold amassed
previously in London.

At this time, in late 1928, things worsened for Britain; she kept losing
gold to Wall Street, and, again, to France. Norman wrote to Schacht: 'The
Jews continue day by day to take away our gold.' 143 As if it hadn't been
enough, his partner Strong died in October of tuberculosis.

It took Norman little time to win over George Harrison, Strong's successor.
Not long after the replacement, Harrison's fellow directors could already
be heard saying that the new boss 'lived and breathed for Norman.' 144
The British Governor courted his new prey immediately, entreating him
to engage without delay in that chase of the rates that Norman and the
former Fed Governor had run in 1920: that is, to prick the bubble for the
sake of Britain's gold. And as proof of his resolve, Norman took the plunge
and raised the bank rate on February 7, 1929, by a full point to 5.5 percent
(Figure 4.1), awaiting immediate reaction in New York.

But New York lingered. There was a communication breakdown within
the American Grid; Harrison and the Anglophiles in New York wanted
to play the game and step the rate up forthwith to 6 percent, but the
seven-member Federal Board, a separate supervisory board presiding
in Washington, seemed to have lost all sense of New York's doings and
intentions. Ten consecutive times between February and August 1929,
fearful of affecting business unfavorably, the Board denied New York's
request for raising the rate to 6 percent. 145 Finally, on August 9, 1929, in a
delirious convergence of policy inspired by diametrically opposed objectives
-the Board interpreting the measure as an expansive and accommodating
gesture towards the market, and New York willing it instead as the coveted,
and restrictive response to an anxious Norman - the Federal Reserve finally
set its rate at 6 percent.

At last, with the green light from New York, on September 26, 1929, a
week after the all-time peak for share prices, 146 Norman raised his rate to
6.5 percent and yanked the air out of the bubble. 'Then, suddenly,' wrote
the Financial Editor of the New York Times, Alexander Dana Noyes, 'the
great decline began. . .No one seemed able to explain the source of the huge
selling orders which poured in... Possibly London... started indiscriminate
foreign selling.' 147 London sold and gold flowed back to Britain.

It is certain that. ..the raise of the London bank Rate to 6V2 percent...
hastened the downfall of speculation in the United States. ..[and]
precipitated the stock exchange crisis and slump of October. 148


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'Death on the Installment Plan' 181


It was done: Norman arrested America's long season of profits, 1914-29, 15
years of avid dreams and opulence, suggested by Britain, and inspired by
the ravage of Europe. Afterwards the rates of London and New York, like
twined serpents in a caduceus of folly, came rolling down as well (Figure
4. 1): the world economy was crippled by debt contracted during the boom
at exorbitant rates, and the central banks' crunch had so depressed prices
as to send the money scampering underground: it was locked up in the
vaults - the rates decreased, banks lent no more, the Grid closed. A crisis
the likes of which no one had ever experienced had begun. Begun as a mere
repetition of the Norman/Strong sabotage of 1920.

The ratio of gold to total credit in America had sunk to less than 7 percent
in April 1929, the lowest point in her history; when the crash hit the US
the paralysis was extensive: 149 through bank failures the American elite
had burnt a third of her Grid to play this British game. It would take the
United States ten years to come out of the Depression. The Dawes bailout,
barring a momentary lending spurt to a comatose Germany in 1930, was
finished: Americans wanted their money back. Suddenly and completely they
ceased to buy German securities. 150

Thereafter, Norman waited. It was a slow process of suffocation that he
observed at home, and especially in Germany. There, the clutches of the
Dawes machine, without the 'stream, ' had brought political despair to such
a pitch that in March 1931, Germany and Austria, Norman's two bailed-
out creatures, announced their intention to unite into a customs union
(Zollverein) as a means to overcome the commercial drought of Middle-
Europe. But on May 11, Austria's leading bank, the Creditanstalt, suffered
a run and, with it, the whole Austrian banking system collapsed. How it
collapsed remains a mystery to this day. The documents available mention
some obscure and 'intricate system of cross-deposits between [the Austrian
Grid] and a number of American and British banks' which had been set
up in 1929 - 'tainted money,' in the words of Norman. What the role of
such a system might have been in this connection is still unknown. 151
Three weeks later, the rupture spread to Germany. The Reichsbank accused
foreigners of an external run, while the Federal Reserve laid the blame on
the Germans for exporting their money. Either way, the money fled, and
Norman knew that Britain was next.

He had been planning and preparing for this fateful juncture a long
time since - at least for the six years that it had taken him to assemble
his new Gold Standard. For indeed it had been constructed for self-
disintegration; the aggregate of his bank's policies throughout this period
proved it irrefutably.


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1S2 Conjuring Hitler


Whenever he had lost gold, Norman was the first to violate the 'rules
of the game' by expanding the money supply instead of restricting it: 15Z
between 1924 and 1929, a significant percentage of the foreign moneys that
Norman had attracted with the trick of the interest differential between
London and New York was taken in by the London joint stock banks and
relent to Germany continually in excess of their resources, with the full
knowledge of the Governor. 153 In the process, the London banks relaxed
their cover and made it twice as thin as customary. An inquiry into such
inexplicable 'oversights' was solicited after the 1931 rout, but nothing
came of it. 154

Shortly after Germany's complete financial collapse, in mid-July, a run
was launched against sterling.

On July 13 an ad hoc committee set up to report on the health of British
banking completed its work: the Macmillan Report, which bared the lewd
foreign indebtedness of British banks, was released with suspiciously
good timing and no explanation whatever of the 'large figures' published
therein. 155 Alarmed by the report and the crisis in Berlin, between July 16
and 29 the central banks of France, Holland, Switzerland, and Belgium
liquidated a small part of their bulky sterling balances in London, and took
away with them £32 million in gold - about 20 percent of Norman's stock.
What followed from that moment on was a tale from an alien realm.

Harrison cabled Norman immediately; 'Can you throw light on this?' he
asked. 'I cannot explain this drop...,' answered Norman. 156 The situation,
to say the least, was serious, and it called for drastic measures. Such as
tightening the rate to 7 or 8 percent, as Norman conceded on July 23,
when speaking again with Harrison over the phone. 157 So what did the
Bank of England finally opt for? On July 29 it raised its rate from 3.5 to 4.5
percent, when 10 could have 'pulled money from the moon'. ..A meager point, as
if it were bandaging a hemorrhage with a gossamer gauze. Bankers round
the world were flabbergasted by London's reaction: unforgivably inane,
they thought.

On the same day, Norman, 'feeling queer,' eventually collapsed during a
meeting at the Treasury. 158 He abandoned the helm at the bank. Adducing
health complications, and without allowing his name to appear on the
passenger list, 159 he boarded a fast liner to Quebec on August 15. His
Deputy Ernest Harvey, was now in charge, and duly instructed. Washington
and Paris immediately came forth with offers of help. Harvey floated the
decoy of Britain's government deficit: 'that,' he averred, 'is the source of
our trouble, and it really can't be helped.' No one believed him, and fellow
international bankers insisted on assisting the Old Lady of Threadneedle


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'Death on the Installment Plan' 183


Street.* On July 31, Paris and New York extended credits to London to
defend sterling, to use it as ammunition, as it were, with which the Bank
of England might repurchase the pounds that speculation was dumping
in London. On August 5, the pound kept skidding, and more gold was
forfeited, but Harvey did not draw on the new Franco-American credits.
The French wondered what on earth he was doing; Harvey replied that he
had let the gold go to teach his colleagues at the Treasury a lesson; to prod
them to balance the budget. Moret, the new French Governor, could not
believe his ears, 'he was appalled.' 160

Harvey, undaunted, and slathering falsehood upon falsehood, professed
further that the source of the run remained inexplicable, and that British
citizens were only marginally involved in it, when in truth suspicion ran
high in the banking community that the British financiers of the City were
the chief speculators against their own currency. 161 The pound continued
to sag, and eventually the Franco-American credits were blown away in
a matter of days. The French and the Americans, not daring to doubt the
good faith of Britain, persisted and in late August offered two additional
lines of credit, in dollars and francs, for a last-ditch defense of the pound.
The Bank of England, instead of keeping the new ammunition close at hand
and firing it from its own defense lines, dispatched it to two minor forts,
the British Overseas Bank and the Anglo-International Bank; and these
two banks, by the frequency and magnitude of their purchases of pounds,
revealed to the speculation what never ought to have been revealed: that
is, the amount of the reserves themselves. 162 Everyone guessed that the
money was on tap, so to speak, and that it wouldn't last long - and so it
was wasted in little time.

Mid-September dealt sterling the coup de grace: no one knows for sure,
but the last fatal withdrawal appears to come by way of the Netherlands, 163
though not on official account: 164 the central bankers stayed put. France
had nothing to do with this last raid. Given the size of her sterling account,
she stood only to lose tremendously from a depreciation of the British
currency; she actually bought sterling at this time. The same applied to the
Dutch central bank. So who really mugged the Old Lady?

The evidence is 'scanty,' regret the historians. 165

Therefore, this had to have been the work of that gray blob conveniently
referred to as 'speculation' or 'the market' - ghost privateers, who in
September ransacked the cellars of the bank some more, thus bringing the

The moniker of the Bank of England.


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1S4 Conjuring Hitler


total loss in the final two months to £200 million in gold and deposits. 166
But it was known that

In its operations with... foreign exchanges balances, the Bank of England
was continuously preoccupied by the need for secrecy and discretion.
That its efforts in this respect were generally successful... is beyond doubt,
as the paucity of press, and even Treasury, guesses as to the extent of
its activities indicates... Public knowledge of the fact that the Bank held
hidden reserves, at times as large as its published, would have made
execution of its. ..policy impossible. ..In its market operations, [the Bank]
deliberately disguised itself. Through a number of accounts at the Federal
Reserve Bank of New York, it prevented banks paying in funds or receiving
them from knowing their ultimate destination or origin. 167

As these were the methods of the Old Lady, the temptation to conclude
that it was the bank itself that led the speculation from under the cover of
its secret foreign accounts by way of short sales and like operations, with
a view to igniting a herd movement, which it then deviously lured into its
own gold sanctum through 'the line of least resistance'- that is, an absurdly
low rate of discount at 4.5 and the weak defense of the two small banks in
September, is rather irresistible.

Then, on September 15, 500 sailors mutinied at Invergordon, Scotland,
because of a pay cut. The meretricious press jumped at the story and blared
out in the open that the Royal Navy was in disarray. The organs of the
empire were now diffusing the psychosis that Britain was on the verge of
a precipice. From Nova Scotia, Norman acted with Harvey to draw up the
draft bill that would abrogate the 1925 Gold Act. On September 18 the
defense of sterling was given up. A day out from Quebec, on the homeward
voyage, Norman received a cable from his men at the bank: 'Old Lady goes
off on Monday'

On Monday, September 21, before a speechless world, Britain suspended
gold payments.

Within four weeks 18 countries would depart from the Gold Standard. To
disperse the loitering speculation, the bank hiked up the rate to 6 percent,
where it would stay for the next four months (Figure 4.1).

At first it seemed one of those incomprehensible losses which the British
didn't quite know whether they were to hail or mourn. Though soon 'the
politicians, the press, and the public seemed to arrive at the belief that
those who... had driven Britain off gold had forced a blessing upon her
government against her will.' 16S


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'Death on the Installment Plan' 1 85


But it wasn't over: the empire's stewards, to make it perfect, achieved this
piece extraordinaire with a solemn finale. Snowden, the chief of the Treasury
and 'Norman's devoted slave,' 169 in officiating over the funeral of the Gold
Standard in the House of Commons, appealed with maudlin majesty 'to
everyone not to use words... at this moment, which will make things more
difficult.' The few skeptics in the House, lest they should crack 'a joke in
the cathedral' if they spoke up, kept their mouths shut. 170

On September 23, Norman docked in Liverpool; on the 28 he was back
at the bank. Allegedly, 'he was utterly bowled over on discovering of the
terrible truth.' 171 Clearly, Harvey and the others 'had lost their heads.' 172

So here was Montagu Norman, a controversial and patently ill man in
charge of the financial arm of the world's empire until late July 1931 - nine
years past the customary term - who relinquished the command at the most
critical juncture of Britain's recent financial history, and in his absence
deputized his most delicate duties to a team of semi-incompetents. As a
result, the empire's currency fell so steeply as to sever the connection to
the gold anchor and hurl the world economy down a spiral slide into hell.
The Navy mutinied, and upon his return the Governor was pilloried like a
monumental loser by a wolfish mob of cartoonists. The pound depreciated
by 30 percent, and the losses of the French and Dutch central banks realized
on their sterling balances numbered in the billions of dollars. The outrage
of the Hollanders at the double-cross was such that they contemplated a
legal suit versus the Bank of England; the Dutch Governor, Vissering, was
fired on the spot.

What did the empire do? Did it fire Norman? Clement Moret, the French
Governor, for having held on to his pounds, 'was decorated as a Knight of
the British Empire in October.' 173 And Norman was confirmed governor for
the first of 13 additional years.

What of prices and gold? Did prices in Britain, as all feared, shoot up
because of sterling's fall? No; Britain, most seemed to have forgetten, did
not suffer the imposition of world prices, but dictated them herself, copper,
freights, wheat, cotton, fats, jute, rubber, and tin were all quoted on the
empire's markets. It was the others that would have to adjust. 174

And gold? Table 4. 1 shows the evolution of the bank's stocks of the metal
between 1925 and 1935. 175

By late 1932, not only was the gold hoard refurbished, but it had even
increased. How? Why, by crushing the Indian serf, of course, with the
exact same device employed ten years before. Between 1928 and 1930,
the Indian government was ordered to dump a third of its surplus stocks
of silver (90 million ounces), thus causing a decrease in the price of the


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1S6 Conjuring Hitler


Table 4. 1 Bank of England gold reserves, 1925-35



Gold reserves


{$ millions at 1929 level)
























metal of 50 percent. 17& In 1931, India's Imperial Bank, besieged by the
furious protests of India's farmers and merchants, was enjoined to peg the
rate at 6 percent; and even the Bank's director, hand-picked by Norman,
remonstrated. The monetary stringency was coupled with a rupee whose
artificial expensiveness in terms of gold was kept maddeningly high, all
of which conspired, in keeping with Norman's expressed wish, to depress
local prices and cause a devastating 'money famine.' 177 Despite the turmoil
and the fiery indignation of Gandhi, Indians had no alternative but to
discharge their debts with the empire by exhuming their stashes of metal. 178
Which: gold, sona, or silver, chandil Since chandi had been rendered nearly
worthless, they could only pay Britain withsorca. 'Distress sales,' they were
called. After September 1931, and for the rest of the decade, a torrent of
gold welled out of India to irrigate the coffers of the City - the flow was
steady and intense. Viceroy Willingdon, ecstatic, reported from the Raj:
'Indians are disgorging gold...' 179

September 1931 was indeed 'the watershed of the interwar period.' The
British betrayal signaled the 'end of the international financial system
established in the 1920s and contributed substantially to the disruption
of the international economy.' 180

While he had been setting up the Gold Standard, Norman, in view of
its forthcoming breakdown, had pulled the sub-Grid of the British empire
together: South Africa, Canada, India, New Zealand, and Australia were
financially re-engineered, either with the creation of a central bank or
the modernization of the existing one. September 1931 thus found the
empire financially compact and self-sufficient, with a vast, closed market
sheltered by imperial preference and soon to be walled by a 20 percent
tariff (October 1932).


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'Death on the Installment Plan' 187


In October 1933, at a dinner hosted by the Lord Mayor at the Mansion
House, Winston Churchill lifted a glass to the health of the Governor: 'British
banks,' he orated, 'have shown themselves capable of a... resourcefulness
which has been a definite contributory factor in the strength of the country
[Cheers]. 'Norman capped it off with an Arab proverb: 'The dogs may bark
but the caravan moves on.' 181

The last scheme of Kurt von Schleicher and the end of Weimar

In December 1924 Hitler was amnestied. He had been in prison since
November 12, 1923 - 13 months of detention in all. He told the faithful
Hess that it would take him five years to resume control of the party. 1SZ
He was provident: five years that coincided with the course of the Dawes
bailout. There was no more question of coups and the like; this time, he
swore, he would gain power by 'legal means.' Rohm, the SA commander,
had no patience for such dilatory tactics: he gave up and shipped to Bolivia
to train the local army. Meanwhile, the Anglo-American secret services had
been watching Hitler with interest since 1922. 183

Ebert, Weimar's first president, died in 1925, and in March new
presidential elections were scheduled. The Nazis threw their slender weight
behind the chief strategist of World War I, General Ludendorff, who found
himself competing against his former other half: Field Marshal Hindenburg.
Hindenburg carried the day with nearly 15 million votes, and his alter
ego, Ludendorff, the reckless gambler to whom Hindenburg truly owed
his fame, garnered a humiliating 1 percent of the people's sympathy: he
was finished, and Hitler, deep down, was quite satisfied to be rid of this
cumbrous, antiquated piece of furniture.

But the measure of the electoral rout gave a fair idea of the Nazis' overall
prostration. Until 1927, Hitler suffered moreover from the handicap that the
Bavarian government had barred him from making public speeches; Prussia
would hold out until 1928. The 'golden years' had shut 'the drummer' up.
So, unable to speak, he delegated the organization of the party to the zealous
Left wing of the northwest, which was led by the capable organizers Gregor
and Otto Strasser. Veterans of the Great War and Freikorps volunteers, the
Strasser brothers incarnated the anti-capitalist current of Germany's petty
bourgeoisie, a movement that hearkened back to late-Renaissance German
utopianism, for which land was conceived as inalienable and protected by
a 'peasant aristocracy,' industry segmented into guilds, and national union
achieved by a federation of self-governed cantons. A federated Germany, in
the view of the Strassers, meant a federated Eurcpe, and an anti-British alliance


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1S8 Conjuring Hitler


of free workers across Eurasia. There was no trace of the religious racialism
of the Hitlerites in the Strassers' outlook.

In 1926, on the occasion of the Fiirstenenteignung, a motion introduced
by the Communists to demand the immediate expropriation of princely
estates for public redistribution, Hitler and Strasser clashed for the first time.
The latter, who wanted to second the Communists, was also campaigning
for an alliance with the East, and widespread socialization at home: the
very antipodes of the Hitlerite strategy. Hitler called a meeting in Bamberg
on February 14, 1926, and lambasted Strasser before the party's vanguard,
deriding, moreover, the Strasser line as 'Spielerei' ('pie in the sky'). 184
Strasser was no match for the Fiihrer; even Strasser's young assistant, Josef
Goebbels, who had been full of pugnacious hope about the confrontation,
was dismayed by his boss's performance. In fact, he was bewitched by Hitler,
the halo, the bodyguards, and the caravan of expensive limousines that
motored him around. The club-footed Goebbels jumped the fence to rejoin
Hitler, who dispatched him to Berlin as theNSDAP's new Gauleiter (district
leader), with the composite task of smashing the Reds, luring the working
class to Nazism, and ousting the Strasserites from the capital. Gregor Strasser
hung his head and fell back within the ranks, while Otto remained defiant.
It was just a matter of time before Hitler would sacrifice the Left wing
entirely; it was altogether a foreign body within the party, which might
have mobilized dissent but was not committed to waging a European war. A
war, which, for Hitler, was the sine qua non for fashioning the empire of the
swastika. And to fight the war the princely estates, the Grid, absentee power,
and heavy industry, for the time being should have stayed right where
they were. On this occasion, because the German Democratic Party had
also ranged itself temporarily 'against the protection of private property,'
Governor Schacht gave up his party membership in a huff. 185 The Fiihrer
and the banker drew a small step closer to each other. The motion of the
Communists was defeated.

The Litmus test of Gregor Strasser's recruiting effort came with the
national elections of 1928, in which the NSDAP scored a miserable 2.6
percent of the vote, 809,000 voices. The marginalization of the movement
might have been suitably blamed on Strasser by Hitler and his Munich
retinue, but selling Nazism ever as the receptacle of brutal malcontent,
especially during the fat years of the American lending feast, could not but
yield null results. And the Hitlerites were aware of it. It was misery they
needed, as in 1923, and Montagu Norman would not tarry long before
setting them loose upon the Fatherland.


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'Death on the Installment Plan' 1 89


When in 1 928 Prussia lifted its ban on the public appearance of the Nazi
leader, whom Weimar no longer seemed to fear, Wall Street happened to
be slowly withdrawing its credits from Germany; Hitler was about to be
summoned to the stage once more - five years after his release, five years
since the foreign overhaul of the German economy.

firmly moved forward by the strange certainty of its Fiihrer Adolf Hitler
that the decisive breakthrough was near, the NSDAP had meanwhile
completed its organisational battle preparations, as if it had prior
information about the impending crisis. 1 s&

In all, and without counting the abominable Zeitgeist of the Modern
Era, three clans contributed to the Nazi seizure of power: Anglo-American
finance, the USSR, and the Vatican - the first two designedly, the third
less so.

With the Wall Street Crash of October 1929, something the Nazi organ,
the Volkischer Beobachter, did not even bother to mention, 187 and the
severance of the pound from gold in September 1931, Anglo-American
finance interrupted the monetary transfusion to Germany, causing
automatically, as shall be seen, the electoral success of the Nazis. In the
same interval of time, as if faithfully aiding the plots of London, the Russian
Soviets engineered within Germany a civil war to 'baptize' the freshly
elected Hitlerite contingent.

The 1923-24 biennium was indeed an historical divide: key personages
that had accompanied the first phase of the German incubation in one
capacity or another had all departed: Havenstein (November 1923), Parvus
Helphand (December 1924), Helfferich (April 1924), Wilson (February
1924), and the cardinal of all professional revolutionaries, Lenin (January
1924). In the five years that followed the death of Lenin, Stalin purged
the Soviet Union of its 'true believers.' There was a group belonging to the
old Leninist guard that still clung fanatically to the notion of 'permanent
revolution.' Drunk with the blood and success achieved thus far upon
the land that was once the Czar's, men like Trotsky, in 1924, were still
convinced of the world's imminent revolution in the industrialized West:
from Germany to America, via France. Trotsky was evidently drifting in an
illusory world of his own, and this would not have been a complication
for his rival Stalin, had it not been that the former was still one of the
symbols of the USSR, and far more worrisome, an exponent and leader of
that group within the Soviets that was seeking a peaceful entente with the
Socialist forces of Germany. 188


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190 Conjuring Hitler


In 1927, after three years of demoniac intrigues, back-stabbing, orchestral
maneuvers, and Siberian confinement for his men, Trotsky was expelled from
the Politburo - he delivered his last speech parrying with a forearm a hail of
inkwells, tumblers, books, and insults. 189 He went into exile in 1929.

Meanwhile, Stalin prepared his part of the German ambush, for the
ultimate benefit of the Nazi gestation, during the Sixth Congress of the
Communist International in Moscow, in 1928.

Already in 1925-26, the Russians had demanded the expulsion of all
those leaders of the German Communist Party (KDP) that had put their
independence of thought above everything else. Afterwards Moscow had
submitted the rest of the KPD to the leadership' of its tool, Ernst Thalmann:
Stalin had no wish to see the German Communists prosper. From the 1925
purge onwards, he fielded Thalmann and the street fighters of the Red Front
as a special shock troop of Soviet foils with which to intensify the clash with
the SA. At the same time, the German Red jackals, upon orders from the
Russian central, were instructed to fragment the German Left. By painting
in its official rhetoric the drowsy Socialists of the German Socialist Party
(SPD) as 'Social Fascists,' that is, as an enemy, Moscow sought to confuse
the electorate of the Left and prevent the formation of a solid proletarian
dam - approximately 40 percent of the vote between the SPD and the KPD
-to the forthcoming Nazi onrush. 190

Throughout the ensuing years, down to and even after the Nazi take-
over, [the line laid down in 1928 at the Comintern Congress] was never
altered. ..Throughout this period, as the shadow of Nazi brutality and
intimidation fell deeper and deeper over German political life, the
attitude of the Communists toward the moderate opponents of Hitler
remained undeviatingly hostile and destructive. It was clear that this
aided the Nazis... Less than three months before Hitler's take-over, the
Social Democrats in their despair... appealed repeatedly to the Soviet
embassy in Berlin to induce the German Communists to give them help
against the Nazis.. .The blunt answer was given by the secretary of the
embassy: 'Moscow was convinced that the road to a Soviet Germany lay
through Hitler'. 191

And then there were the Catholics - a whole third of the German
population under Weimar. Hitler could not afford the luxury of alienating
the absentee owners, nor could he repel outright the adepts of Rome with
his racial gnosis, which, in its esoteric details, should only have been shared


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'Death on the Installment Plan' 191


among the Nazi initiates. In religious matters, the stance advocated by the
party was one of neutrality.

In 1928, when the Dawes annuity was increased, Germany protested so
violently that a new Committee, chaired this time by the General Electric
director, Owen D. Young, was constituted to draw up the revision of the
original bailout. Between February and June 1929, the clubs drafted in Paris
the final installment of 'the merry-go-round of reparations of debts, the
most preposterous episode in modern history': 192 this was the Young Plan.
It was a direct sequel to the 1926 business with the French over the link
between German payment and war remittances to the Allies. According
to its terms, Germany was to pay 59 slightly reduced installments until
1988. Part of the burden was to be securitized, that is, packaged and sold to
private investors on the money markets of the West, so as to raise some cash
pronto for the ever-thirsty French, who in exchange promised to evacuate
the Rhineland in 1930, five years before the original deadline imposed at
Versailles. To assist in the task of selling the bonds, a new private bank, the
Bank for International Settlements (BIS) was established in Switzerland at
Basle. The Agent General was demobilized, and Germany was the mistress
of her railroads once again. The Depression would cut short the life of such
a plan to a mere year and a half.

As Reichsbank president and financial expert of the German delegation,
Schacht signed the Young Plan in June 1929, but then the ebb from New
York began to sponge off the money from Germany. Foreseeing what lay
ahead, Schacht probably panicked. He had to cut loose from the sinking
ship. So in December, in the midst of the final round of negotiations for the
new plan, he troubled the waters by circulating an official letter, 'a bomb,'
in which he recanted his commitment adducing all manners of diplomatic
and financial quibbles. The government, he claimed, had inserted late
additions that violated the original document. 193 The effect in the financial
community was so distasteful that the Finance Ministry recommended that
he should resign, which was precisely the egress Schacht was hoping to
fish from his mischief. In March 1930, President Hindenburg, indignant for
what seemed to him as a shameful 'mutiny before the enemy,' 194 and not
quite capable of fathoming the motives of this petulant Schacht, accepted
the banker's resignation disdainfully.

Schacht, it is true, had attempted in vain throughout his tenure as
Weimar's Governor (1924-29) to curb the extravagant borrowing of
the municipalities, though he had clearly done absolutely nothing to
interrupt the giant American transfer, pecuniary and technological, to the
great industrial poles of Germany 195 - for good reason: this had been the


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192 Conjuring Hitler

objective of the prize essay he had submitted to Dulles in 1922. All in all,
Norman and the clubs were delighted with him. He had done well. And
they all surmised that it was not yet over for this resourceful hierodule of
the great Grid, who retired to his estate in Brandenburg to watch from a
distance how the story unfolded, while reading Mein Kampf.

1930: with high finance wreaking havoc in the background, the Red Front
in battle trim, and an open Nazi hand outstretched towards Catholicism,
the crisis finally struck Germany with all the violence the savvy of men
could muster.

Unemployment began to decimate the country. On paper, there were
over 3 million jobless individuals by 1930. Despair would lead to many of
them committing suicide.

The republic was finished: in March 1930, unable to force through a
hostile House a raise in the unemployment insurance, the last of Weimar's
ghost Cabinets fell. A conservative Catholic, Heinrich Briining, was chosen
by president Hindenburg as Weimar's next Chancellor. Briining was bent
on enforcing harsh decrees to balance the budget. Hoping to find some sort
of coalition amenable to support his politics, he dissolved the Reichstag in
July and called for new elections in September.

Then came the Nazi breakthrough: from 2.6 percent, they jumped to 18.7
percent of the vote - 6.4 million voices. After the Socialists (24.5 percent), the
Nazis ranked as Germany's second political force. The Catholics wielded 15
percent of the vote; the Communists, 13.5 percent; whereas the Nationalists,
the survivors of the Wilhelmine Reich, gradually dissolved themselves into
insignificance - as a whole, they had attracted 47 percent in 1924, 39 percent
in 1928,24 percent in 1930, and would fall to 10 percent in 1932. 196 By then
the incubation would be complete; the old guard would die giving birth to
the Nazi movement. On October 13, 1930, nearly six years after Hitler had
been released from prison, 107 Nazi representatives paraded through the
Reichstag. Fully obedient to Moscow, armed and trained by agents of the
Soviet secret police (the GPU), who filtered through the German borders
with false passports, 1 million Red fighters whittled their bludgeons to
welcome the new Nazi arrivals. Ready to brawl, Rohm shipped back home
from Bolivia in January 1931.

As soon as the 'stream' of foreign money was drained out of Germany,
all the trappings of the Allied bailout snapped closed upon her. Since the
Reichsbank Law of 1924 forbade the central bank from advancing cash to
the Reich above a low statutory level, the federal and regional governments
fell back upon the private commercial banks, begging them for money. The
banks, lending upon canons of profitability, were not accommodating, and
the few that were willing to purchase public bonds reduced proportionately


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'Death on the Installment Plan' 193


their engagements with the private sectors, exacerbating thus the monetary
stringency and unemployment. 197 As in 1923, the German Grid was literally
colonized by the Allied investors: more than 50 percent of all German bank
deposits belonged to foreigners in 1930: i9& this was money that would vaporize
at the first sign of distress. And, finally, the unshakable burden of the
reparations impeded any freedom of financial initiative on the part of
the Reich. The 'Dawes machine' had nailed Germany to the cross, right
and proper.

When, in March 1931, Germany and Austria announced their desire
to fashion through a customs union what was de facto the Anschluss* - a
Greater German-speaking Reich under republican auspices - vital funds
were mysteriously withdrawn in sequence from Austria in May and from
Germany in June, shortly after the Briining Cabinet had published a
new set of emergency decrees. These contemplated cuts in the salaries
of government officials, public expenditure, and war pensions, and an
increase in taxation - measures that fell under the caption of 'deflationary
policies'. All they effected was to reduce the money supply so as to keep it
proportionate to the available hoard of gold and foreign exchange, which,
incidentally, foreigners and German absentees, as in 1923, were swiftly
exporting out of the country.

A few weeks after the aborted Anschluss, the United States, as predicted
by Swiss banker Somary in 1926,^ passed the Hawley-Smoot Tariff Act,
which instituted the highest rates in American history increasing duties
on a number of products more than 20 percent.

After the engagement of the Anschluss, Germany was a city besieged,
with the lines of supply all cut, and the resources of the defenders rigidly
limited by a watchful foe... Voices raised on every hand celebrated the
example of Samson, as indicating the only possible course for a desperate
Germany. For deep in the Teutonic soul lies the ineradicable conviction
that Germany will not fall alone, nor European civilization long survive
her ruin. 199

On June 20, in the wake of an unsightly hemorrhage of gold out of
Germany and the consequent disarray suffered by the leading banking
establishments of the West, US President Hoover declared a general
moratorium on reparations and debts for a year. The measure was designed

Germany's annexation of Austria,
t See above, p. 1 75.


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194 Conjuring Hitler


to give the German economy some respite and prevent it from collapsing
altogether. Four days later, after the entreaties of Chancellor Briining
and Luther, the new Reichsbank Governor, the French, American, and
British central banks, in addition to the new Swiss institute, conceded an
emergency loan to Germany: crumbs. The Germans begged for more. On
July 9, Luther flew to London via Paris to implore the creditors to revive
Weimar. Norman shook his head, as he had done eight years previously in
the presence of Governor Havenstein; he empathized, but added that there
was not much he could do at present. The issue, he concluded regretfully,
was political rather than financial. In the meantime, Norman advised
Luther to restrict credit further. 200 Evidently, Norman was resolved upon
ousting the Briining-Luther team from power by a maneuver of prolonged
financial exhaustion. Already, after the fall of the Creditanstalt, the British
Governor had told the media that the Austrian bank needed a 'foreign
butcher' and that 'Schacht was the right type of butcher.' 301 Schacht was
flattered, but by this time, he was 'taken': in fact, he had liked what he had
read in MeinKampf so much that in January 1931 he had hooked up with
the author himself to talk things over. 'It became unmistakably clear that,
whereas French policy aimed to perpetuate the status quo, Norman... was
working for a new order. ' zoz

The financial shape of the 'new order' was delineated in the summer
of 1931. In July, after the failure of several important banks and their
rehabilitation at the public's expense, the most acute phase of the German
crisis ended, but there was 'no return to "normal conditions".' 203 Tight
exchange controls were introduced, along with the establishment of special
banking consortia for rescuing the healthiest part of the starved economy.
State control over the economic apparatus was significantly extended. This
would be the system that the Nazis would inherit and which would fuel
their miraculous recovery. Special Standstill Agreements were reached with
the creditors on September 1, which froze within Germany $1.25 billion. Of
these frozen credits, 30 percent were British short-term assets; a fortnight
thereafter began the final 'run' on sterling. Official unemployment in
Germany rose to 5 million.

In October, after the world financial system had been disintegrated,
officers of the Royal Air Force escorted Alfred Rosenberg, Hitler's theorist
of the race, in a guided tour of the London clubs. Rosenberg encountered,
amongst others, the director of The Times, Geoffrey Dawson; the editor of
the Daily Express and Churchill's sidekick, Lord Beaverbrook; the human
spider himself, Norman, whom he indulged with anti-Semitic disquisitions;
and the future great electors of the Nazis, the directors of the Schroder


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'Death on the Installment Plan' 1 95


Bank. 04 This was a concern towering over a vast network of interests all
over the world; its legal office in Wall Street was none other than Sullivan
& Cromwell, where the Dulles brothers, John Foster, the lawyer of Versailles
and future US Secretary of State, and Allen, the Cold War chief of the CIA,
had completed their apprenticeship. 205 Bruno von Schroder, the patriarch,
had been one of the founding members in 1905 of the Anglo-German
Union Club, 206 and his bank had come to belong to 'that small ring of
London finance houses [that had] an acknowledged, if unwritten, claim
to be represented. ..on the Court of the Bank of England.' 207 'Since the
war...Schroders had become the financial agents of Germany in London.' 208
From 1918 to 1945, the fiduciary of Schroders on the Court of the Bank
of England was an individual by the name of Frank C. Tiarks. In a variety
of posts and assignments, Tiarks had been involved with the 'German
experiment' since its inception in 1918. 209

For a while, the German government paid out the dole, but by the fall
of 1931 the jobless were left to fend for themselves. The political troopers
of all colors clashed repeatedly on the streets, the blood flowed. In this
atmosphere, Hitler, as representative of Germany's novel mass movement,
encountered President Hindenburg (see Figure 4.2) on October 10. The
timeliness of the encounter was simply extraordinary: a mere fortnight
after the British disruption of the Gold Standard, the Nazis sought an audience
with the republic's president to make what was, in fact, their first legitimate
bid to power. And, from the Sea Powers' viewpoint, the preconditions to
such an encounter could not have been more favorable: a new, dynamic
nationalist leader face to face with the ersatz-Kaiser Hindenburg, a war
hero and resplendent symbol of the imperial epoch - 'It is done,' they
must have thought.

And yet it wasn't. Hindenburg felt but the most profound revulsion for
this 'Bohemian lance corporal'; he received, entertained, and dismissed the
latter with iciest coolness. Germany resisted. Hindenburg remained solidly
behind his Chancellor, Briining.

Spited, Hitler joined the great anti-republican manifestation of the
Right gathered on October 11 at Bad Harzburg, where the private armies
of reaction were seen filing by supportive crowds and a podium of leaders,
including Schacht. The latter, in the guise of Hitler's officious economic
councilor, could not contain the lust that made him launch into a speech,
a vile one, against the pathetic attempts of Luther - Schacht's successor at
the Reichsbank - to salvage the situation.

Chancellor Briining, by now ruled by decrees, invoking the Article 48
of the Weimar Constitution, which enabled him to pass controversial


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196 Conjuring Hitler


ordinances above the head of the Reichstag: the collegial fashioning of
laws in Germany had definitely ceased to function. The vexatious measures
Briininghad published in July were enforced on December 8, 1931, through
one such decree. The Chancellor took a dangerous gamble: he aimed to
disarm emotionally Germany's creditors by making the pain at home ever
more excruciating, hoping thence to obtain the cancellation of reparations,
and then to launch a program of public works. In fact, he had no choice,
much as the foreign creditors had no pity. Like Weimar, Briining was
doomed from the start.

1932, the year of the electoral madness. Having completed his first
seven-year term, Hindenburg was up for re-election in March. Hitler, after
some hesitation, decided to challenge him. The Nazis spent much money
on publicity, as well as on an unprecedented number of plane flights
advertised in the press under the slogan of 'Hitler over Germany.' 210 In
the first round, Hindenburg polled 49.6 percent, Hitler 30.1 percent of the
vote - a disappointment. Hindenburg was re-elected president with the
second ballot. Given the violence of the street clashes that accompanied the
election campaigns, the Briining government, for fear of civil war, banned
Hitler's paramilitary corps: the SA and the SS were enjoined to disband.

Then Kurt von Schleicher slowly emerged from the mists of the ministerial
backwaters. This was the 'field-gray eminence' whose shadow lurked behind
every plot that had twisted the uneasy life of this wretched 'republic'

Schleicher had begun his career of backstage puppeteer in Ludendorff's
General Staff during the war by organizing the orderly retreat of the German
forces; he had been the one negotiating with Ebert during the sedition of
the German Soviets in 1918-19, and a coordinator of their suppression
by the White Army; with von Seeckt in 1923 he had planned the state of
emergency; and he had been one of the architects of the secret entente with
the Trostkyites and the Soviet Army: a sharp brain, a sophisticated officer,
enamored of his extraordinary skills. That is all that is known. Schleicher
remains the true enigma of Weimar. No one has ever deciphered the man:
'a question mark with the epaulettes of a general,' said Trotsky. 211

From 1929 on, Schleicher, as head of the political office of the Reichswehr
Ministry, had acted as the unofficial liaison between the army and the

On April 28, he invited Hitler to initiate a series of secret talks with a view
to toppling Briining, now known as the 'Hunger Chancellor' for having
smashed the country and himself into a cul-de-sac. The plan was to lift
the ban on the SA and dissolve the Parliament in return for temporary
National Socialist tolerance of the new government. As straw-chancellor of


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'Death on the Installment Plan' 197


the new government, Schleicher had selected a Catholic aristocrat, Franz
von Papen, a rather unprepossessing gentleman of leisure, fond of horse
riding and intrigue. Papen would lead a Cabinet of barons maneuvered by
Schleicher from behind the scenes in the view of the eventual economic
rehabilitation of Germany. The 'Old Man' Hindenburg was persuaded, and
on May 30, 1932, Briining fell. 'A hundred meters from the finish line,' the
latter would add, sorrowful.

In fact, in June, during the international conference gathered in
Lausanne, now that the incubation was finished, the Allies at the suggestion
of Britain terminated at long last the reparations scheme by demanding a
symbolic lump sum of 3 billion marks, which Germany would never pay
- Hitler would repudiate reparations in 1933. And Veblen was vindicated:
the Germans had surrendered under that head approximately 10 percent
of their income until 1923, and nothing afterwards: all the money for
that purpose had been borrowed, and would have never been repaid. The
end of reparations ended war debts as well. Between 1918 and 1931, the
United States recovered only 20 percent of the total credits extended to the
Allies . Z1Z Thereafter American legislation forbade token payments, and no
one insisted on paying anything anymore - this was the last of it. Between
German loans and Allied credits, America had so far sunk 20 percent of
her 1914 GDP into this European adventure (around $40 billion); 213 she
would come collecting in World War II, and make the investment pay off
after 1945.

Papen, nominated Chancellor on May 31, 1932, proceded then to
dismiss Parliament. Germany geared up for the second electoral joust of
the year. This time the Nazis gave their very best. Thousands of speakers
rambling across the Fatherland, Hitler's outlandish airplane jaunts from one
rostrum to another, radios ablare, vinyl records, marching bands, mounds
of merchandise, reels rolling, swastika pins, a state-of-the-art propagandistic
film shot by no less than Twentieth Century Fox, zl 4 towers of pamphlets,
oceanic quilts of posters patching the walls of all cities and flags everywhere:
ababylonian splash. It was now or never. Also thanks to the strong popular
appeal of Gregor Strasser's economic program calling for land-reclaiming
projects, rural settlements, and public works to be funded by the somewhat
magic suggestion of 'productive credit creation,' which amounted to an
insurrectional takeover of the Grid by the communal hordes of Germany's
burghers, the NSDAP scored its record poll of 37.3 percent of the votes on
July 31,1 932: 13.7 million ballots. 21 5 This was the maximum Nazism would
ever be able to capture by legal means - a significant share, for sure, though
far short of the absolute majority. This was no breakthrough.


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198 Conjuring Hitler


As soon as the ban on the SA was lifted in June, Reds and Brownshirts
tore each other into pieces; more than 100 street killings were counted in
a month, with three times as many wounded. Goebbels wrote in his diary:
We're headed straight for civil war, but the Wilhelmstrasse doesn't seem
to notice.'

On August 10, Hitler met Hindenburg again and bid for the chancellorship.
Hitler told the president that he was not willing to join the present Cabinet
to play second fiddle to Papen, nor did he intend to waste energy searching
for a supporting coalition in the Parliament. He too wanted to rule by
decrees: all or nothing. Nothing, replied Hindenburg, brusque; he distrusted
Hitler completely. Hitler seethed.

At this juncture, the puppet Papen severed the strings from Schleicher
and began to conspire on behalf of the Anglo-American cabal against
his mastermind. 216 The horse-riding aristocrat expected to bend Hitler
into obedience and domesticate him in a baronial Cabinet by strangling
his party financially with another election, in which, as Papen correctly
intuited, Hitler was most likely to lose seats - by now, the people were
weary of electoral campaigns and unfulfilled promises. To carry this out
Papen persuaded his absentees friends, bankers, and industrialists to stop
their contributions to the Nazis.

Who had been funding them from the beginning? According to one
hideously humorous folk tale eagerly circulated, the Nazis financed
themselves by way of rallies and contributions, in addition to the storm
troopers' late endorsements of razor blades called 'Stiirmer' ('Stormer'), and a
brand of margarine named 'Kampf ('Battle'). 217 Ten years of political activity
all over the nation, and three technologically innovative, mass-publicized
elections in a country half -bankrupt, funded by means of tickets, piddling
donations, and margarine!

A more creditable version exposed by a first-class historian that had
access for two years to classified documents alleged that Nazism from 1919
to 1923, the year of the putsch, had been financed by the secret funds of
the Reichswehr (the army), and thereafter by German industrialists, 21 s
such as the steel magnate Fritz Thyssen, who began paying Hitler in 1931
by remitting funds to his deputy, Hess, via an account with a Dutch bank
which was interlocked with a Wall Street outfit called Union Banking
Corporation. This was a subsidiary of Harriman Brown Bros, that was
managed by Prescott Bush. 219 In 1934 the foreign correspondent of the
Manchester Guardian confirmed the widely diffused rumor that the bulk of
Nazi funding was foreign in origin:

Hitler had large funds at his disposal, not obtained entirely from German
sources. He got money from certain capitalist interests in foreign countries,


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'Death on the Installment Plan' 1 99


who were attracted by his hostility to Soviet Russia, or by... his policy
to increase the demand for armaments... International finance does not
seem to be unfavorable to the Nazi regime. 230

In September, Papen dissolved the Reichstag once more and new elections
were scheduled for November 6. His hopes were realized: the Nazis lost
2 million votes - their percentage slid to 33.1. They were bankrupt and
losing momentum fast. But Papen himself foundered with the election: the
Nationalist block, which he incarnated, suffered a disastrous decline; he and
his barons were incapable of taming Germany's riot. The unemployed were
now officially 6 million, and adding drifters and the undeclared, the new
horde of vagabonds numbered approximately 9 million individuals, that
is, about half of Germany's workers. 221 Here was the long-term effect of the
'Dawes machine, 'Montagu Norman's masterpiece. Stories of indescribable
violence, street clashes, rural incest, and robbery made up the news of an
ordinary day.

On November 19, Hitler, who was still in command of Germany's first
political force, came knocking on Hindenburg's door to demand once again
the president's mandate. And once again he was rebuffed. 'A Cabinet led by
you,' Hindenburg told the Fiihrer in all frankness, 'would develop necessarily
into a party dictatorship with all the consequences for an extraordinary
accentuation of the conflicts in the German people. ..For that, I cannot
answer neither before my oath nor to my own conscience.' This rejection
appeared final. In this hour Hitler was afraid - and utterly broke; he confided
to Goebbels that if the movement collapsed, it would take him three minutes
to blow his brains out, and that would be the end of it. zzz

Now was the time for the serpentine Schleicher to pull the wires of the
last, decisive plot: he went to Hindenburg and pleaded with the Old Man to
let him, the general, take the matter in his hands. With a shiver of disastrous
forebodings, the Old Man consented, and on December 2, he appointed
Schleicher Chancellor of the Reich, the last of the Weimar Republic.

On December 15, the general on the radio announced a public program
of large-scale work-creating endeavors; he looked to the Left and sought
to create a transversal alliance that cut across the Socialist and Catholic
unions, the army and the Strasserite wing. It was a superb maneuver, a
last sally which Germany conceived through one of her generals to save
herself from the abyss, a true fruit of despair. On December 19, Schleicher
received Maxim Litvinov, the Russian Foreign Minister, who appeared
perfectly cordial. 223 But Litvinov was deceiving the man whom the German
reactionary press was presently attacking as the dreaded 'Red General': in
the first half of October Litvinov had already told Ivan Maisky the newly


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200 Conjuring Hitler


appointed Soviet Ambassador to London, that the Nazis would soon come
to power. 234

In spite of everything, Schleicher set his plan into motion: the post of
vice-chancellor he offered to Strasser, and looked forward to tearing away
the Left wing onto his camp. And Strasser did not say no... The Parliament
he would dissolve and prorogate the elections past the constitutional 60-
day limit - he trusted he would sway the old president, Hindenburg, to
grant him that much. This would take care of the Nazis, whose ballot-box
strength was rapidly waning. And if push came to shove, he would ready
the army to engage the Hitlerites in a genuine civil war. Had this maneuver
succeeded, by some evasive caprice of fate, Germany would probably have
been saved.

To fend off this diversion, on January 4, 1933, Papen summoned Hitler
to convene under cover of secrecy at the townhouse of Baron von Schroder.
A partner in J. H. Stein of Cologne, the German appendix of Schroders,
Kurt von Schroder, along with Schacht and other exponents of German
big business, had signed a petition in November 1932 addressed to von
Hindenburg, urging the president to appoint Hitler as chancellor.

During the pivotal synod of January 4, Hitler, sobered by the cold shower
at the polls, agreed to join a coalition government, which he had until
now sternly refused, and to serve as the quartet's spearhead - or rather
figurehead, as Papen and friends intended - in overthrowing the republic. 325
From now on, Baron von Schroder and his syndicate of investors stood
behind the debts of the party: with the stroke of a pen, the absentees granted
the Nazis a new set of keys to the Grid - they granted them unlimited
'credit. ' 22& On January 17, Goebbels entered in his diary: 'The financial
situation is suddenly improved.'

Simultaneously, asked by an American journalist at his country residence
about the permanence of the Schleicher regime, Schacht responded,
confident: 'three weeks.' 227

Schleicher's spies found out about the hidden assembly, and the news of
the Papen intrigue was leaked to the press. But everything conspired against
the great conspirator. The Junkers and big business, let alone the absentees
of the Grid, were all aggressively arrayed against Schleicher's collectivist
measures. The Left, devouring herself, still spared some life to worry at his
throat, while the Catholics were taking their cues from the ambassador of
the Pope, Monsignor Eugenio Pacelli.* As head of the German nunciature
for the entire duration of the Weimar regime, Pacelli had expended himself

* The future Pope Pius XII (1939-58).


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'Death on the Installment Plan' 201


on a tireless hunt to wrest from each Land (German state) a collection
of agreements between the Holy See and the Land's secular government,
securing rights to a variety of catechumenal trademarks, such as doctrine,
education, and worship: the so-called 'concordats.' At this crossroads, in
January 1933, jolted by the opportunity offered by the pious von Papen for
clinching the much yearned concordat with the Reich, Pacelli prompted
the German Catholic leaders to explore 'the possibility of at least a modus
vivendi with all the Right, including the Nazis, in order to combat the danger
from the Left' and the blasphemous Bolsheviks. 33S

Incredible as it all might appear, Weimar's two largest 'democratic' mass
parties, the Socialists (the SPD) and the Catholics, who together stood for
35 percent of the electorate, which could have risen to 52 per cent with
the added strength of the Communists (a full majority!), feeling more
menaced by Schleicher than by Hitler, joined hands to dethrone the Red
General. 239

Indeed, three weeks was what it took the quartet, led by the Papen junta
and backed by the conspicuous interference of foreign finance, to buy off,
coax, and convert the rest of the establishment, especially its last standing
bastion, the old Field Marshal Hindenburg, and obtain thereby the removal
of Schleicher. The 'question mark with the epaulettes of a general' faded in
less than two months; the president dismissed him on January 28, 1933.
Shortly afterwards, Schleicher was seen walking 'in a long oval around his
room, whispering to himself, head half bent.' 230

Ironically, of all the great actors, it was the army of the Reich that was
the one least inclined to fight the next war.

On January 30, Hitler was sworn in as Chancellor. Papen was Vice-
Chancellor in a Cabinet that numbered only two Nazis, Frick and Goring,
the rest of them were blue-blooded aldermen.

Six months later to the day, Montagu Norman, without explaining and
without excusing, vouched publicly for the first issue of Nazi debentures
to be sold on the markets of London. 331 Three months previously, Schacht
had been recalled by the Nazis to resume control of the Reichsbank.


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5 The Reich on the Marble Cliffs

Fire, Legerdemain and Mummery All the Way
to Barbarossa, 1933-41


Who is inspired and instructed by God, can only do good. Everything
that the Englishman does is thereby fundamentally righteous. And even
then, if he once does something that is abject according to conventional
morality he so does it as to annihilate the opponent of God, who is in
any case unrighteous, and for that all means are sacrosanct.

Reinhold Hoops, England's Self-Deaption 1

I regard Halifax as a hypocrite of the worst type and a liar... Churchill is
the very type of a corrupt journalist. There is not a worse prostitute in
politics. He himself has written that it's unimaginable what can be done
in war with the help of lies. He's an utterly amoral, repulsive creature...
Stalin is half-beast, half-giant.

Adolf Hitler, Adolf Hitler's Secret Conversations 2

We were entering the Lemur-peopled woods where human justice and
man-made laws are unknown; in them there was no fame to be won.

Ernst JUnger, On the Marble Cliffs 3


To the pressure of our repeated onslaught

Our enemies are forced to yield

And, fighting unsteadily,

They are pushing toward the right

And so confusing the left side

Of their main force in the fight.

The firm head of our phalanx

Is moving toward the right and, like a flash,

They dash into the weak spot. -

Now splashing like storm-tossed

Waves, equal forces are wildly

Raging in the twofold conflict;

A more glorious thing has never been thought up,

This battle has been won for us!

Goethe, Faust Part Two, Act Four (10640-10653) 4



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The Reich on the Marble Cliffs 203


Nazi Coup d'etat

And so in January 1933 Hitler was made Chancellor - which is not to say
that he and his associates had truly seized power, yet. In fact they had taken
the deal from the barons - Papen, and his patrons - with strings attached.
The aristocrats thought that Hitler had been finally 'framed in.' 'Within
two months,' Papen smugly told a conservative critic, 'we will have pushed
Hitler so far into a corner that he'll squeak.' 5 Including Hitler, there were
just three Nazis in the new Cabinet, and at first it seemed indeed that they
merely represented the added touch of populist legitimacy to what was by
and large a Fascist, elitist remix of the Second Reich. But the Fiihrer had his
foot in the door. So now his preoccupation was how to drive the patricians
out, let all the other Nazis in, and make himself absolute master of the
house. A bankrupt house, that is. All in all there was nothing exceptional
in the means he employed to achieve the objective; he resorted to the
customary, bloody intrigues of Levantine kingdoms: deceit, backstabbing,
physical liquidation and terror. Means so customary, in fact, that one could
have almost predicted the Fiihrer's moves from 1933 to 1934 by consulting
the second part of Goethe's Faust (1831), which tells the story of a monarch
who, with the help of the Devil (Mephisto), restores order to his broken-
down empire. Acting on Mephisto's counsel, the elite subdues the masses
by terrorizing them with one, great sudden fire, and revives the languishing
economy by printing special money-bills mortgaged on the imperial right
to the land. This late inflationary blaze finds its necessary resolution in a
great military campaign against the neighboring 'enemy'

In broad outlines, the experience of the Third Reich was not much
different. Shortly before the March elections of 1933, from within, the
Hitlerites and the pro-Nazi elements of the establishment launched a coup
d'etat, which was masked by a spectacular act of sabotage: the Reichstag fire.
Using this internally manufactured act of terror, the Nazis passed a series of
bills limiting civil liberties, and so managed to scare the population as to
score, with the additional quota of the traditional conservatives, a narrow
electoral majority. Thereafter, on the strength of this emergency legislation,
they annihilated the Leftist opposition in a few months. That meant also
purging the revolutionaries from within their own ranks, which was done
in June 1934 when the question of the succession to the presidency came
to the fore: shortly before the death of Hindenburg, Hitler bartered the
elimination of the SA hotheads and the surrender of the Brownshirts to
the army in exchange for the fealty of the generals.

Then, from 1933 to 1938, the Nazis tackled the gripping economic
depression and turned it into an exceptional season of unprecedented


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204 Conjuring Hitler

growth, which was for the most part characterized by military expenditure.
The Nazi Recovery was made possible by the expert coordination of Schacht
and his team of specialists operating from the Reichsbank and the Ministry
of Economics. To lighten and speed up Germany's industrial revival, the
economic stewards of the Third Reich implemented a few modifications
in the make-up of the financial apparatus that allowed the preparation for
war and the overall performance of the system to proceed untrammeled by
cyclical complications. By 1939, Germany had thus completed her second
Five-Year Plan, Dawes being the first, and found herself ready to attack.

Now one wonders what the other powers were doing while Hitler was
rearming. And the answer is that they - Britain, the USSR, and the United
States - did all they could to facilitate his task. They provided the Nazis
with resources, military know-how, patents, money, and weapons - in
very large quantities. Why? To set the Nazis up, lead them on, and finally
destroy them, and take Germany into the bargain at war's end. Throughout
the 1930s, the United States acted as a mere supplier to the Nazis in the
shadow of Britain, who produced the entire show. This show had to end
with Britain's participation in a worldwide conflict as the leader of the
coalition of Allied forces against Nazi Germany. But the Hitlerites had to
be duped into going to war against Russia with the guarantee that Britain,
and thus America, would remain neutral: Hitler would not want to repeat
the errors of World War I. Therefore Britain had to 'double' herself, so to
speak, into a pro-Nazi and anti-Nazi faction - both of which, of course, were
components of one and the same fakery. The complex and rather grotesque
whole of Britain's foreign policy in the 1930s was indeed the result of these
ghastly theatrical diversions with which the Hitlerites were made to believe
that at any time the colorful Nazi-phile camp would overthrow the hawks
of the War Party, led by Winston Churchill, and sign a separate peace with
the Third Reich. The secret goal of this unbelievable mummery was to drive
Hitler away from the Mediterranean in 1941, and into the Soviet marshes,
which the British would in fact allow him to 'cleanse' for three years, until
the time would arrive to hem the Nazis in and finally crush them.

None of this would have been possible without the unreserved
collaboration of Soviet Russia. The Soviets worked in unison with the anti-
German directives of Britain as if they were her most faithful ally: they,
like Britain, appeased the Fuhrer, and contributed abundantly to the Nazi
war machine, shipping carloads of provisions to Germany throughout the
entire length of the Nazi rearmament. Furthermore, Russia would take in
the brunt of Germany's comprehensive powers of devastation, and absorb
it with 20 million dead. After the carnage the Nazis were so exhausted that


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The Reich on the Marble Cliffs 205

they fell rather easily when the Allies finally boxed them in, in June 1944. In
recompense for such an unspeakable sacrifice, the Anglo-Americans threw
half of Europe to their Slav accomplices - their old, grateful beneficiaries
of 1917.


The Weimar Republic, Nazism's incubator, was destroyed in five stages: 6
(1) under the Catholic Briining, the 'Hunger Chancellor' (27 March
1930-30 May 1932), the parliamentary regime was suspended and rule
by presidential decree instituted; (2) under von Papen, the petty Catholic
aristocrat intriguing on behalf of the absentees, and initially launched as
General von Schleicher's figurehead (31 May 1932-1 7 November 1932), an
authoritarian restoration of the old imperial order ('the Cabinet of barons')
was briefly attempted, which was marked by the suppression of Leftist
opposition and the timid implementation of public works programs; (3)
under von Schleicher, the 'Red General' (2 December 1932-28 January
1933), the boldest maneuver took place against the secret built-in provisions
of the Treaty of Versailles: a transversal sally led by parts of the army against
the agrarians and finance, relying upon the populist support of Socialist
trade unions and the Nazi Left wing; (4) under Hitler, a first phase was
spent drafting patriotic acts against terrorism (30 January 1933-5 March
1933); (5) under the Nazi Gleichschaltung (the 'normalization,' 6 March
1933-2 August 1934), Hitler regimented the whole of Germany in the
spirit of his party.

Now that the Nazi creature was formed, it did what had long been
expected of it: it broke free of its stifling hothouse and, in time, pushed
towards Russia.

On 1 February 1933, 48 hours after taking over, Hitler dissolved the
Reichstag. President Hindenburg had needed a little persuasion before
granting his new Chancellor the permission to do so - 'Why?,' he asked
Hitler, T thought you had gathered a working majority...' Hitler's reply
was prompt: 'This is time to deal with the Communists and Socialists once
and for all.' 7

New elections were announced for March 5. Yet another electoral round
swept the Fatherland. On January 31, Goebbels wrote in his diary: 'The
broad outlines of the conflict to be waged against the Red terror have been
established in the course of a meeting with Hitler. For the moment we shall
abstain from taking countermeasures. Not until the opportune moment
when the Communists launch a revolution shall we strike. ' s


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206 Conjuring Hitler

Hitler's electoral calendar, drawn up by Goebbels, was published on
February 10: therein no meeting was scheduled for February 25, 26, or
27. 9 On February 26, Berlin's fashionable fortuneteller, a fraudster by the
name of Hanussen who had entertained scores of SA leaders in his theatrical
venue - a high-class lupanar on the Lietzenburger Strasse - 'predicted' in a
publicized seance, that the Communists were about to torch an important
governmental building to set off a massive rebellion. 10

On the night of February 27, 1933, the Reichstag's cupola went up in
flames, blazing like a giant piece of charcoal, beckoning the late stragglers
of Berlin. The Fiihrer was summoned at once to the site. Upon reaching the
smoldering remains of what used to be the Parliament, he exclaimed: 'This
is a beacon from heaven... No one can now prevent us from crushing the
Communists with a mailed fist.' 11 Even Goring arrived, overexcited - the
emotion of both leaders appeared genuine. According to the official version,
the Reichstag fire was an 'act of terrorism,' a Communist crime. Yet attempts
at sedition were witnessed nowhere round the country. All was silent. Lists
of arrests, which had been prepared long before, led to the incarceration
of several thousand Communist and Socialist activists - the Gestapo came
into being, and the camps received their first inmates. On February 28, the
KPD (German Communist Party) was outlawed. Meanwhile, the electoral
push was intensified by the squawking of slogans, torch-lit processions,
marches and drills.

On March 5, on election day, despite the prodding of the terrorist antics
and loads of cash from I. G. Farben, 12 the Nazis were still not capable of
reaping a majority: they accumulated 43.9 percent of the ballot, which only
with an 8 percent nudge from the moribund Nationalists, allowed them to
form a qualified quorum in the House.

In its war against terror, the government issued two ordinances, on
February 28 and March 7, respectively, 'for the defense of the people and
the state,' which restrained the freedom of the press, individual liberties,
and the right of assembly. On March 12, the swastika-crested flag of the
party was promoted to National Ensign.

Having the Reichstag burned to the ground, the congress convened in
the Kroll Opera House on March 23. No Communists in the House; with
the 'suspension' of 30 additional Socialists, the number of representatives
had been reduced by 109: the remaining deputies were asked to pass an
Enabling Act which would have given the government the right for four
years to legislate by decree, without constitutional restrictions. The corollary
of such a bill was to reduce the political machine of the country to a one-
party decision panel.


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The vote: 441 ayes, 94 (Socialist) noes - Hitler was granted full powers.
By March 31, the Nazi Gleichschaltung was in full swing: a centralized
bureaucracy replaced the federal constituency established by Bismarck - all
strings were now pulled from Berlin, via the subordinate control of an array
of delegates (Statthaiter) loyal to the Fiihrer.

On April 7, 1933, the bullet-riddled body of the 'clairvoyant' Hanussen
was found in the wooded outskirts of Berlin.

In May, the Hitlerites proceeded to dismantle conclusively the party
system of Weimar: the SPD leadership was incarcerated wholesale; with one
blow an organization commanding 4 million workers, and endowed with a
capital of 184 million Reichsmarks, was crumbled into dust. Nowhere was
there the slightest reaction. Let alone resistance. The Nationalist veterans'
paramilitary formations, like the Stahlhelm (the Steel Helmet) were next.
Then came the turn of the Catholics: the deal for them was self-dissolution
in exchange for a concordat between the Holy See and the Nazi Reich. By
the terms of such a pact, the Vatican would have recognized the Nazi state,
agreed that the bishops pledge their allegiance to it, and forbidden priests
to engage in politics - all this in exchange for a Nazi promise to respect the
Church's right to catechesis and its property. The Secretary of State of the
Vatican, Eugenio Pacelli, had been swaying the 23 million German Catholics
in this direction at least since 1931. Heinrich Briining, the former unlucky
Chancellor, who was now in charge of the Catholic Zmtrum, pressured
from Rome, agreed bitter in his heart on July 4 to dissolve this pillar of
German political history - the party that had also been Erzberger's. And to
add insult to masochistic injury, the Nazis rejected those members of the
Center party that willingly applied to flow into their ranks. The concordat
was signed on July 8 and ratified on September 10, 1933.

The concordat broke down almost at once. Within ten days of its signing,
Hitler's SA attacked the parades of the Catholic Youth League; the beatings did
not cease, they were worsened by the more systematic persecution of active
Catholic dissenters, who were interned in the camps and/or bludgeoned
to death. Pacelli did not hide from his foreign visitors his disgust at these
happenings, 13 but he thought he had no choice, no weapon at this stage
other than appeasing the Nazis - things could have always been worse, he
sighed: in Germany there could have been Bolshevism, which spared no
priest. Veblen had foretold this much: the forthcoming reactionary regime
of the Reich would be championed by the Elder Statesmen of the West as
the bulwark against the (imaginary) Red menace.

In the span of six months, Hitler and his blackguards had smashed the
incubator into pieces - there now remained to consolidate the National-


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208 Conjuring Hitler


Socialist Revolution by sealing a twofold pact with the front legs of the
quartet: industry/finance and the army.

Meanwhile, September 21, 1933 was the date set for the beginning of
the trial of the Reichstag's putative arsonists: a young Dutchman, former
Communist sympathizer, by the name of Marinus van der Lubbe, and a
handful of Communist leaders, three of whom were Bulgarian Bolshevik
agents, all of them suitably trapped in a judicial proceeding that promised to
turn into a spellbinding spectacle. The accusations were poorly constructed -
too hastily; the case was suspect, the judge was embarrassed, the prosecutors
confused. The Communists defended themselves easily, and were forthwith
acquitted. There remained van der Lubbe, the inescapable useful idiot of yet
another terrorist sham: he alone, so claimed the accusation's new theorem,
set 1 1,000 cubic meters of property on fire. During the proceedings, van
der Lubbe laughed as he lied - a laugh that was 'strange,' they reported. 14
He driveled; he made no sense. The police had found him meandering
in the hall of the Reichstag, haggard, canopied by the long curtains on
fire. Commentators at the trial were of one mind: what they observed
was 'a human wreck,' an 'unfortunate, doped up. ..moron.' 15 The world
had seen this before: as the next step, the suicidal 'moron' would beg
the government's henchmen to finish him off. His plea to the judges: 'I
demand that I be punished by imprisonment or death.' 16 The trial ended
in December; van der Lubbe was executed on January 10, 1934. Not even
at Nuremberg, in 1946, when they could have made the most of it, would
the Allied inquisitors be able to shed light on the incident and identify the
culprits. So was bestowed on history yet another unsolved act of terror with
the usual ingredients: a sacrificial 'moron' without motive, a conspiracy of
silence, and a catastrophic sequitur on the high plane of events.

With or without evidence, however, in terror 'is fecit cui prodest' always:
'the one who did it is the one benefiting from it' - that is, the Nazis
themselves. Indeed, not even the evidence was lacking: everyone knew
that a group of SA did it, possibly with the connivance of Goring and
Goebbels, 17 - a few SA leaders themselves crowed about it in public. 18 In
the end it appeared that van der Lubbe was a drifter 'recruited 'by Hanussen,
the glamorous psychic dispatched in April, as a favor to some SA bigwigs,
clients of his. 1 9 The drifter, whose homosexuality had been exploited by a
gang of a dozen Brownshirts, 20 was lured by them into the Reichstag, while
they, after igniting the fire in several other spots, had 'left through the secret
corridor linking [the Reichstag] to the Residence of Goring, the Reichstag
President.' 21 This 'prank' was, in brief, a gift from the SA to their Fiihrer.


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And Hitler, indeed, was in dire want of a roaring endorsement from
the people; he addressed them on November 12, 1933: 'Men of Germany!
Women of Germany! Do you approve the policy of the government? Are
you prepared to declare that it expresses your opinion and your own will,
and solemnly to make it your own?' This time the plebiscite was in the
Puhrer's favor by over 90 percent of the vote.

But by the spring of 1934, the Nazi tenure was still not petrified: there
remained the thorn of Rohm's SA. These troops, now 3 million strong - ten
times the size of the official Reichswehr - were demanding the 'Second
Revolution.' What this meant from the economic standpoint was unclear:
possibly the early socialization schemes of the Nazi party, or a re-edition
of Schleicher's programs - in short, naive plans that dreamt of abolishing a
most powerful network of interests, those of German business and finance,
which Versailles had left, deliberately, untouched. This was the world of
the aristocrats and the business moguls - the hated Bonzen- who stood 'for
law and order, respectability, and philistine values.' 32 And Rohm was no
economist, he was the eternal front-line lansquenet; he wanted to absorb
the army and not be absorbed by it, to do away with the officer caste and
transform Germany into a giant farmstead-economy ruled by a clan of
proud Nazi herdsmen (his SA). Hitler tried to reason with him, in vain. To
his gang, Rohm vented:

Adolf is rotten. He's betraying all of us. He only goes around with
reactionaries. His old comrades aren't good enough for him. So he brings
in these East Prussian generals. . .Adolf knows perfectly what I want... Not a
second pot of the Kaiser's army. ..Are we a revolution or aren't we?... 33

There began to circulate talk of sedition - plots either to remove Hitler
or kill him. Sometimes, the name of the unyielding 'Red General,' von
Schleicher, was dropped in this connection, but the conspiracy if any, was
yet fluid. The ground under his feet, Hitler still sensed, was not as firm as
he wished it to be. Especially as the Junkers, from their stalls, were showing
signs of growing impatience with the factious confusion reigning amongst
the Nazis. In Cologne, chezvoa Schroder, on 4 January 1933, it was national
cohesiveness upon which Hitler had been sold - the Fiihrer had better keep
his end of the bargain with his financial backers.

Looking ahead, in May, it became clear that Hindenburg had not much
time left to live. Hitler could not afford to leave the post of Reich president
vacant. Meeting with the Defense Minister General von Blomberg aboard


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210 Conjuring Hitler

the cruiser Deutschland he traded the Presidency for the liquidation of
the SA. 24

In June, when the old Field Marshal fell ill, Hitler decided to act. The
SA were given a month's furlough, and most of their rebellious chieftains
retired, unsuspecting, to the lake resort of Wiessee. On June 30 the purge
began. Squads of SS executioners were dispatched to this vacationing retreat
to round up Rohm and his clique and shuttle them off to the Stadelheim
prison in Munich. One by one, including Rohm, who rejected the offer to die
by his own hand, they were shot down by Hitler's praetorian commandos.
Loose ends were tied and old scores were settled in the killing. Nine of the
ten surviving SA arsonists of the Reichstag disappeared. 25 General von
Schleicher, his wife, and Schleicher's assistant General von Bredow, both
generals being also adversaries profoundly acquainted with the Reichswehr-
Red Army connection, were cut down by volleys of machine-gun fire; Gregor
Strasser, the looming wedge of the National Socialist movement, who had
retired to private life, was taken to a jail, shot in the neck and left to bleed
to death. Funded by a mysterious network, his brother Otto, who had
defected from the NSDAP in 1930, would lead, as head of the so-called Black
Front, an ineffective propaganda war against Hitler from Czechoslovakia,
and then France, before vanishing into Canada at the outbreak of the
war. 2& Other Catholic exponents were murdered as well - yet one more
warning to Rome. Finally, having not forgotten the double-cross of the
1923 Beerhall putsch, von Kahr, the Bavarian commissioner who dropped
Hitler and the putschists to the Weimar police, 'was taken away by SS men
and later found hacked to death near Dachau.' 27 In Munich the blasts of
gunfire were heard throughout the entire day; then at dusk, silence. The
exact figure of victims is not known. Presumably, the purge erased between
300 and 1,200 individuals. zs The President was alerted; Hitler, strained by
tension and exhaustion, reassured the Old Man that a terrible revolt had
been headed off. The generals were satisfied.

At the end of July, Hindenburg was on his deathbed; he asked his watchful
doctor Sauerbruch, the celebrious surgeon: 'Has Freund Heinz come into the
house yet?' 'No,' replied the doctor, 'He is not in the house yet, but he is
prowling in the garden.' 39 On August 2, Freund Heinz (that is, death) stole
in the house and took the Old Man - he had lived 88 years. For Germany
the Field Marshal had done his best, as had Germany during the war, but
likewise his best had not been good enough. The following day, on the legal
basis of a document drawn up at the Chancellery, with the tacit approval of
the army, Hitler announced to the people that he would thenceforth fuse
into his hands the titles of Chancellor and President, and assume in their


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The Reich on the Maible Cliffs 21 1


stead the sonorous appellation of Reichsfiihrer. On August 19, 1934, he
demanded yet another referendum to be acclaimed as 'the leader,' unique
and unchallenged, and thereby to sanction the ultimate effacement of the
Weimar Republic. It was 'yes' by 90 percent.

The pretended Hitlerite revolution was the outcome not of any deep
will of the masses but a sort of violent dynamism from which the ruling
Right wing expected to profit by canalizing it. ..It was von Papen who,
thanks to his ascendancy over Hindenburg, organized the coup d'etat.
This coup d'etat was simply a 'Kombination,' a scheme prepared through
fifteen years of diabolical intrigues and spectacular mass demonstrations.
It owed its success to terrorism... 30

Money magic, work creation, and foreign aid

There are two great unknowns in the history and politics of the Third Reich:
the army and the finances.' 31 Associated with the latter was none other
than the 'old wizard' himself, Hjalmar Schacht, the financial druid plugged
by Dulles and the Anglo-American cabal in early 1922, and Reichsbank
president from 1923 to 1930. Francois-Poncet, the French ambassador to
the Third Reich, remembered him thus:

Schacht was a cynic, a frantic blusterer, a person possessed of unbridled
ambitions. A tall, dry, spare devil of a man, his features might have been
hacked out by a bill hook, and his long wrinkled neck was like the neck
of a bird of prey. 3z

It must have been harrowing, for such an ambitious creature as he, to sit still
away from the levers of power for three interminable and comatose years,
1930-33. Considering his professional origins, sponsors, and character,
it was hardly surprising to find him on the Nazi bandwagon at the onset
of the Depression. Of the opportunists that swarmed to Nazism after the
momentous election of September 1930- the Septemberlinge, as Goebbels
contemptuously tagged them - Schacht was the most prestigious by far. 33
At the time, Schacht told himself that he had to commit; he just could
not keep calm at the thought of Germany falling prey, should Hitler have
stormed the Chancellery, to all sorts of unsavory monetary cranks, who
teemed the back rows of the Nazi apparatus - they had to have professionals
there at the top. 34 He had to come back and 'do the trick,' as his by now
most intimate friend Montagu Norman, had been taunting him to do,


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212 Conjuring Hitler


publicly, since 1931. In due time he would have. For the time being, he
advised Hitler to be in his speeches as vague and noncommittal as possible
in matters relating to the economy.

Notwithstanding the bleak premonitions of the Papen government,
Germany experienced in the summer of 1932 a modest economic revival.
The truth was that part of the financial network, which was supportive of
Papen, put a little faith in him and his barons and loosened the strings
of the purse. In fact, lukewarm attempts on the part of the Grid to release
some cash in the system had been afoot for over a year.

In the summer of 1 93 1, at the trough of the slump, funds were no longer
flowing from abroad. The ailing banks, who had granted credit to businesses
for the most part now semi-defunct, rushed to the central institute in hope
of selling it their 'frozen notes' (the lOUs of the bankrupt concerns) for a
'sufficient' amount of cash. The Reichsbank, whose discount rate in August
was already a steep 10 percent, felt overwhelmed by the request and the
tawdry quality of this paper. To pass muster, a bill required three signatures:
the drawer's (creditor), the drawee's (debtor), and a guarantor's. Sections of
the banking community suggested that the third underwriting come from
a specially designed institute, the Akzeptbank, whose capital was promptly
subscribed by the corporate leaders of the Grid. When all was done, the
price for the rescue added up to 10 percent, plus 2 percent as a commission
fee for the middle-role of the Akzeptbank: a net bite of 12 percent in the
general tide of insolvency-outrageously expensive. 35

By mid- 1932, the Reichsbank had accumulated a sizable chunk of such
'frozen paper' in its portfolio and made good profits on it. But these advances
of cash at such a high cost still amounted to no more than drops in the
ocean: joblessness was not relieved in the least. Simply put, the German
Grid had no faith whatsoever in the republic.

It was true that the state was bankrupt, but not entirely true that
Germany had no money, or no capital. In 1931, the foreigners, indeed,
had withdrawn much, as had the expatriate Germans, but the bulk of the
foreign exchange sucked in during the great American feast of the 1920s
was hoarded underground, and, most important, so was the mass of the
nation's aggregate wealth. Such wealth, mostly in the form of securities,
represented that sumptuous infrastructure and industrial apparatus - the
second largest in the world - erected with the Dawes loans, and which
presently lay dormant.

The silent shufflings of these banking consortia between 1930 and 1933
were part of a broader engagement on the part of Germany's financial
interests into 'impairing' forms of investment: that is to say that


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The Reich on the Marble Cliffs 213


the banks did not employ their funds to create new wealth of productive
capital, bul... simply confined themselves to buying capital goods (fixed properly,
securities, etc.) already in existence. The savings funds reentered the general
circulation of industry and trade not by the act of investment, but by the
expenditures of the impoverishing borrowers and sellers, who expended
the money to meet their living expenses or their losses in business. 36

In other words, the banking system and the great industrial conglomerates
were making use of their cash literally to buy up the rest of the country
by purchasing 'property' (deeds, stocks, mortgages and the like) at slashed
prices from insolvent producers and consumers. The modicum of activity
registered in 1931 under the auspices of the Reichsbank, the Akzeptbank
and their affiliates constituted precisely this redistribution of wealth from
the economy to the Grid; redistribution that accentuated, of course, the
already skewed concentration of power in the hands of the latter. Between
the slump and recovery stood unemployment; meanwhile, the absentees
took advantage of the overall cheapness, attracting to their orbit additional
titles of ownership. This was also how the central bank came to own, by the
end of 1931, conspicuous stakes in several of the great Berlin banks. 37

In 1932, 'the money/ in the form of cash, stocks, and bonds, was indeed
sunk underground in the accounts of Germany's banking network. A
succession of ministers pleaded with the bankers, entreated them, while
searching for a clever argument that might bring the absentee gentlemen
to turn on the money tap. Briining tried when the match was already lost.
Under Papen, because of his connections, the financial interests instead
made some room for a trial at reform.

The chief device introduced in the summer of 1932 was the 'tax certificate'
(Steuergutschein): a variation on a general financing template, which was one
of many refined instruments of Germany's national political economy, 38
and which Schacht, as we shall see, would transform for the Nazis into a
standardized and swift mechanism. 39

The idea behind tax certificates was to grant businesses a rebate on
their forthcoming tax payments. The authorities would consider the most
recent figures of tax yields and multiply these by a percentage (the rebate);
the product would then be converted in a number of certificates to be
distributed amongst the entrepreneurs, who in turn could use them to
remit future tax dues. 40

The paper bore interest of 4 percent: the intent was to send the recipients
of these certificates to knock on the gates of the monetary markets and
pressure the banks to discount the paper at their counters - the 4 percent


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214 Conjuring Hitler

was, again, the lure for the 'investors.' This roundabout device was nothing
less than the government's demand on behalf of struggling producers for
a cash loan from the powerful investors: the firm would obtain the cash,
minus the discount, hopefully thrive thereafter, and the Reich would pay
interest on the certificates to the banks with the taxes it expected to levy
from a boosted economy. In sum, the scheme comprised a short-term loan
from the banks to the Reich, and a favorable (and interest-free) medium-
term loan from the Reich to businesses. In the event, the lag would have to
be bridged by further long-term borrowing on the part of the government,
which, in the light of the anticipated economic improvement, should not
have been a problem. 41

What did the businesses actually do with these certificates? Most spent
the cash either to pay their debts or to employ the rebate to cut their prices,
thus making things far worse in an environment where falling prices were
the crux of the paralysis. The chief objective of the Papen plan was to
encourage the use of the certificates as security for credit advances to be
devoted to plant expansion and production; and particularly as touched
the unemployed masses, the proposal was drafted with an eye only to
boosting private consumption.

The whole came far short of the mark: only a very modest contingent of
workers was reabsorbed. And when, by mid autumn, the baronial Cabinet
of von Papen appeared to be vacillating, the banking Grid recoiled in a
heartbeat. 'The market was not prepared to take up the paper as fast as it
was offered.' 42 Unemployment, which had decreased until then, started
in November to rise once again. And continued to climb under Schleicher,
who was dreaded by the financial and aristocratic elites, even though he
endorsed the fiscal policy of his predecessor.*

Intriguingly, in the dreary days of November 1932, as he cast about for a
successor to Papen, the Red General came to consider Schacht himself as a
potential candidate for the Chancellery. Not for a moment was the banker

At this time, an important think-tank in Berlin (the Institut fur Konjunkturforschung)
spread the myth that the recession had been overcome in the spring of 1932, and since
the end of World War II, the Liberal establishment has repossessed this exaggeration
with a view to employing it against the contention that there had been willful action
behind the subsequent Nazi boom; no such thing was to be entertained: the boom
had thus to be ascribed only to the 'impersonal/ 'unpredictable' swings of the business
cycle. We shall briefly show that this was not true. In fact, the alternate vicissitudes
of German unemployment in thebiennium of 1932-33 maybe easily correlated with
the political orientation of the said elites: the brief respite registered in the Spring of
1932 was due exclusively to the favor accorded by the German clubs to Papen, whereas
the recessionary relapse experienced in late 1932 was but the clubs' manifest sign of
hostility towards the Schleicher government.


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The Reich on the Marble Cliffs 21 S


enticed by the prospect of becoming the puppet of Schleicher. The general
seemed to have forgotten that the banker belonged to a wholly different and
much more powerful fraternity than his own. Besides, Schacht had already
thrown in his lot with Hitler. Nevertheless, morbidly curious, the banker
presented himself to the interview to sniff, 'size up' this bothersome, plotting
general. Even in his post-war memoirs, in which he spent superhuman
energy to depict himself as a paragon of nobility was Schacht incapable
of concealing his clannish, implacable hatred for Schleicher - possibly the
only Weimar politician who came close to aborting the Nazi incubation.
Schacht reminisced:

Although I immediately decided to refuse I was interested to discover
his political views of the situation. His statements were so colorless
that I had time to look around the room. It was every bit as devoid of
character as the man's speech - without any personal touch, any sign
of individual taste... He pinned his last hope on a split of the National-
Socialist Party. When he expressed this hope in my presence I broke in:
'I think, General, that you underrate the iron discipline of the Party so
assiduously maintained by Hitler. ' On that occasion Schleicher smiled in
a superior fashion. Not long afterwards he ceased altogether to smile. 43

Doubtless, Schacht must not have mourned the Red General the day
following the Purge, 30 June 1934. By then, Schacht was solidly enthroned
as Hitler's new Reichsbank governor. He also enjoyed the undivided support
of the Army and of the organized metallurgy industry, who championed his
candidacy for leading an economic dictatorship focused on rearmament.
The dream, sketched in the memo that he had forwarded to Dulles more
than a decade ago, was about to come true: supreme monetary command
over an oligopolized structure. However, Schacht had an adversary in
the person of Kurt Schmitt, the Minister of Economics, who favored the
development of a domestic consumers' market - Schmitt, moreover, had
had the favor of Rohm. 44

A few days after the Purge, in early July, Minister Schmitt, an asset of the
insurance lobby, addressed an assembly of German exporters. No sooner
had he opened his allocution, 'What, then, is to be done?' than he fainted
dead away, and was hauled off to convalesce in seclusion. Four weeks later,
Schacht was summoned by Hitler, who immediately probed him: T must
find someone else for the post and would like to ask you, Herr Schacht,
whether you would be prepared, in addition to your office of President of
the Reichsbank to take our Ministry of Economic Affairs?' How could he say


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216 Conjuring Hitler


'no? 'There remained the one and only possibility/ Schacht would recall
in his autobiography- the possibility of 'working from within outwards.' 45
In Nuremberg he would confess: 'I'd even join the devil, for a big, strong
Germany.' 46

On July 30, 1934, Schacht officially succeeded Schmitt as Economic
Minister; President Hindenburg undersigned the appointment and died
three days later. 47 Germany had its new Mephistophelean steward: Schacht
was Reichsbank president and newly appointed Economic Minister, vested
with the superadded honorific of General bevollmachtigte fur die Kriegswirtschaft
(General Plenipotentiary for the War Economy). They now said of him that
he was the 'Economic Dictator of Germany.'

July 1934 was but a replay of March 1933. On the 17th of that month,
Schacht had been officially recalled at the central bank - to steer the ship
he had forsaken three years before. This had been the exchange between
Hitler and Schacht:

[Hitler:] 'Herr Schacht, I am sure we are agreed that at the moment there
can be only one urgent duty for the new national Government, and that
is to do away with unemployment. For this it will be necessary to find
a very large sum of money. Do you see any possibility of raising such a
sum - other than through the Reichsbank?'

[Schacht:] I agree with you entirely, Chancellor, that it is essential to
wipe out the unemployment figures. But no matter what money can be
extorted from other sources, it would still be quite insufficient for the
job. You won't be able to avoid recourse to the Reichsbank...
[Hitler:] 'You must be able to say to what extent the Reichsbank can and
must - help.'

[Schacht:] 'I am honestly not in a position, Chancellor, to mention any
particular sum. My opinion is this: Whatever happens, we must put
an end to unemployment and therefore the Reichsbank must furnish
whatever will be necessary to take the last unemployed off the streets.'
[Hitler:] 'Would you be prepared to take command of the Reichsbank
again?' 48

Behind Schacht, also known as 'the American,' 49 stood important
segments of German absentee ownership and Anglo-Saxon finance. As
Hitler recalled, the first allotment earmarked for rearmament purveyed by
the Reichsbank to the Hitlerites was of 8 billion marks; of that sum, Schacht
and the Reichsbank deducted 500 million marks as interest. Not even the
Nazis were spared the payment of interest: - 6.25 percent. And they paid,


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The Reich on the Marble Cliffs 21 7


without protest. They would honor the obligation by availing themselves
of the power to tax. The price was high, Hitler fumed, but he kept quiet.

Unlike Rohm, his SA, the Strassers and their Left wing, the Hitlerites had a
solid grasp of economic realities. After sacrificing the SA to the army, Hitler
now had to play a careful game with the Grid, to which he already owed
much, and which he did not underestimate, hence his adulatory conduct
while conversing with Schacht. This was his second compromise with the
powers that be: like his old comrade Rohm, Hitler hated the bankers ('that
other gang. ..bunch of crooks,' and Schacht, a 'swindler!') 50 no less than
he hated the Prussian generals, but he had to accomplish his mission in
the East, whatever the cost.

Schacht knew what Hitler wanted from him; now was the time to 'do the
trick.' First of all he was expected to ignite that Initialzuendung, or 'initial
spark, ' with which Papen had attempted to shock the German economy in
the throes of 1932. The jump-start, all experts agreed, should have come
from government expenditure, but, for the rest of the common mortals,
the 'big problem remained as it had always been, where to find the money,'
51 or, in other words, how to 'make capital appear when seemingly it did
not exist.' 52

As mentioned before, the unemployment condition inherited by the
Third Reich was nothing short of catastrophic: 9 million jobless out of a
labor force of 20 million - two out of every five Germans employed in 1929
were without work in the winter of 1932-33. 53

Since 1930, as workers were being laid off and the national income was
plummeting, the Grid had made a fortune out of the misery of the Fatherland
by buying stacks of securities 'cheap.' This process of financial concentration
was achieved in 1933, the year of Hitler. Then, as if materializing out of thin
air, a host of 'semi-public' financial institutes appeared that began to issue
bills by broadsides of several billion Reichsmarks every year. Bills, which
the central bank proceeded to discount, just as it had done in 1931; yet this
time neither unsteadily nor with avariciousness, but on a vast scale and at
a most generous rate. Thus began the Nazi economic miracle - the so-called
process of work creation.'

In June 1933, the economists of the Third Reich attacked the crisis on
the labor front. The operation came to be defined as one of Vorfinanzierung:

The financial contrivance the credit institutes employed to stimulate
economic activity was a special kind of paper.

After the great inflation, the 1924 statute of the Reichsbank did not
allow unrestricted purchases of government paper. The only instrument


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21 S Conjuring Hitler


against which the central institute was permitted to advance cash was
the commercial bill, for only this last, at least on a purely formal level,
carried the guarantee that tangible wares were indeed being produced. 54
In 1933, by dint of this clause, statutory prohibitions were outflanked* and
the legal outfit was at last cleared to accommodate imposing injections of
monetary means.

The financing procedure was orchestrated as follows: first of all, the
Reich borrowed from the Reichsbank - this was the opening of the Grid
propitiated by Schacht. Then the government, via specialized credit
agencies, re-loaned such credits to provinces, municipalities, communes,
and other local public bodies.

The works were carried out by private entrepreneurs under contracts with
the municipalities. The main instrument of financing consisted of so-called
'work-creation bills' (Arbeitsbeschaffungswechsel), which were extended to the
contractors by the commissioning cities and accepted (discounted) by the
banking establishment: at the bank, the bill was immediately transformed
into check money (and cash), which was devoted to hiring the jobless and
commence the works. If the discounting credit institute was itself in need
of cash, it might present these bills for re-discount at the mother institute,
the Reichsbank (see Figure 5.1).

Of course, the paper bore interest: 4 per cent like the tax certificates
-thus these bills were conceived as a perfectly liquid short-term investment
medium. Nominally the bills matured in three months, but as a rule they
were subject to 20 automatic renewals, which carried the actual maturity
of the paper to five years. At maturity the Reich honored the bills with the
tax revenues generated by the Vorfinanzierung: this obligation represented a
long-term liability to the Reich for the amounts originally loaned on short
term by the private banking Interests. 55 Stripped of its roundabout features,
the procedure of the bills came down to the financing of public spending
by central bank credit, with the Reichsbank acting as the credit-generating
agent for the Reich. At the beginning of this sudden work-creation campaign,
the burden of 'financing' was borne entirely by Schacht's institute. 56

Simply put, there was money in 1931 which had vanished underground
and failed to re-emerge for the length of three long years. Then the Nazis
came, and when the banking Grid sent its financial ambassador, Hjalmar
Schacht, to the central bank, it thus gave the signal to pour, once again,
the monetary base that had vanished back into the main avenues of the

They would be abrogated the following year in the ambit of the consolidation
movement, which is discussed below.


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The Reich on the Marble Cliffs 219


Figure 5.1 The cycle of work creation

network. So the big Berlin banks of the Grid returned the money by lending
it to the Reich, the Reich lent it to the cities, the cities gave these bills to the
people, the people brought them their commercial banks, which changed
them into checks, and the system came alive.*

The initial monetary injections were allocated for infrastructure. And
the bills took on the name of the type of project that they were meant
to finance: 'work creation bills,' 'special highway bills,' 'land reclamation
bills,' and so on. Entrepreneurs cashed in, had their paper discounted, and
paid the workmen. Banks turned to the Reichsbank, which started to print

Technically speaking, the large Berlin banks behind the Reichsbank reinjected the
high-powered money in the system, and the commercial banks, on behalf of all the
other, lesser absentees, endorsed the bills and magnified the issue through the deposits
multiplier: the 4 percent interest on the bills acted as a magnet (of all other hidden
deposits) trawled by the Reichsbank in the phase of pre- financing.


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220 Conjuring Hitler


paper money; with it banks repaid the debts they couldn't honor during
the slump, and fueled the recovery. Men found work again, they did not
spend much; what they managed to lay aside was automatically reinvested
by the savings banks within the self-same circuit of state expenditure.

Hitler was triumphant; he was seen digging, repeatedly, before delirious
crowds: digging the 'first spadefuls' (erste Spatenstkhe) of the several legs of
the Autobahnen network that were being laid across the country, the first of
which joined Heidelberg and Frankfurt on September 23, 1933. 57

In August 1933 something decisive came to pass: Schacht encountered
the lords of German steel - amongst them the giants Krupp and Siemens.
Together they founded the Metallforschungsgesellschaft, or Mefo (Research
Corporation of the steel industry) - a fictitious corporation with a meager
capital endowment (250,000 marks), against which, from 1934 to 1938, 12
billion Reichsmarks worth of bills were issued for the first war commissions,
with the same procedure previously outlined. The Mefo bill was the true
spark that triggered the process of rearmament. Although until the outbreak
of hostilities only 20 percent of the total rearmament expenditure would
be financed in this manner, the Mefo allotment would cover 50 percent of
total expenditure on military orders during the initial years. 'The absolute
secrecy of this arrangement was preserved until after the war.' 5S

The Mefo bill was peculiar paper: it rested upon virtual treasures
- upon titles of ownership which, during the twilight of Weimar, were
amassed in the sparse hands of the absentee owners, the new indisputable
masters of Germany. The Mefo bill was the fruit of a compact between the
economic overlords and a tenebrous knighthood, between the highest
German dynasties and the Nazis, who, with the monopoly of violence
and the promise of war, fulfilled respectively two fundamental economic
prerequisites: they ensured taxation, and warranted the yield promised by
the Nazi bill - that 4 percent stamped upon the paper. Namely, the price of
gold, of money, which, in a world contorted by vehement protectionism,
would hopefully be repaid with the surplus forthcoming from the rapine
of war. Hitler confirmed three years into the war:

The payments of debts. ..presents no problem. In the first place the
territories which we have conquered by force of arms represent an
increase in national wealth which far exceeds the costs of war; in the
second place, the integration of twenty million foreigners at cheap rates
into the German industrial system represents a saving which, again, is
greatly in excess of the debts contracted by the State. 59


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The Reich on the Maible Cliffs 221


The obvious legerdemain: there wasn't a gram of gold to back the Nazi
bills, just a different set of relationships, which varied by definition with
the political humor of the times. Behind the Mefo bill there were but a
paltry equity base, a non-existent corporation, the goodwill of German steel
lords, the proverbial discipline and industriousness of the Teuton, and the
complicity of bankers and high world finance, which, through their own
network, managed to convey, as will be detailed hereafter, the raw materials
needed to equip with breathtaking rapidity a redoubtable army.

Upon these formidable monetary premises, the economists of the Third
Reich redesigned the structure of the capitalist machine. Two were the main
difficulties to overcome: (1) to free the economy from disproportionate
financial overhead charges; and (2) to find an outlet for the enormous
productive potential of modern industrial systems in such a way that
remuneration, profit, and interest would not be wholly eroded.

It was up to the Reichsbank to make the opening move if the first
cbjective was to be attained. By rediscounting the bills forwarded to it by
credit institutes, the bank of issue ministered the decisive shot of liquidity
to the system. Part of this monetary mass went to settle the debts incurred
by slump-stricken businesses (banks and firms), 60 part was employed to
reanimate the economy. This time Germany had German money, no
borrowed cover in gold, pounds, or dollars. In fact, gold reserves officially
amounted to 1 percent of note circulation in 1936; 61 in the eyes of the
people the seal of the Reich sufficed, the paper was unquestionably taken
- it was money all right.

The advent of Nazism coincided with a veritable jubilee: the record shows
the virtual annulment of all private debt. Like magic, money became less
expensive. At the beginning of 1933, the prime rate of interest was over
8 percent; 62 by 1935, through an intricate reshuffle of a gamut of other
variously named bills dealt across Germany's banking network, Schacht
compressed it to 2.81 percent. 63 Germany was liquid again.

Then entered the Nazi economic ministries; all their attention was
focused upon the industrial sector: first of all, they ordained in July 1933
'compulsory cartels,' that is, a strong concentration of all main concerns;
there followed the capital concession: the so-called Preisfinanzierung
(financing by prices).

The Reich placed the order for goods and construction and agreed to a
price that, in addition to entrepreneurial profit, included an accelerated
depreciation allowance (that is, a stipulation under the pretense that
equipment wore out faster than usual), which was tantamount to the total
remission of interest charges, and to the concession of a bonus, which


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222 Conjuring Hitler


firms would devote to the expansion of plants (self-financing scheme).
In 1937 the ratio of interest charges to sales for business bottomed out at
0.40 percent. 64

Commercial banks were relegated to the mere discounting function: they
still held the privileged right to exact interest against the bills tendered by
the Reich, yet they had to forego the far more important prerogative to dictate the
nature and direction of all investments, as well as the copious rents obtainable
therefrom. 65 These rents, instead, were appropriated by the Reich, which
in turn ceded them to businesses with the Preisfinanzierung.

Throughout the cycle (die Konjunktur), the level of the workers' wages
was pegged at the depression rates of 1932-33, some 21 percent below
the prosperity level of 1929. 66 Prices, instead, were capped by decree
in November 1936. By thus repressing consumption, the production of
weaponry was intensified, and the original loans were transformed from
short- to long-term engagements: consolidation was initiated.

Germans were now told that the money they had laid in was being
immobilized - maturity dates of Reich securities were gradually postponed
(28 years for the initial Reich bond auction of 1935, at 4 percent). War
would settle all accounts payable. Meanwhile, the economy pushed on:
between 1933 and 1936, German GNP increased by an average annual rate
of 9.5 percent, and annual productivity for industry and crafts rose by 17.2
percent. The average annual growth of public consumption during these
four years was 18.7 percent, while private consumption increased only by
3.6 percent annually. 67

In 1935 military expenditure amounted to approximately half of the
entire governmental outlay. From then on this share was bound to rise

Nazi bills were initially paid off with tax proceeds, but in the course of
the consolidation, financial authorities ended up paying only interest on
the lengthened loans, putting off the reimbursement of the principal until
the end of war. By thus postponing 'the evil day,' observed the specialists of
the Bank of England in 1939, 6S the Nazis appeared to have flattened the ups
and downs of the cycle for 'ten or perhaps twenty years': it looked as though
the whole endeavor was pervaded with the lightness of a zero-interest loan.

Hitler had blind faith in his divisions. So did his financial backers,
seemingly. In four years, Hitler conscripted these armies, by 1938 erasing
9 million unemployed, 69 redistributing wealth with highly progressive
taxation, 70 improving somewhat the quality of life until 1939, and
repressing even the least inflationary hiccup.


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The Reich on the Marble Cliffs 223


Finally, the abundance of modern industrial systems, which translated
into an overall diminution of the price level, and which failed to comply
with the logic of profit. What to do with it? War. Schacht helped Hitler by
luring back to the surface those pecuniary hoards that had been concealed
for three long years in order to finance the war at 3-4 percent. '[Schacht:]
I had to find a way of extracting this fallow capital from the safe deposits
and pockets where it... lay, without expecting it to remain absent for long
or lose its value.' 71

Throughout the Nazi boom the money owners had collected interest;
they would have to wait for the end of the conflict in the East - such was
the understanding - to get their own capital back. They had allowed Hitler
to spend over 100 billion marks for the mission. 72 This was no economic
recovery but a feverish sweat before the last Herculean labor.

On the international front the affair was no less involved.

Of the 34 vital materials without which a nation cannot live, Germany
had only two in ample quantities - potash and coal. 73 For the rest it would
have to rely on its chemists and international friends.

Schacht and his associates at the ministry of economies set out on a
world tour to conclude general compensation or clearing agreements with
whole countries. These agreements were predicated on the creation of a
common account into which German importers paid their bills in marks;
these same marks could then be drawn by German exporters for their sales
to their trading partners. The exchange rates were not allowed to float freely
and were often fixed afresh for each major transaction. This system, which
ousted all previous methods, became the framework of nearly 65 percent
of Germany's foreign trade. 74 Playing (1) on an overvalued clearing rate
of the mark and (2) on buying far more from the others than selling to
them, 75 Schacht involved over 25 countries into these bilateral waistcoats:
Latin America, the Balkans, Greece, Turkey and Eastern Europe - Romania,
Bulgaria, Hungary, from which the Germans secured oil-yielding fruits,
oilseed, fibers, soyabeans, bauxite, oil, against iron and weaponry, 76 mostly
for the benefit of the cannon-maker Krupp. 77

But what of the industrialized West; Anglo-America, for instance?

Britain, of course, now that Nazism had ripened, was particularly
scrupulous in grooming it as best as she could. In July 1934, right when
Schacht was crowned Economic Dictator, she concluded with Germany the
Anglo-German Transfer Agreement, considered one of the 'pillars of British
policy towards the Third Reich. ' 7S Under its norms, the Third Reich was
allowed to accumulate a sizable trade surplus vis-a-vis Britain; the surplus
translated into free sterling, which the Nazis could employ to purchase


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224 Conjuring Hitler


whatever commodities they might need for rearmament on the empire's
world markets; rubber and copper being chief amongst these. 79

By the end of the decade, Nazi Germany was Britain's principal trading client.
In 1937, for example, she provided a market for more British goods than
any other two continents combined and for four times the amount taken
by the United States. 80

Then there was the unending headache of the Dawes loans and of all
that money still owed to the City of London, which Germany had captured
and was not willing to relinquish. Under the legitimate cloak of the so-
called Standstill Agreements, that is, the deal on credits whose principal
was frozen in Germany and upon which the debtor was only obliged to
pay interest, Britain, despite some top bankers in London who rebuffed
the claim as a 'misapprehension,' 81 not only renewed the original 1931
debt standing but also added fresh credit to the original amount at least
by a multiple equal to the number of renewals throughout the entire Nazi
takeoff (193 3-39). 82

On December 4, 1934, Norman advanced the Nazis a loan of approximately
$4 million in order to 'facilitate the mobilization of German commercial
credits': that is, new money to pay old debts - or better said, a gift? 3 Not
yet satisfied, and in direct opposition to that segment of the British interests
which keenly insisted on being refunded by Germany, Norman fought
nail and tooth against the setting-up of a clearing union between Britain
and Germany: in fact, a clearing would have automatically diverted 'free
sterling' into debt repayment, and Schacht would therefore have lost his
cherished allowance in pounds for international purchases of raw goods
and materials. 84

There were several voices in the City that spoke of further money, outside
the Standstill Agreements, being loaned by Britain to German private
concerns, such as I. G. Farben. The Bank of England itself instructed its
employees not to discuss openly such a matter, which was 'confidential.' 85
The archives of the Bank are indeed mute on this count; these other amicable
'extensions' might very well have been significant.

Of the foreign money she owed in 1932, Germany would repay her
creditors less than 10 percent by 1939. 86 Notwithstanding, international
business kept on treating Hitler's Germany with pattes de velours- especially
the arms-makers. In 1935, an Anglo-German Society was founded 'in which
Unilever, Dunlop Rubber, the British Steel Export Association, and British
Petroleum' all participated. 87 The prestigious British manufacturer of
heavy guns, armor plate and warships, Vickers-Armstrong - curiously one
of the very few concerns salvaged during the Slump by Montagu Norman


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The Reich on the Marble Cliffs 225


himself 88 - had been offering, as early as 1932 in the official publication
of the German army, the Miiitar-Wochen-Blatt, tanks and armored cars. 89
At the annual meeting of his company in 1934, Sir Herbert Lawrence, the
Chairman of Vickers, was asked to give assurance that the corporation
was not being used for the secret rearmament of Germany. This was his
reply: 'I cannot give you assurance in definite terms, but I can tell you
that nothing is done without the complete sanction and approval of our
own government.' 90

William Dodd, a history professor, served as American ambassador to
Berlin from 1933 to 1938. 'Der gute Dodd,' Hitler would pityingly say of
him, 'he can hardly speak German, and made no sense at all. ' 91 Dodd might
not have spoken good German, but he wrote good enough English to relate
the following to his President, Roosevelt, on October 19, 1936:

At the present moment more than a hundred American corporations have
subsidiaries here or have cooperative understandings. The Du Pont have
three allies: (1) Chief: I. G. Farben Co. (2) Standard Oil has made $500
million a year helping the Germans make Ersatz gas for war purposes; but
Standard Oil cannot take any of its earnings out of the country except in
goods. They do little of this, report their earnings at home, but do not
explain the facts. (3) The International Harvester Company president
told me their business here rose 33 per cent a year (arms manufacture, I
believe), but they could take nothing out. Even our airplanes people have
secret arrangements with Krupp...Why did the Standard Oil Company
of New York send $1 million over here in December, 1933, to aid the
Germans in making gasoline from soft coal for war emergencies? Why do
the International Harvester people continue to manufacture in Germany
when their company gets nothing out of the country? 92

Roosevelt was evasive, but encouraged Dodd to continue his reports. Not
satisfied with the official explications (that Germany should have been
allowed to rearm in order to regain world status), the candid ambassador
had been recording in his diary several suspect transactions since his arrival
in Germany: on September 19, 1934, high-class aircraft manufacturers made
in the USA were delivered to Germany against $1 million in gold - Dodd
confronted Schacht about the sale; the latter tried at first to deny it, but
seeing that Dodd was about to brandish a hard copy of the deal, gave in and
confirmed. On October 19 of the same year, it was the turn of the British:
Vickers had just sold the Nazis a cargo of war materiel, and despite the
haggling over the Standstill and the alleged insolvency of Germany stories


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226 Conjuring Hitler


of which filled the newspapers daily, the Germans paid for the weapons in
cash; with the evidence, Dodd then rushed to the British ambassador, Sir
Eric Phipps, who pretended to be surprised. 93

These were only anecdotal fragments of a deep and intricate intercourse
consummated by the Allies with the Nazi regime. The Allies, as is well known,
had traded heavily with Hitler; they had traded 'with the enemy.' And it
appears, in fact, 'that the effective influence of foreign capital, an influence
which exerts itself far more with investments than with credits, grew under
the Nazi regime.' 94 'At the time of Pearl Harbor, American investment in
Nazi Germany amounted to an estimated total of $475 million. Standard
Oil of New Jersey had $120 million invested there; General Motors had $35
million; ITT had $30 million, and Ford had $17.5 million.' 95

Frank Knox, the US Naval Secretary (1940-44), would admit that in the
biennium 1934-35, Hitler received from America hundreds of state-of-the-
art airplane engines, and a Senate investigation concluded in 1940 that
American industrialists had been freely selling a plethora of military patents
to Germany with the consent of the government: Pratt & Whitney, Douglas,
Bendix Aviation (controlled by GM, which at the time was controlled by
Morgan & Co.), to name but a few, handed over to BMW, Siemens, and
others a collection of aviation military secrets, 96 while Stukas bombers, as
mentioned earlier, were built with techniques learned in Detroit.

Western pundits have always taken the easy way out, explaining away
these treasonous deals as the proverbial misdeeds of a few fat, rotten apples
trucking with despots for the sake of 'quick bucks' - the customary litany
against 'corporate greed.' That might be the case for the few deals paid
in gold - of which the Nazis had virtually none - but certainly not for
the colossal Allied investment sunk into Germany without any prospect
of retrieving the gains, let alone the original capital on a relatively brief
notice: hence the perplexity of Dodd. Many of these 'foreign' installations
would be spared the Allied bombs at the end of the war, and one is left
to wonder when, in fact, the respective governments of Britain and the
United States began to think of Europe as their own private domain - the
new western appendix of the empire - and of Hitler and his regime as an
obtrusive nuisance to be propped up at first and then annihilated in a
prolonged international conflict.

Governor Schacht must also have wondered. For years, almost deaf
to Hitler's repeatedly avowed goals of the Drang nach Osten (the 'Push
to the East'), Schacht preconized, instead, a return to Germany of her
former African colonies. He too seemed to envision a Reich that would
tower over Middle Europe - the grossdeutsch Reich inclusive of Austria and


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The Reich on the Marble Cliffs 227


Czechoslovakia as a minimum - yet one connected to exotic outposts by
means of a decent-sized navy. But Hitler had no interest in colonies.

It has been written that by early 1935 two blocs supporting different world
views formed inside the Nazi establishment and fought for supremacy:
a pro-Anglo-Saxon banking-industrial grouping assembled around 'the
American' Schacht versus the party of I. G. Farben/Deutsche Bank, which
aimed to decouple Germany from the British-dominated world markets
and create a closed Eurasian economic bloc 97 - a self-sufficient fortress
stretching from Odessa to Bordeaux.

In August 1936, Hitler drafted a secret memoir which informed the
second Four-Year Plan for the rearmament of Nazi Germany. I. G. Faiben was
indeed the soul of the project, and Goring became its economic supremo.
Yet the new Four- Year Plan, which came into force in September, was only
a prod to accelerate preparedness for war: home production of foodstuffs,
minerals and synthetic ersatz materials,* for which the plan is remembered,
were tasks that had been previously coordinated by Schacht - they were
merely to be boosted on a much wider scale. 9S

According to the rumor that he himself would spread, Schacht, bitterly
and overtly critical of Goring's uneconomic squander of resources and
foreign exchange, and fearful of the runaway inflation that might have
resulted from turning ever more butter into guns, distanced himself from
the Fiihrer and began to lose favor with the Nazi elite." This rumor might
have led to the other, according to which the antagonism of Farben would
eventually cause the banker's downfall. 100

As in 1930, Schacht felt the ground quaking, but this time the position
of Britain, as will be seen, was so ambivalent that not even the guileful
American' was quite certain of the posture he should have assumed. That
war would come was certain: Schacht himself, with the Mefo bills, had
raised the Wehrmacht from the dead - he was no pacifist. But what sort of
war? The emergence in Britain of the anti-Nazi War Party led by Churchill
was reason enough for him to become apprehensive, and so he receded - a
few steps, by arguing in public with Goring. The story of Schacht's protests
against the risk of inflation and the uneconomic use of foreign exchange
was a fable. In fact, as Hitler would later recall:

[An inflationary] crisis could only have arisen after all the unemployed
labour had been absorbed, and this did not happen until late 1937 or
early 1938. Up till then the only difficulties we had to face were those

Especially substitutes for rubber and gasoline.


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22S Conjuring Hitler


of foreign exchange. Schacht had told me that we had at our disposal a
credit of fifteen hundred million marks abroad, and it was on this basis
that I planned my Four Year Plan, which never caused me the slightest
anxiety... And that is how things are today [August 1942], and we never
find ourselves blocked for money. 101

On November 26, 1936, Schacht was relieved of his post of Minister for
Economic Affairs and Plenipotentiary for the War Economy, and confined
his duties to governing the Reichsbank.

After Kristallnacht, the night of November 9, 1938, during which
synagogues all across Germany were desecrated and destroyed, Schacht
was offered by Hitler his last opportunity: he was dispatched to propose
to influential Jewish captains of Anglo-American finance a plan for the
evacuation of Jews from Germany - Montagu Norman would preside. In
sum, Schacht's plan sought to impound the wealth of German Jews as
collateral, and on that basis issue an international loan at 5 percent to be
subscribed by their wealthy co-religionaries: the funds sequestered would
go towards the amortization of the loan. A quarter of the dollar proceeds
gathered with the subscriptions would then be devoted to paying the
prospective evacuees their passage out of the country. 102

'Not an ideal proposition,' by Schacht's own admission, 103 but better,
he reasoned, than leaving the Jews at the mercy of the party. Undoubtedly
his plan was larcenous and extortionate; and as such it was scoffed at by
Roosevelt in the United Sates and by Chamberlain and Halifax in Britain:
between December 14 and 17, emboldened by these politicians' chiding,
the Jewish bankers flexed their muscles and sabotaged the conference 104
-no submission to Nazi blackmail, they rebutted.

Schacht had failed, and he was not irreplaceable: on February 21, 1939,
he was dismissed from his post of Reichsbanks president. He would retain
the honorary title of Minister without Portfolio until January 21, 1943.

A British masquerade to entrap the Germans anew

'Nostra maxima culpa,' 'our gravest fault': so reads the chapter title of one
of many books, all alike, devoted by British historians to that disturbing
season of their history known as 'appeasement.' 105 'Culpa': 'fault,' 'error,'
'regrettable mistake' - for having tried to appease a regime, Hitler's, that
would not and could not be pacified by any amount of goodwill, however
profligate. A mistake at best, a shameful episode at worst - but a misjudgment
in any case.


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The Reich on the Marble Cliffs 229


According to this myth, because her elite unexpectedly found itself deeply
torn over foreign policy into several antagonistic currents, Britain well-
meaning but short-sighted was incapable of reading Nazism's mind, and
ended up as a result bearing some of the guilt for the ensuing disasters. On
the surface of Britain's political landscape, it is real factions that we're made
to see, headed by real leaders, fighting with vehemence over a range of vital
points. Profiting from such political discordance, so goes the apologue,
Hitler gave full rein to his mad ambition.

The truth is different. The British establishment was a monolithic
structure: the dissension among the stewards, if any, was over policy, never
over principles and goals, which were the same for them all. The British
were never torn by disagreement as to what ought to be done with Hitler.
That much was obvious: destroy him in time, and raze Germany to the
ground - imperial logic demanded it. Rather, the point was a pragmatic
one: how could the Nazis be most suitably bamboozled into stepping, anew,
into a pitfall on two fronts? The answer: by dancing with them. And dance
the British would, twirling round the diplomatic ballroom of the 1930s,
always leading, and drawing patterns as they spun that followed in fact a
predictable trajectory.

The tactic they employed was to animate a variety of political formations,
as if laying out tools of differing gauges to be fitted to the task as the
opportunity arose.

Since Versailles, the elite fissured into three formations: (1) the anti-
Bolsheviks, (2) the Round Table group, and (3) the appeasers (see Figure
5.2). From 1919 to 1926, the first party, which included the leading foreign
expert, Sir Eric Simon; the Ambassador to Berlin, D'Abernon; and the
South African Imperial Minister, Jan Smuts, dominated the government:
in the early 1920s, they posed as the anti-French faction, which gave its
blessing to the secret rearmament of Germany with a view to revamping
the latter as 'the bulwark' against Communism. 106 It was most probably
this gang that Veblen had in mind when in 1920 he alluded to the Elder
Statesmen conspiring at Versailles to restore German reaction against
Russian Bolshevism. But the plot was thicker than what even Veblen could
have imagined.

The true core of the imperial monolith was the Milner group, whose
word was printed in the monthly review The Round Table.' This party also
included Simon and Smuts, as well as the editor of The Times, Geoffrey
Dawson; two key players of the Foreign Office, Lord Lothian (Philip Kerr)
and Lord Halifax (Edward Wood); and Samuel 'Slippery Sam' Hoare, an

* See Chapter 1, p. 39.


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The Reich on the Maible Cliffs 23 1


imperial factotum issued from an old banking family, who had spent time
in Russia during the war as a member of the British intelligence services
-'he was so expert at his job, the Tsar accused him of foreknowledge of
the murder of Rasputin.' 107

Between 1919 and 1924, this set controlled a fifth of the Cabinet members,
a quarter in 1931-35, and a third in 1935-40. 10S

To straddle and wait for events to unfold, The Round Table made a
pretense of endorsing as its official policy agenda the utterly spurious
scenario of the 'world in three blocs,' whereby a Germany free to roam
in Central Europe was to be hedged between the western embankment of
France and Britain, and the eastern defense of Russia's 'out-of-the-way...
scarcely surveyable' empire. 109

The Versailles Treaty (1919) and the Dawes Plan (1924), were prevalently
the work of these two groups. 110

Finally the appeasers included a heterogeneous collection of backbenchers,
such as Churchill and Lloyd George, who recommended 'peace with
honor,' 111 'non-partisan' technocrats like Norman, and segments of the
intelligentsia - publicists and writers like Keynes. All were keen to show
a benevolent face to the enemies of yesterday, and to tie new bonds with
them in the name of 'sportsmanship.'

Thus by the middle of the Dawes period, the empire disposed of at
least three stock masks: the friendly face of appeasement, the dogged front
of anti-Communism, and the placid, middle-of-the-road approach of the
Round Table. Towards the end of the Weimar incubation, the anti-Bolsheviks
receded in the background, while the appeasers gathered steam - the poker
face of the Round Table reigned supreme, and even a pro-German fringe
promoted by Rolf Gardiner and similar ante diem deep ecologists sensitive
to the common heritage of Nordic folklore came into being (Figure 5.2).
This was a peripheral movement, however, devoid of popular support and
political clout. 1 1Z There was no genuine pro-German feeling in Britain,
only a burgeoning jungle of make-believe.

After Hitler's first six months in power the masquerade really began.

On the diplomatic front, the Fiihrer started by signing an alliance with
Poland on January 26, 1934: this signaled the end of the old secret policy
of the German generals, who during Weimar had rearmed with Russia in
view of a joint assault against Poland, their common enemy. Hitler, instead,
would have liked to see Poland involved in an anti-Bolshevik campaign
spearheaded by Nazi Germany.

On April 9, 1934, Germany publicly announced that she was rearming
- against the provisions of Versailles. France worried. Meanwhile, the
Germans had guests: Royal Air Force Captain Winterbotham, the spy who


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232 Conjuring Hitler


had squired Rosenberg during his autumnal tour of the London clubs in
1931,* was presently attended toby his former visitor and theFuhrer himself:
Winterbotham was an asset of MI6, British counter-espionage, and of the
intelligence division of the Air Ministry. His was one of the first masks of the
mummery: he had been posing as an 'admirer' of the regime - as a staunch
appeaser - since the first Nazi electoral breakthrough, and by now he had
gained the complete confidence of his hosts. The Nazis told him everything:
they told him how, together with England, they would have destroyed
Communism, and how zealously they were preparing for Operation Otto,
later codetiamed 'Barbarossa,' that is, the invasion of Russia. 113

On July 25, 1934, a hapless vanguard of Austrian Nazis, trained by theSS
with the approval of Hitler, botched a coup in Vienna: they assassinated the
premier, Dolfuss, but could not go any further. The Italian leader, Mussolini,
who acted as the protector of Austria, alerted his divisions on the common
frontier; he then turned to France and Britain for coordinating a disciplinary
maneuver against the brash savagery of the new German regime. France
turned to Britain, and Britain said 'no': no military castigation of Germany -
it was not worth it. Britain, the French concluded, had written off Austria. 114
And she had: Mussolini would not forget Britain's betrayal, nor would Hitler
- gratefully: with Austria, he would try again later.

In the same month, Conservative leader Stanley Baldwin, the fox who
would soon become Prime Minister (June 1935-May 1937), had 'defended
Germany's right to recreate and air force: "She has every argument in
her favor, from her defenseless position in the air, to make herself
secure".' 115

And in the summer of 1934, Churchill resurfaced from the parliamentarian
swamp with an important agenda: he wooed the Soviet Ambassador in
London, Maisky, singing to him of his love for the British empire - his 'be-all
and end-all' - and truncated the ode by inviting the Russians to join forces
with Britain against Hitler. 116 Immediately thereafter, Churchill stormed
the House to diffuse a series of alarmist speeches, in which he 'prophesied'
that in one seven-day attack on London by the German Luftwaffe, 30,000
people would be killed or maimed. Lloyd George would then be charged
by Baldwin to rebuke Churchill for ignoring how critical it was for Britain
to have Germany as a bulwark against Communism. 117

Splendid maneuver: now a fourth mask was added to the British
panoply (Figure 5.2) - an anti-Nazi, pro-Russian nucleus coagulated round
Churchill, while the pacifiers behind Lloyd George rose in influence. It

* See Chapter 4, pp. 194-5.


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was a democratic, taut face that Britain was now showing to the world - a
face upon which expressions of cynical pragmatism (appeasement) were
somewhat tempered by the moderation of the Milner fraternity and the
□pen dissent of Churchill. It was the wholesome visage of pluralism.

In January 1935, Baron Wilhelm de Ropp, a Bait double agent working
in Berlin for Winterbotham's team, met with two of King George V's four
sons in London: Edward VIII, the Prince of Wales, and Prince George, the
Duke of Kent, to 'give them a complete picture of the qualities of Hess,
Rosenberg, and the other leaders.' 118

This was the overture of the masquerade's most picturesque visual effect:
the dressing of a pro-Nazi Peace Party crowned by a royal candidate. The
intelligence services were now casting for a suitable foil among the regal
offspring, someone to play the role of the antagonist in the hypothetical
scenario whereby Britain would be split into a dominant anti-German War
Party and an underground pro-Nazi Peace Party. Edward, then living easy
as the world's ageless teenage idol, seemed to fit the role to a T: his German
was fluent, and he was always eager to evoke the sweetest summers of his
childhood spent in the company of his favorite 'Uncle Willi,' the former
Kaiser Wilhelm II, his father's cousin. 119 Edward passed the audition.

On March 6, 1935, in the face of German rearmament, France reinstituted
military conscription. Ten days later, adducing the French decision as
a pretext, Hitler did likewise - again, in violation of the provisions of
Versailles. Britain 'protested,' though, curiously, she did not omit to enquire
with the Nazi authorities: 'Would the German government be still willing to
receive Sir Eric Simon and Anthony Eden of the Foreign Office, as previously
scheduled?' - hardly the concern of an enemy. On March 25, the two
British statesmen landed in Berlin. The German interpreter Paul Schmidt
recalled Simon's large brown eyes gazing paternally upon the Fiihrer, with
fondness. Eden was more circumspect.

Before them, Hitler expatiated once more on the need to form a common
front against Bolshevism, and - the novelty - he foreshadowed the possibility
of coming to an understanding on rearmament ratios: say, to begin by
allowing a tonnage for the German fleet 35 percent as large as that of the
Royal Navy. The British did not say no.

The talks had been a success. They were concluded by a festive brunch
at the British embassy, where the ambassador, Sir Eric Phipps, had lined up
his children to give Hitler and his train the Nazi salute, shouting 'SiegHeil!'
- a choreographic effort, so thought the German interpreter, that was 'a
little shameful.' 120 All would have been perfect had Eden not taken leave
to continue on to Moscow.


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234 Conjuring Hitler


This was the earliest instance of the Foreign Office's duplicitous mime;
the Germans were shown two faces: the congenial countenance of Simon,
and the skeptical brow of Eden; the former being presented in a higher
position of authority, and the latter flying subsequently to Nazism's enemy.
The display was as much for the consumption of Germany as it was for that
of European diplomacy: poised on this perennial ambivalence, Britain was
best situated to carry out her plan.

As the follow-up to the March encounter, Hitler delegated the Anglophile
Joachim von Ribbentrop, a former champagne dealer who had married into
a wine dynasty and joined Nazism via von Papen, to seal in London the
'35 percent deal' for the German navy.

'Never Forget,' Ribbentrop was warned before the negotiation by the
military attache of the Japanese embassy in London, Navy Captain Arata
Oka, 'that the British are the most cunning people on earth, and that they
graduated to absolute masters in the art of negotiation as well as in that of
manipulating the press and public opinion.' 131 But neither Ribbentrop nor
any other Nazi had the faintest idea of what sort of cunning they would
be dealing with.

Talks commenced on May 24 at the Foreign Office in the presence of
the benevolent Simon. Ribbentrop, as expected, demanded that the British
acquiesce to the ratio advanced by Hitler in March. But Simon turned red;
he glowed with fury: he found the request outrageous and such dilettante
bluster unacceptable. That ended the discussion. Ribbentrop and his team
were, to say the least, confused. Two days later, however, the German
legation was conveyed to the wainscoted halls of the Admiralty, where
Simon's Deputy, Sir Robert Craigie, announced with composure that Britain
accepted the German offer: Ribbentrop's associates were speechless at their
good fortune. 1ZZ Thereupon Hitler phoned Ribbentrop: 'Good job,' he
thundered, 'this is the most beautiful day of my life.' 123 All would have
been perfect had the Fellows not subsequently refused to admit Ribbentrop's
son to Eton. 134

In the space of six months, spanning between the Norman-inspired Anglo-
German Payments Agreement of late 1934, and the Naval Pact, officially signed
on June 18, 1935, Hitler won from Britain no less than her official financial and
military support. The Fuhrerwas exultant.

And France, disheveled, didn't know where to turn: in mid May 1935,
in despair, she concluded pacts of mutual assistance with Russia and

On June 19, 1935, Edward VIII made his debut as the pro-Nazi candidate
when at Queen's Hall he delivered a speech to the ex-combatants of the


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The Reich on the Marble Cliffs 23 S


Legion inviting them to bury the animosity of the Great War between
Britain and Germany forever. He was showered with a standing ovation,
while all around the Union Jack mingled with the gamma-crossed standards
of the German veterans. The speech made a splash, and King George was
quite appropriately disturbed. 125 A month later, it was Hitler who received
the British combatants at the Chancellery: together they evoked the days
of the trenches, reminiscing with passion, as if they had been brothers-in-
arms firing from the same dugout. 126

The biennium 1936-37 represented the apogee of appeasement. Its
beginning was of promise: on January 19, 1936, King George V sank into his
final sleep, which was shortened by an injection of morphine and cocaine,
so that he might be declared dead in the morning edition of The Times} 21
He was succeeded by Edward, Prince of Wales, the Nazi candidate himself.
The ceremony of the coronation was fixed for May of the following year.

Then in March 1936, Germany locked irreversibly into the path to war; she
was ready to play her first gambit: the occupation of the demilitarized
zone of the Rhineland. As seen earlier, the clause in the Versailles Treaty
contemplated the consequences of such a move in no ambiguous language.
If a single German soldier trespassed on the Rhineland buffer, it was war.
Britain, Italy, and Belgium would have rushed at once with swords drawn
to back up France.

The half-baked 1936 Wehrmacht of Hitler was in no case a match to
France's tested force de frappe: 'France,' General Jodl would confess at
Nuremberg, 'could have blown us into pieces.' 128

Regardless, the Fiihrer 'gambled.' On March 7, denouncing the Franco-
Soviet agreements, Hitler ordered three meager battalions to cross the Rhine.
France's wall, the Maginot Line, was on full alert; her North African troops
massed on the border - all she needed was a signal from London. Von
Neurath, Germany's Foreign Secretary, was terrified; Hitler, trembling with
emotion no less than his minister, spoke words of strength for them both:
fear not, he whispered, Britain shall not budge.

And indeed she did not: by the evening of the seventh, her stewards were
scrambling all over to shield the Nazi advance. The press magnates, Lord
Beaverbrook of the Daily Express, who was also courting the Russians since
June 1935 on behalf of his intimate Churchill, 139 and Lord Rothermere of
the Daily Mail, cheered loudly for Hitler and Germany. '[Hitler:] All the
Beaverbrook-Rothermere circle came to me and said: "In the last war we
were on the wrong side.'" 130

From London, Lord Lothian and Lord Astor, intoning the usual refrain that
Germany was the dam against Bolshevism, scolded their French colleagues


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236 Conjuring Hitler


for being so 'quarrelsome' 131 about Germany's understandable desire to
walk into 'her own backyard.' 132 Thereafter Eden and Lord Halifax flew to
Paris to deliver France a double blow. Upon arrival, Eden enjoined: 'refrain
from any act conducive to war, England wants peace.' And Halifax doubled:
'settle the issue with negotiation.' Flandin, France's Foreign Minister, did
not understand; 'if England acts,' he insisted, 'she will lead Europe. ..this is
her last chance. If she does not stop Germany now, all is lost...'
France had not read Mackinder.

All the British gave France after this decisive Nazi sortie, as a sop, was
a public session in London at the Council of the League of Nations on
March 14. On this occasion, Eden, in a perfect construct of Foreign Office
double-speak phrased for the pleasure of Nazism, averred that the occupation
of the Rhineland was a violation of the Treaty of Versailles, but did not represent
a threat to peace. It compromised the power of France, but not her security. The
French were stupefied.

Britain had flagrantly dishonored her pledge to guarantee the security
of Europe. The following day, Eden, as if nothing had happened, invited
Ribbentrop for breakfast to pore over some maps and canvass German
geopolitics. On March 29, without wasting an instant, Goebbels appealed
to the Rhineland with one more referendum to suffrage its incorporation
into the Reich: 99 percent favorable. 133

For the British set-up, the appeasing thrust could not but elicit an opposite
reaction: after the Rhineland coup, the anti-Nazi faction led by Churchill
was turned with Jewish funding into a faster, more articulate and most
secret outfit known as The Focus. As was the expressed wish of its leader,
no detailed record of the group's formation and activities has ever been
divulged. 134

But Hitler was not in the least worried by Churchill's party which, to
him, was just an annoyance capable of nothing more than words. After
March, the Nazis were ever more willing to indulge their British infatuation
-with torrents of champagne, feasts, conferences, summer and winter
Olympics, and the disclosure of military secrets. Yet the Fiihrer yearned for
something of heavier symbolism - an encounter at the very top, say, with
the Prime Minister, Baldwin. Baldwin knew better, and courteously declined
the invitation. 135 Instead, the Prime Minister fished Lloyd George from the
extras of Britain's appeasement and sent him off to meet the Fiihrer in his
Eagle's Nest in the Bavarian Alps.

Thus the event was charged with a symbolism of a different valence: on
September 4, 1936, Hitler clasped hands not with his British opposite, but
with one of Nazism's most accomplished midwives: that same Lloyd George


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The Reich on the Marble Cliffs 23 7


that had cut the deal in Versailles. The two conversed animatedly about
the war, politics, and labor issues. Hitler, overawed by his guest, whom he
described as a 'genius,' wished to display him at the party convention in
a few days, but Lloyd George, with caution, refused, though he did not
refrain from bad-mouthing the Czechs 136 - a hint.

In sum, the encounter was another success, and Lloyd George would
thereafter extol the Fiihrer in the press, acknowledging him as the 'greatest
German of the age.'

With regard to this episode, the question has been raised: 'Who fooled
whom?' 137 That the British government fooled the Germans is hardly
disputable; whether Lloyd George was a conscious or an unconscious tool
of such a manipulation is irrelevant - and the only striking certainty is that
Hitler and the Nazis never fooled anyone.

And the foolery went on, ever more imaginatively. At this time Edward,
the new king, had an American mistress: Mrs. Wallis Simpson.

In the last months of 1936, the Prime Minister, Stanley Baldwin, with
the complicit act of Edward, was about to carry off a phenomenal show.
The Prince of Wales was most likely instructed to go about reciting the
mantra 'No marriage, no coronation,' whereby he publicly conditioned
his coronation on making Wallis, a twice-divorced American commoner,
his Queen. Baldwin would have then seen to it that a press campaign and
a query submitted to the Dominions as to appropriateness of the choice of
bride would have gone against the marriage. 138 And so it did on November
16; afterwards Edward faced three choices: (1) give up Mrs. Simpson and
keep the throne, (2) dismiss Baldwin and his Cabinet, (3) abdicate.

Although Wallis implored the Prince to keep his throne, and her as his
concubine almighty, 139 Edward, for 'love,' chose the least sensible option
and abdicated on December 10, 1936. 'God save the King,' he shouted at
the end of his speech. Albert, the Duke of York, ascended to the throne as
George VI: thus the royalty was split between a conventional regent and
his brother, the 'pro-Nazi' Edward, who would thenceforth acquire the
title of Duke of Windsor.

The Nazis mistook the abdication for the result of an inner struggle to
purge the royalty of its alleged 'pro-German' sympathizers, which did not
exist, and though the Fiihrer was distressed by the event, 140 the aim of the
ploy was to keep him always hanging with a tantalizing game of wink and
brush-off - which was working perfectly.

In June 1937, Edward and Wallis married in France, and in October they
were invited to Germany for a grand tour of the Reich: everywhere the Duke


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23S Conjuring Hitler


and Duchess were hailed, and Edward requited the salute. On October 12,
1937, the day following their arrival, Edward was introduced in the house
of Robert Ley, the Nazi Labor Secretary, to Himmler, Goebbels, and Hess 141
- an encounter for which the intelligence services had prepared him two
and half years previously.

Finally, in November 1937, after all this profusion of geniality on the
part of Britain, the time came to thrust the Fiihrer forward on to war. The
mission of Lord Halifax on November 19 to the alpine residence of Hitler was
the turning point in the dynamics leading to World War II. By this time, the
broad aggregation of the appeasers dissolved into the two main 'parties'
of Britain: 142 the anti-Bolsheviks, who had regained the helm with Neville
Chamberlain, and the Round Table, the two being relayed by the propaganda
of the Peace Party, which fluctuated in their midst (Figure 5.2). The Nazis
now stared at three different facets of a single front urging them to expand
their European stronghold before aggressing the Soviets.

In synthesis, Halifax told Hitler that: (1) Britain considered Germany the
bastion against Communism; (2) Britain had no objection to the German
acquisition of Austria, Czechoslovakia, and Danzig; and (3) Germany should
not use force to achieve her aims in Europe.

In the light of (1) the agenda set inMeinKampf, which all British stewards
had studied carefully, (2) the world's full-fledged rearmament, (3) the steady
and intense supply of British and American weapons the Nazis had received
during the past four years, and (4) the Reich's notorious preparations for
Barbarossa, Hitler was justified in disregarding entirely the specious warning
not to use force: in brief, Britain was urging him to go ahead. Ordinary
Britons, and the rest of the world, were told nothing of this autumnal

'So oder so,' 'in one way or another,' Hitler decided in January 1938 'to
achieve self-determination for the Austrians': in other words, he was going
to annex the country. In February, the Prime Minister, Neville Chamberlain,
and the Secretary of the Treasury, Sir Eric Simon, announced in the House
of Commons that Great Britain could not be expected to support Austrian
independence. This was the signal.

On March 12, Hitler marched into Austria and asked the Austrians
thereafter to sanction the deed with a referendum: 99.7 percent swung
to his side in favor of grossdeutsch unity - the Push to the East had begun.
Czechoslovakia was next.

On April 21, 1938, General Keitel received orders from Hitler 'to draft
plans for invading Czechoslovakia.' 143


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The Reich on the Marble Cliffs 239


It is important to emphasize that at this point not a single maneuver
on the path to war was the fruit of Hitler's strategy or imagination; the
schemers of Versailles had prepared the route for him long ago, and the
British stewards were now facilitating the progression.

By sequestering the 3.4 million Sudeten Germans (22 percent of the
population) into the artificial creation of Czechoslovakia in 1918-20,* the
old treaty furnished the Fiihrer with the beautiful pretext of claiming these
back into the Reich in the name of 'ethnic self-determination' - and so
Hitler did.

The British press - again, the Daily Mail of the appeasing Rothermere
- opened fire with a leader on May 6 denouncing Czechoslovakia as a
hateful country, inhabited by rascals, whose treatment of the German-
speaking Sudeten was an outrage that Britain could not tolerate. 144

Once more, France, the helpless Marianne forsaken by Britain, scurried
around frantically to patch up some kind of belated common front against
this Nazi juggernaut - whose 15-year incubation France's mischievous pride
had ultimately favored.

In May she supplicated the Russians to intervene on her side against
Germany. She appeared to be utterly unaware that both Britain and Russia,
who always seemed to be playing in tandem, had no intention whatever
of stopping Hitler at this point.

Russia replied that she would do so as long as Poland and Romania
afforded her the passage of Soviet troops in their territory (see Figure 5.3).
Which was a bluff, because the Soviet Union did nothing to dissipate the
rancor and seething hostility that divided her from Poland on one hand,
and Romania on the other. France then implored both countries, but they
refused: they did not trust the Russians, least of all in their home - 'Give
up,' said Poland to France, 'Czechoslovakia is dead.'

As France insisted, on May 20, 1938, Litvinov, Russia's cunning Foreign
Secretary, torpedoed once and for all France's endeavors to convey Soviet
divisions westward by raising the prospect of Russia attacking Poland: Russia
might have to do so, fibbed Litvinov, to protect Czechoslovakia from the
greed of Poland, which wanted to rob the former of the coal-rich district
of Teschen. Thus the Soviets hamstrung France's tangled skein of alliances.
And once again, by the end of May, the ball was in Britain's court. 145

Poland was the keystone of the pre-war crisis because: (1) thanks to
Versailles, by means of the Corridor, she might be set at variance with
Germany; (2) she was allied to France; (3) but she was indeed hostile to
Czechslovakia, who was an ally of France; (4) she was temporarily allied to

See Chapter 2, p. 65.


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240 Conjuring Hitler


Figure 5.3 Alliances and threats on the eve of the Czechoslovak crisis, 1938

Germany, the enemy of France, and (5) she was sharply hostile to the USSR,
the mortal enemy of Germany. Poland's buffer position allowed Britain to
buy precious time to direct the march of the Hitlerites.

The combined forces of Britain, Russia, Czechoslovakia, and France
would have literally pulverized the Wehrmacht in 1938: all the powers
involved knew this. 146 Especially Britain, who, within two weeks of Hitler's
annexation of Austria, moved to emasculate Czechoslovakia and allow
Hitler and herself to complete military preparations.

Already on March 24, Neville Chamberlain, sending another smoke signal
to the Nazis, announced that Britain would refuse to lend assistance to the
Czechs if they were attacked or to France is she went to their rescue.

At the end of May 1938, Hitler marked the date for striking at
Czechoslovakia: October 1. Then a group of generals clustered round the
Chief of the General Staff, General Ludwig Beck, hatched a plot in three
phases: (1) they would attempt to dissuade the FUhrer from his plan; (2)
they enjoined Britain to stand firmly by Czechoslovakia and promised Hitler
that she would fight him; and (3) if Hitler persisted in his resolve to wage
war, they would proceed to assassinate him - the date was set for September
28, 1938. 'Although message after message was sent to Britain in the first
two weeks of September. ..the British refused to cooperate.' 147

Instead, the stewards - Halifax, Simon, Hoare, the British Ambassador
in Berlin, Henderson, and the whole set - launched a disinformation/


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The Reich on the Maible Cliffs 241


terror campaign in grand style: they began interminable and most intricate
negotiations by which they sought to persuade the Czechs to surrender
to the Reich the German-speaking Sudeten districts, upon which, most
importantly, were erected first-class fortifications that would have posed a
serious obstacle to a Nazi advance.

The argument they peddled for the purpose declared that: (1)
Czechoslovakia would have been irremediably smashed in a war against
Germany (which was false); (2) Russia's military value was nil (which was
false); (3) the Soviet Union wouldn't have honored her alliance with the
Czechs (which was true only insofar as Britain herself did not intervene);
and (4) Germany would have been merely satisfied with the Sudeten
regions (false) and with the Polish Corridor (true). 'To make their aims
more appealing they emphasized the virtues of "autonomy" and "self-
determination."' 148

The British plan, clearly, was to dismember Czechoslovakia which, with
34 sterling divisions, 1 million men, well trained, and with a high morale,
could very well stall Hitler in the middle of Europe.

Meanwhile, to sell these catastrophic lies to the public, the stewards
unleashed a bogus terror campaign, which the Peace Party amplified, by
grossly exaggerating Germany's bellicose potential, misrepresenting the
fighting assets of the Czechs, and presaging the absurd threat of an aerial
attack by the Luftwaffe, accompanied by gas attacks: in the first weeks of
September, Londoners were fitted with gas masks and were taught air raid
shelter drills. 149

Then, to shield Hitler from General Beck's conspiracy, in September
Chamberlain flew to Germany twice, on the 15th and 22nd, to reach
an agreement that would prevent the Nazis from going to war over
Czechoslovakia - for their own good. An elderly British Prime Minister
boarding a plane for the first time in his life... to rush to Germany. Unheard
of. '[During the Czech crisis, Chamberlain] used secret messengers to
let Hitler know that he should ignore tough official statements that
might emerge in the next few days from Britain and France regarding
Czechoslovakia. ' 15 °

The talks would lead to Chamberlain's infamous radio speech of
September 27: 'How horrible, fantastic, incredible it is that we should be
digging trenches and trying on gas masks here because of a quarrel in a
far-away country between people of whom we know nothing.'

The following day, the day the generals were going to pull the trigger
on the Fiihrer, France, Germany, England, and Italy convened in Munich
to carve up Czechoslovakia, without consulting anyone, least of all the


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242 Conjuring Hitler


Czechs: the homeland that the Anglo-French had granted the Czechs in
1919 as a reward for their provocation in Siberia they now took away. In
four stages, Germany occupied the designated and fortified areas, while
the rump of Czechoslovakia was to be guaranteed by France and Britain
- the guarantee would never be given. The Czech army disbanded, and on
October 10, the Czechs surrendered another piece of their mangled estate
to the Poles.

On October 21, Hitler issued orders to invade the rump and turn it into
a protectorate, which punctually came to pass on March 14, 1939 - the
Czechs offered no resistance. And Montagu Norman, picking the pockets of
the senseless victims, remitted to the Reichsbank, treacherously, £6 million
of Czech gold held in custody at the Bank of England. That Norman was
in close contact with the Chamberlain faction is certain (it couldn't have
been otherwise), but the nature and content of their interaction have never
been revealed. 151

Now, to finish off Versailles, only Poland remained - and after that,
Germany would be at the gates of the Soviets: Captain Winterbotham, the
British spy, had recently returned from Eastern Prussia, where the district
leader had confided to him that Baibarossa should have been operational
by May 194 1. 15Z There was nothing that England did not know.

The stewards changed costumes once more (Figure 5.2). Appeasement, as
a public stance, was finished: after the Czech invasion, it could no longer be
'sold' to the masses. So a different configuration emerged: the pro-Nazi Peace
Party took the back-seat to posture as an elitist den of frondeurs, while the
Round Table and the anti-Bolsheviks fused in an informal 'diarchy/ whereby
the visible front, led by Halifax, made a pretense of enforcing tough-dealing
with the Nazis, while the secret front, staffed with the Chamberlain group,
continued to bestow upon Hitler concessions and 'friendly' assurances that
Britain wouldn't fight. 153

Hitler had gone as far as he had been allowed, and it was time for Britain
to set him up on the Western Front and thus precipitate the war. On March
31, 1939, 'Exactly half-way between the public break-off and the secret
resumption of... economic negotiations with Germany,' 154 Chamberlain
informed the House of Commons that 'in the event of any action which
clearly threatened Polish independence, His majesty's Government would
feel themselves bound at once to lend the Polish Government all support
in their power.'

This was an extraordinary assurance. The British government since 1918
had resolutely refused any bilateral agreement guaranteeing any state in


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Europe. Now they were making a unilateral declaration in which they
obtained nothing but in which they guaranteed a state in eastern Europe,
and they were giving that state the responsibility of deciding when the
guarantee would take effect, something quite unprecedented. 155

No matter how shrewd as to realization and timing, the strategy of
Britain was always the same: that is, pit foe against foe and secure her
own involvement by priming satellite nations like land mines encircling
the enemy of choice - in this case, the Germans. What she had done by
guaranteeing Belgium on the eve of World War I, she now replayed with

Hitler had begun talks with Poland in October 21, 1938, by asking,
predictably, for the city of Danzig and a kilometer-wide strip across the
Polish Corridor to provide a highway and a four-track railroad under
German sovereignty. These, indeed modest, requests were made to the
Polish ally in an atmosphere as cordial as possible; they were the last, paltry
shreds of Germany lost at Versailles: Hitler had no desire to overrun Poland,
but rather to engage her in the forthcoming onslaught against Russia. 156 Yet
by late March, Poland turned litigious, and at first, the Fiihrer, not realizing
that Britain had made clandestine overtures to Warsaw, could not fathom
'Poland's newfound resilience.' 157

Not content with duping the Nazis, the British inveigled the Poles as
well by making them believe that Britain and France would have unbridled
a full-scale offensive against Germany, should the latter have decided to
strike at Poland. But in the late spring of 1939 no aid worthy of the name,
consisting of either men or munitions, was seen traveling from the Allied
countries to Poland: 'Britain had stalled when Poland requested economic
help and military equipment to prepare to deal with a German invasion.' 158
By May, Hitler readied his generals to consider Britain, for a time, the
proximate enemy.

From London, the Chamberlain group continued to dance with the
Nazis, promising as late as August a 'full-bodied political partnership' in
exchange for peace, 159 while the Round Table persisted in urging the Poles
not to back down.

Hitler refused to believe that the Anglo-French were in earnest - it was a
put-on, he concluded. He was fully armed, he had lost the Poles, he needed
to strike - he was going to have the war that he wanted.

In the spring of 1939, Roosevelt's clandestine emissary, Supreme Court
judge Felix Frankfurter -who was close to the American Jewish Committee,
which, in turn, stood 'at one or two removes' behind The Focus - visited


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244 Conjuring Hitler


London. Soon after his departure an extravagant publicity campaign began
on Chuchill's behalf. 160 The War Party was thus catapulted to the vanguard
of British policy (Figure 5.2), eager to meet Hitler on the battlefield. In May
1937, when Germany had dismissed Churchill as a political lightweight,
the bulldog had warned Ribbentrop: 'Do not underrate England... She is
very clever. If you plunge us all into another Great War she will bring the
whole world against you.' 161

Before commencing, however, the Fiihrer had to think the unthinkable:
to sign a truce with none other than Bolshevik Russia to sweep Poland out
of the way.

A Soviet tale of madness and sacrifice

All appeased the Nazis: the Pope for fear, the British by design, and the
Russians to buy time. Stalin, too, had read Mein Kampf^ 2 - he harbored
no illusions: the Nazis would come to him sooner or later.

Russia underwent her first Five-Year Plan in October 1928, four years
later than Germany's: from the latter the Soviets imported large amounts
of capital equipment and machine tools; Krupp and the aircraft-maker
Junkers possessed installations in anti-capitalist Russia, as did such jewels of
corporate enterprise as Standard Oil, the enthusiastic Nazi-phile Henry Ford,
and a variety of other Anglo-American concerns involved in the extraction
of gold and oil. Stalin planned on trebling the production of iron, coal, and
oil. To justify the forced industrialization of the country, he raised the spook
of a forthcoming aggression from the West, and proceeded to consummate
the endeavor at the expense of 25 million peasant households - the Kulaks.
Five million of them were obliterated while their estates were shattered and
collectivized. The environmental and economic repercussions, let alone
the human strain of such a sacrifice led Stalin's Russia by 1930 to such a
disastrous impasse that only the capitalist rescue of the West enable him
to tide over his dictatorial caravan to the next and last stage of the great
pre-war mummery. For instance, the dam on the Dniepr - the greatest of
such salvaging investments - was funded by US money and fitted by a
British concern. 163

When Hitler came to power, Stalin observed. He watched the suppression
of the German Communists with utter detachment - such was the deserved
fate of what had been all along an expendable crew since the early 1920s.
And in June when the Fiihrer purged the dissenters in his bosom, then
Stalin realized that the incubation was terminated, and that Adolf Hitler


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was indeed the piper conjured at Versailles who would be leading the
German hordes into Russia.

Presently, he too had to appease. Britain's game was transparent: as
in World War I, she wanted Russia to win the war in Eurasia for her by
swallowing the Nazis into the steppes and devour them, like the Whites, in
a drawn-out and prolonged effusion of blood. To Churchill, Baldwin would
thus sum it up in July 1936: Tf there is any fighting in Europe to be done,
I should like to see the Bolshies and the Nazis doing it.' 164

It was understood that the fighting should have been to the detriment
of Germany rather than Russia, as Veblen had wrongly assumed. And the
USSR, ever the imaginary foe of the Anglo-American oligarchy, would oblige.
For that, though, the path had to be cleared of any kind of disagreement,
of any kind of old Bolshevik talk - the talk, say, of Trostky and of all those
who wanted to fight too soon and too far afield, overstepping the present
entrenchment of Russia, which was in line with the designs of the Sea
Powers, and in the name of junkyard bywords such as 'world revolution'
or 'Socialist brotherhood.' A corps not of doctrinaires, but of two-faced
tacticians was what was needed in the Red Army and the Politburo. And
Hitler, with his fire and night of the long knives, provided the Red Czar
with the inspiration.

In the wake of the holocaust of the Kulaks and the ensuing catastrophes,
the majority of the army, the peasantry, the commissars, and 90 percent of the
party machine had come to stand foursquare against Stalin's regime. 165

The pressure was about to reach breaking point when, suddenly, on
December 1, 1934, the Stalinist nomenklature moved to head off the
opposition. Laying hold of another useful idiot, the secret police of
Leningrad 'oriented' this obscure and allegedly 'hysterical' 166 student by
the name of Nikolaev into the corridors of the Smolny Institute.* There,
Sergei Kirov, Stalin's old comrade, and at the time his leading rival, was
shot dead by the young unknown: twice Nikolaev had been found by the
local police wandering around the Institute, armed, and twice upon higher
and veiled orders he had been released, till Kirov fell.

Stalin rushed to Leningrad to find, as Hitler did in Berlin the year before,
that the intelligence services were serving him a 'fire' and 'the arsonist' on
a silver platter. And the arsonist, as the Russian public was subsequently
disinformed, was but the tip of a vast terrorist network woven by a gang of
Trostkyite saboteurs, in cahoots with the German Reaction - a variation on

* The school for noblewomen from which Lenin directed the Bolshevik coup d'etat
on 25 October 1917, and which was later taken over by the Communist Party of


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246 Conjuring Hitler

the usual 'terrorist lie' that generally inaugurates a coup carried from within
by the most conservative and unscrupulous fringe of a despotic regime.

Two days after the assassination, Nikolaev 'accidentally' perished in a
Leningrad police van while the first wave of the great Stalinist purge washed
over the apparatus of the Soviets: hundreds were immediately rounded up,
laboriously tortured and killed; hundreds of thousands were shipped off to
Siberia. This was only the beginning of a five-year slaughter, which shaded
off into delirium during the great Show Trials of the Stalinist era.

Not coincidentally, the first season of such theatrical trials was produced
by Stalin within a few days after the German occupation of the Rhineland,
in March 1936: before the much aroused audiences of the world, the former
apparatchiks first accused themselves and one other of being foul, shifty
vermin, and then shambled to the wall. Face to face with the firing squad,
they died shouting hails for Stalin and the Revolution - as if echoing the
mutinous SA, who had fallen in June 1934 yelling 'SiegHeilV

By such ways, the old Leninist Guard was flushed down the drain,
one faction after another standing trial to betray the next with false
accusations planted in pre-packaged scripts recited by a chorus of inquisitors
methodically cast for the role. The peak of British appeasement, 1937,
marked the paroxysm of the Stalinist Terror, which was but the second
cycle of the cleansing mass sacrifices inaugurated by Lenin after the Civil
War to keep the conquered beehive of Russia chronically malleable.

As one of Trotsky's men, Radek, too, was doomed. The sinuous
propagandist of much Russo-German incestuous dealing and one of the
privileged few selected to accompany Lenin in that famous voyage across
Germany arranged by Parvus in 1917, Radek was called to the dock, and
as all the others before him had done to shield their own families, he lent
himself to the sham. On January 23, 1937, in the course of his 'confession,'
Radek, summoned by the prosecutor to shed light on his alleged network
of 'complicity,' dropped the names of Putna and Tukhachevsky.

Putna was a little known general, but Tukhachevsky was a celebrity. The
former was in fact one of the top brains of the Red Army, serving at this
time as the military attache at the Russian embassy in London, whereas
the latter was the Red Army's most prestigious commander - the glorious
Tukhachevsky. Born a Muscovite patrician in 1893, he joined the Great
War as a czarist officer. Captured twice by the enemy in 19 15 and 19 16, he
managed to escape from his German captors by improvising such utterly
reckless getaways that romanesque tales of the boldness and soldierly
brilliance of this Slav Monte Cristo preceded his return to Russia. It was with
the profoundest dismay that Tukhachevsky witnessed the collapse of the


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The Reich on the Marble Cliffs 247


Russian armies during the Kerensky intermezzo, and when the Bolsheviks
seized power, he was one of those officers who, unlike the Whites, pitched
their sabers in the water and donned the Red Star, resigned in their hearts
that the world they had known would never come back, and that Russia
had to be created anew.

At only 26, he was made a general in Trotsky's converted divisions -
thereupon he would lash at the Whites like Nemesis incarnate, thrashing in
sequence the Czech legion and Kolchak in Siberia, and finally dealing the
decisive blow in the South to Denikin's loyalist armies. On the home front,
he brought to heel rebellious peasant formations even by using poisonous
gas. And by the mid 1920s he emerged as the unrivaled prince of the spets,
the new vanguard of young 'specialists' that dreamt of transforming the old
imperial army into a new mechanized fighting device. It was not by chance
that he would be chosen to form the strongest link of that subterranean
connection that tied the Red Army to the German military-industrial
complex from 1926 to 1932. The Russians learned much from the Germans:
revolutionary theories on tank warfare from General Guderian, and many
other prized secrets from the rest of the Reichswehr's top brass: Schleicher,
Bredow, Blomberg...

By 1935, the spets had so advanced the metamorphosis of the old Russian
army into the hierarchized Moloch of their dreams that Stalin conferred
upon the ambitious Tukhachevsky, whom he nicknamed 'Napoleonchik,' 167
and a handful of other 'Kommandirs' the title of Marshal of the Soviet
Union - Tukhachevsky being, at 42, the youngest.

By this time, knowledgeable as he was of Germany after nesting for the
best part of the Nazi incubation within her officer caste, Tukhachevsky
guessed correctly, point by point, the objectives and the timetable of the
Hitlerites. There was not an instant to lose: Russia, France, Czechoslovakia,
and Britain had to unite and crush Nazism in a major offensive.

In January 1936, following the death of George V, Tukhachevsky was
sent to London as Stalin's representative to attend the funeral of the
king. Magnificent opportunity: thereafter, in fact, he counted on meeting
exponents of the British General Staff, whom Putna had contacted on his
behalf. Utterly deceived like everyone else as to the nature and aims of the
British empire, he believed that he would need little time to seduce the
British generals with what appeared to be an irresistible proposal. 16S

Citing precise numbers, Tukhachevsky invited the British to consider that
by 1937 the rearmament pace of Germany would find itself significantly
behind the joint production of weaponry by France and Czechoslovakia.
And what was more, Russia's scaled-up manufacture of fighter planes, tanks,


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24S Conjuring Hitler


and cannons, which could have been deployed in Czechoslovakia by means
of a spectacular 'aerial bridge' across Poland and Romania, would have
made the Allied defense arsenal such that even a pre-emptive blitz against
Germany could have neutralized the Nazis without excessive damage.

And the British? They listened politely and shook their heads - not
interested. To justify the snub, they would craft the lie that Tukhachevsky
had inflated his numbers, the same lie that the stewards upheld when in
1938 they moved to declaw the Czechs. And hadn't Lord Lothian in 1935
confidently assured a group of visiting Ministers from Germany that 'they
would cut through Russia as through butter'?

Disheartened, Tukhachevsky left London. And tried again in Paris. But the
French showed no inclination to fight at this time, and preferred to repose
behind their fortified lines. 'But it '11 be too late,' expostulated Tukhachevsky.
Only two months later, after the Rhineland coup, France's Foreign Secretary,
Flandin, would cry out to the British the exact same words.

Defeated, the young Marshal returned to Moscow - in time to partake
in the reunion of the Soviet Supreme. Listening to the speeches of the
Foreign Secretary, Litvinov, and of the Prime Minister, Molotov, he was
literally struck, if not provoked by the mild, and almost kind words that
were spoken towards Germany.

Then Tukhachevsky took the stand and slung around barbs that were
meant to cut deep: trenchant words aimed not just at the Nazis, but also at
the party grandees that inexplicably soothed them. He spoke exuding the
assurance of a general backed by the whole of a powerful army.

If there ever was anybody Stalin should have feared amongst the warriors,
Napoleonchik was always the one: temerarious and naturally situated to
attract any coherent build-up of insubordination, Tukhachevsky was now
putting the whole of Stalin's and Britain's, appeasement at risk.

According to a story, dismissed by some as fantastic, through the White
central of Russian emigres in Paris, the Soviet secret police (the GPU) obtained
a dossier falsified by the conniving Nazi intelligence services (the Gestapo),
which provided Stalin with 'crushing evidence' that Tukhachevsky, Putna,
and their confederates had not ceased to betray Russia for more than a
decade by passing on to Germany Soviet classified information. 169

On June 12, 1937, a laconic communique featured on the last page of
the press organs reported that Tukhachevsky and Putna had been executed.
There followed the liquidation of 35,000 additional officers - about half the
commanding corps. All in all, the Stalinists cannibalized with the purges
two-thirds of the governing class - roughly 1 million individuals.


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The Reich on the Marble Cliffs 249


Legend has it that Stalin decapitated the Red Army with a view to repelling
from Russia the eventual Nazi onslaught and diverting it towards the West
-Britain and France - where, as he hoped, the Wehrmacht would crumble,
prostrate. But if that were so, why was he so keen on making the Nazi war
machine as strong as possible by pursuing doggedly since 1935 a policy of
economic cooperation with the Reich?

In fact, while Anthony Eden reached Moscow from Berlin in March 1935,
Soviet envoys were in Berlin negotiating with Schacht a long-term loan
of 200 million marks, which Stalin would have flaunted as 'his greatest
triumph. rl 70 On the basis of this and further, larger availments of credit, the
Nazis extended technical know-how for a steady and much more significant
counterpart of Russian oil, grain, rubber, and manganese, without which, as
is widely recognized, the Wehrmacht would have never been in a position to
strike in 1939. 171 The collusion was so intense that in April 1937, Kandelaki,
Stalin's chief economic legate, was received by the Fuhrer in person. Russian
convoys laden with war supplies would be regularly sent to Germany until
the very day of the Nazi attack, Operation Barbarossa', June 22, 1941. 17Z

In sum, Britain from the right and the USSR from the left had been fitting
and rousing this Nazi construction since 1919: the former with diplomatic
cunning, American loans, appeasement, the imperial markets, and the
support of the Bank of England; the latter with the Red Terror, the sabotage
of the Left opposition and vital materials in the run-up to war. Russia and
Britain did move in sync. Alone the Nazis would have gone nowhere.

In March 1938, the Soviets acknowledged the Anschluss without protest,
and in May, as seen, they undermined France's belated efforts to assemble a
coalition against Germany. On March 10, 1939, as he broached the question
of its late annexations, Stalin displayed such good humor toward the Nazi
Reich that three days later Hitler despoiled the rump of Czechoslovakia.

And in the spring of 1939 the masquerade spiraled into the last act.

On one side were the appeasing schemers of Britain, who kept on making
all sorts of alluring promises to the Nazis, and who renewed their deceitful
oaths on March 16, 1939, by ratifying a master commercial agreement with
Germany. 173 On the other was the Churchillian War Party, which pushed
for an immediate entente with Russia and France: but it was out of office,
and its antics, thus far, were for display only.

On May 19, Chamberlain, responding to Churchill, refused officially
to bind Britain in any alliance, and seized the moment to laud Poland,
grotesquely - Poland, that 'virile nation,' he orated with a straight face,
that 'is bound to give us all the aid... it can.'


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250 Conjuring Hitler


While the deceptive lure of a British partnership was kept dangling
before the eyes of the Nazis until early August (and beyond), from April
1939 Britain conducted mock negotiations with Russia and France - mock
negotiations, whose sole intent was to hoodwink the French into believing
that Britain was serious about confronting Hitler in the immediate future,
and which Britain would finally sap by conveying to Moscow on August
11a legation of second-rank generals devoid of decisional power. 174

Russia was no fool to any of these games - in fact she readied herself to
deal directly with the Nazis in early May, when Molotov was appointed
Foreign Secretary to replace Litvinov, who was Jewish, and was therefore
not suitable for negotiating with a Nazi envoy.

Things came to a head on August 19. On that day, Poland, ever more
heedless, refused once and for all to allow the passage of Russian troops
in her territory, although Romania had agreed to do so; Germany and
Russia signed a commercial pact, and Ribbentrop's visit to Moscow was

On August 23, 1939, Hitler's new Foreign Secretary landed in Moscow,
and by the late evening it was done: Nazi Germany and Bolshevik Russia
undersigned the stunning Ribbentrcp-Molotov Pact of Non-Aggression. The gem
of the document was the secret protocol that envisioned the partition
of Poland between the two signatories - just a respite before the great

Then, in the presence of his Nazi guests, the Red Czar drank to the health
of the Fiihrer, waited for Ribbentrop to depart, and finally muttered to the
intimate circle: 'Of course, it's alia game to see who can fool whom. I know
what Hitler's up to. He thinks he's outsmarted me but actually it's I who
tricked him. ..War would passes us by a little longer...' 175

World War II was less than a week away.

On August 12, a mere fortnight before the Russo-German truce, Ernst
Jiinger completed the final draft of On the Marble Cliffs, which would be
published later in the fall. This was the central novel of the Third Reich,
written by the rhapsodist of its warrior caste. 17& Reading it allegorically,
the book disclosed an esoteric narrative of the German vicissitudes from
the end of the Great War until the vigil of World War II, whose symbolism
the Hitlerites would temporarily turn to political use.

On the Marble Cliffs told the story of two brothers, who, after taking part
as knights in the campaign of Alta Plana gave up the sword and retired to
a life of contemplation within the walls of a monastic retreat. The sanctum
of the cloister - the venue of rituals untold - was matted by vipers that


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The Reich on the Maible Cliffs 25 1


periodically untangled to form the blazon of the flaming fire-wheel - the

The brothers had once been initiated into a fraternity, called the Order
of the Mauretanians. 177 Power was the principle worshipped in their
lodges, and the brotherhood demanded that domination be exercised
dispassionately, whether in insurrection or in order - no surprise then
if members of parties otherwise mortally hostile were seen conversing
amicably in the underground walkways of Mauretania: all of them were
pupils of the same master. Such a master was the Chief Ranger, an ogre
larger than life, half-giant, half-beast - a tyrant terrible, earthly yet seduced
by the ways of 'technique'.

Nestled into the marble cliffs, which looked down upon the prosperous
counties of the Marina, the hermitage afforded a vista over Burgundy to
the south, and the isle of Alta Plana, enveloped by glaciers. To the north, at
the back of the cliffs, ran the marches of the Campagna, which turned into
marshland as they neared the long sickle-shaped thickets of the Ranger's
sylvan domains. There, in what was known as Flayer's Copse, the monstrous
retinue of the Ranger might be espied dispatching sacrificial victims in
ways indescribable.

The war on the borders of Alta Plana had forever disrupted the order that
reigned over the coastal dominions: gone was the rough core of honor. The
Marina was now ridden by crime, and agents and spies, who had descended
upon it from the northern dark woods. Biedenhorn, the chief of the army,
thus acquired significant clout. In the turmoil, the clans sought him out, as
did the woodland riffraff, with whom he compromised by ceding to them
the control of several districts. Evil blood thus spread from the forests in
the veins of the world and the weak rebelled against the laws that had been
issued for their very protection. Resisting the rebellious rage whipped up
by the huntsmen and the even cruder foresters stood the proud Belovar,
a chief herdsman of the Campagna often seen in the cloister, whose farm
was a home to many sons of the land bent on opposing these powers of

One day, Braquemart, a Mauretanian obsessed by dreams of resurrecting
the sun temples of an old race of gods, reached the hermitage, accompanied
by a silent young prince, to speak of a plan. Braquemart confided to his hosts
his desire to embark on an adventure, to the north, where he would put
into practise his theory that in the new hive masters were to be separated
from slaves and never allowed to cross-breed again.

Against the counsel of a mysterious priest, the head of a matriarchal
church hovering behind the scenes, Braquemart and the prince, joined


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252 Conjuring Hitler

by the brothers, pushed on and invaded the demoniacal forest. They were
backed by Belovar and Sombor - his corpulent son - who sicked on the
mastiffs of the Ranger their two packs of snarling molossi, roused by blood
they had licked off the flags of their masters.

The hounds of Belovar - the pride of the old man - fought bravely across
the ungodly brushes, but the red dogs of the Ranger, whose chilling laugh
might be heard from afar, had numbers on their side. Chiffon Rouge, the
enormous molossus leading the red pack, came rumbling down upon Belovar
and his dogs in charges so violent that soon ill-omened signs of cracking
could be seen in the ranks of the herdsmen. They were overwhelmed: one by
one they were slain. As they retreated, the brothers discovered the severed
heads of Braquemart and the prince impaled upon spikes in a clearing
bordering the Copse. When they repaired to the Marina, it was too late: a
spectacle of devastation opened before the narrator, who cast a long, lewd
glance upon the ruins of the cities that lay smoldering, sparkling with fire
like a necklace of rubies.

In the twilit finale of Jiinger's fantasia, Chiffon Rouge led the conclusive
attack against the hermitage perched on the cliffs, but as the dogs from
hell fumbled into the crypt, the sanctuary's snakes wrapped the beasts into
their coils and strangled them all.

Meanwhile the villagers hustled in droves to abandon the ravaged Marina
in ships overladen headed to Burgundy and to Alta Plana. On one of these
vessels the brothers embarked and reached the ice ring of the visible isle,
where they were received in the farmstead of hospitable friends - friends
that once had been knights whom the brothers had fought in that distant
campaign. On seeing their shelter, the narrator concluded, 'we felt we had
come home.'

The narrator was Ernst Jiinger himself and 'Brother Otho' was his
younger sibling Friedrich Georg, both of whom had fought with conviction
as commissioned officers on the Western Front during World War I, the
'campaign' against Britain - the icy Albion depicted as Alta Plana, which
faced Burgundy, that is, France. The Marina was Germany, and the hermitage
was something of a Thule Lodge: the elitist, and occultist, vantage point
secured by the counter-initiates of the New Germany - the proto-Nazis
like Jiinger, who had been originally inducted into the great network of
power. The order of Mauretania appeared to be an antipodal Freemansonry
which bred tyranny in all its forms, hence the possibility of chancing in
its corridors upon Nationalists slumming with Bolsheviks and professional
revolutionaries: possibly men, say, like Parvus and Trebitsch.


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The Reich on the Marble Cliffs 253


The state of decay in which the Marina found itself after the war was a
transparent allusion to the corruption of the puppet republic of Weimar:
Germany had been turned overnight into a house of sin, where delinquents
mixed with the helots, the huntsmen, and foresters. The huntsmen were the
Socialists, with whom Biedenhorn, the Chief of the Reichswehr (Groener,
Seeckt, Schleicher...), sealed on behalf of the clans (the upper classes) the
lurid compact for the suppression of the Councils' Republics. These Councils
were in turn infiltrated by the foresters, that is, the Communist agents that
had descended from the forests - the sickle-shaped and bloody woods of
Bolshevik Russia - into the plains of the Campagna: Central Europe.

Standing guard against these hellish hordes was Belovar, with his son
Sombor and their two packs of hounds: that is, Hitler, the honorary member
of Thule, the portly Goring, and the SA and the SS, who marched behind
banners maculated with the blood of the martyrs of November 9, 1923*
-a consecratory ritual introduced by Hitler in 1926. 17S

The setting was thus laid for the coming expedition of Braquemart and
the prince: the invasion of Russia - Operation Barbarossa - led by the top
echelons of the SS (Braquemart and his fixation with ancestral archeology),
and the Junkers of the Wehrmacht, symbolized by the mute prince, whose
silence was the tragic presentiment of a forthcoming doom. Jiinger, seeing
it as his duty to join this brigade^ was yet certain that the 'herdsmen' of
Germany would be routed in the deep maws of Stalin - Chiffon Rouge
- who appeared to be cheered by the Devil himself - the Chief Ranger.
In the end, the Bolsheviks laid waste the whole of Europe while the Nazi
initiates forsook the marble cliffs and 'came home' to the oak groves of
their knightly brethren in Britain. The defeatist narration of the coming
battle against Stalin prompted several party censors, including Goebbels,

'On Sunday morning took place the most singular ceremony of the Third Reich, that
of the consecration of the flags. One would bring before the Fuhrer "the flag of blood,"
that which was carried by the militants killed at the time of the aborted putsch of 1923,
in front of the Feldherrenhalle of Munich.. .With one hand, the Chancellor clasped the
banner of blood, and the pennants to be consecrated with the other. He supposedly
acted as the vector of a fluid unknown, and thus the blessings of the martyrs were
bestowed upon the new symbols of the German Fatherland. Purely symbolic ceremony?
I don't think so. There truly lives in the thought of Hitler as in that of the Germans
the idea of a sort of mystical transfiguration, analogous to that of the benediction
of the water by the priest, - if not to the Eucharist. Whoever fails to discern in the
consecration of the flags the analogue of the consecration of the bread is not likely to
understand anything about Nazism. I don't know what was the Germany of yore. She
is today a great, strange country, more removed from us than either India or China.
The flag itself accentuates thus stunning oriental impression...' (Robert Brasillach, Les
stpt couleurs (Pans: Plon, 1939) pp. 123-4).
t He would indeed be re-enlisted in World War II as an officer, who would see active
duty first in occupied Pans and then briefly on the Eastern Front.


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254 Conjuring Hitler


to demand that the book be banned and the author punished, but Hitler
intervened personally in the matter, forbidding anyone to molest the bard.
Such an allegory, painted by a writer who was at the time imposing himself
as one of the greatest literary talents of the twentieth century, with its
emphasis on: (1) the religious hatred for the Red Empire in the East, (2)
the certainty of spiritual victory over the enemy - the snake smothering
the hound - and (3) the hand conclusively outstretched towards the racial
brethren of Britain, was precisely the sort of coded message the Fiihrer
wished to diffuse in the direction of what he believed to be the British allies
of the Peace Party. As they were to take their preliminary steps towards war
in a most uncertain environment, whose shifting sands were the work of
Britain's unceasing dissimulation, the Nazis endeavored to the best of their
ability to secure this elusive partnership with the British empire, which
they saw as the fundamental prerequisite for founding their Aztec beehive
in the plains of Ukraine.

But even the metaphors of Jiingerwere powerless to altera decision made
long before Stalin would reach the marble cliffs, by men that never had
and never would befriend the Germans.

Fake war in the West, true push in the East

Poland refused to negotiate and Germany declared war on her on September
1, 1939. On September 27 Warsaw surrendered. As agreed by her barbarous
invaders, the country was torn in the middle and its population treated
like refuse - the Germans did what they did, and the Russians applied
their methods by a preliminary round-up of 22,000 members of the Polish
intelligentsia - officers, intellectuals, officials - whom they shot, one after
the other, in the nape of the neck before dumping them in the ditches of

And with its trumpeted unilateral promise to guarantee the independence
of this 'virile nation,' what did noble Britain do? Nothing. She watched

Everything repeated itself: when war broke out, Churchill was summoned
by Chamberlain to resume the command of the Admiralty - the very same
post from which in 1915 no less impassively he had let the Lusitania sink
in the hope of drawing the United States into the conflict.

Formally, Britain was now bound to declare war upon Russia too, but
of course, she didn't. And Joseph Kennedy, the American Ambassador in
London, who was fascinated by the twisted pattern of British diplomacy,


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The Reich on the Marble Cliffs 25 S


asked Churchill why. The latter replied: 'The danger to the world is Germany,
and not Russia...' 179

During the Polish campaign, the Franco-British contingent numbered
1.5 million troops on the Western Front, where Hitler had stationed a mere
350,000 men - clearly there was no willingness to fight the Nazis. Instead of
bombs, leaflets were dropped from planes assuring the German population
that the Allies had no quarrel with them, but only with their rulers. 180 Strict
orders were issued to the Royal Air Force not to bomb any German land
forces - such orders would remain unchanged until April 1940: 'When some
Members of Parliament put pressure on the government to drop bombs on
German munitions factories in the Black Forest, Sir Kingsley Wood [the Air
Minister] rejected the suggestion with asperity: "Are you aware it is private
property?'" 181

And this time the blockade round Germany was perfunctory: throughout
the war the Nazi regime would restock its facilities via countless channels
from all over the world.

On October 12, Hitler addressed the first of his peace speeches to Britain:
along with the desire to come to an understanding, he envisaged the
possibility of relegating the Jews in the Polish rump under German control.
Britain rejected the overture.

On February 10, 1939, Pope Pius XI died; Pacelli, the diplomatic fox of
the Vatican and former nuncio to Germany, succeeded him as Pius XII on
March 12.

In late November, Pacelli decided to redeem somewhat the damning
mistakes of the past. And he went far. He consented to serve as the liaison
between the Catholic resistance in Germany and the British Foreign
Office for what was another serious attempt to assassinate the Fiihrer. 'The
hazardous nature of such a plot for the Pope, the Curia, and all those
associated with the Vatican can be hardly exaggerated.' 182 On December
5 he summoned the British Minister, Osborne, to the Vatican and passed
on to him the following information from the German anti-Nazis: (1) in
the coming spring Hitler was about to launch a major campaign in the
West, and (2) this offensive would not occur if a nucleus of Wehrmacht
generals succeeded in overthrowing the Hitlerites - for that, the German
rebels conditioned, it was imperative that Britain guaranteed an honorable
peace for Germany.

Osborne relayed this to the Foreign Secretary, Lord Halifax, who in
turn reported to the Prime Minister, Neville Chamberlain. These plots to
assassinate Hitler were always a nuisance and a source of embarrassment
to Britain: she did not want the fruit of her conjuration dead just yet;


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256 Conjuring Hitler


certainly not at this early stage. And so the stewards sabotaged this plot
as well. Osborne complained to the Pope that the coup was 'hopelessly
vague,' and Halifax, as disingenuous as could be, lamented that Britain
would not collaborate unless the German conspirators showed their faces
and submitted a definitive program outlining their intentions. The Pope
persisted, but Osborne, cued by his superiors, cut the secret talks short: 'If
you want to proceed with a change of government,' he retorted curtly to
Pacelli, 'get on with it. I don't see how we can make peace so long as the
German military machine remains intact.' 183

And still no fighting from the Allies - the people called it the 'drole de
guerre,' the 'funny,' 'phoney' or 'sitting' war - Sitzkrieg.

Between April and May 1 940, Hitler occupied Norway and Denmark. And
on May Day he launched the invasion of France and the Low Countries.
The nine months of the Sitzkrieg came to an end.

At long last the War Party, which had been pining for action since
1934, was picked as the first mask of the masquerade: the time of Winston
Churchill had arrived (Figure 5.2). Contrary to what transpired from
the public debate, the changing of the guard between Chamberlain and
Churchill was smoothest: it was indeed a conspiracy of these two to bring
about what had been a foregone conclusion for years: 184 On May 10, 1940,
Winston Churchill took the helm of the empire as Prime Minister and chief
stalwart of the anti-Nazi crusade. Surprisingly, the vast majority of Liberal
historians have seldom if ever wondered: if all such fights and feuds within
the British Establishment about Germany were real and not feigned, why
would Churchill, the staunch anti-German, retain in the Cabinet and in
key Intelligence positions most of Chamberlain's entourage? 185 In fact,
he kept the very appeasers, the alleged pro-Nazis of yesteryear, many of
whom were always 'his men' (for example, Sam Hoare), to do what they
had continually done for years with unsurpassed ability, that is, delude
the Nazis with the prospect of an alliance - a delusion designed to redirect
the Reich towards Russia and gain time before the Americans were drawn
into the war.

On May 15 Holland fell. With clemency, on May 24 Hitler allowed the
evacuation to Britain of the drifting Franco-British contingent at Dunkirk
-375,000 men, a third of whom were French. Belgium surrendered on the
27th, and the Nazis marched into Paris on June 14, 1940.

After dynamiting the commemorative car at Compiegne near Paris, in
which Erzberger had signed Germany's humiliating surrender in November
1918, the Germans proceeded to occupy the north of France so as to keep
Britain in watchful view, and surrender the remainder of the country to


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The Reich on the Marble Cliffs 25 7


their French Collabos under General Retain, possibly as a reward for making
the victory of the Nazis so suspiciously speedy.

As Prime Minister, Churchill also became the chief choreographer of the
masquerade: with over three decades of intelligence operations behind him
and an extraordinary talent for theatrical mendacity, he was eminently
qualified to direct the final and riskiest steps of the dance. Now was the
time to play the Windsor trump card again.

The plot was to create a counterfeit zone of British appeasement in the
Iberian peninsula. Windsor would be the bait. Edward was presently serving
as Major General of the British Army in the Allied Command stationed in
Paris. On May 16, he 'suddenly deserted his post without authorization - a
court-martial offense - and took the Duchess to the South of France. ' 18&
What looked like a mad scramble to escape from the advancing Nazi
divisions was instead a secret mission to the neutral terrain of Spain. On
June 20, Edward was in Barcelona.

Meanwhile, on May 19 Churchill had dispatched Samuel Hoare as British
Ambassador to Madrid: a former 'appeaser' whom the Nazis did trust.

Furthermore, by way of Sweden, the British disinformed the Hitlerites
in late May that a core of pacifiers, opposed to Churchill was coalescing
around Halifax. 187 The counterfeit bisection of the British establishment
into adversary clans, which had been employed for the Trebitsch dupery of
1920, was presently readapted on a giant scale to the last stage of Britain's
great deception of the Third Reich (Figure 5.2) - and, not by chance, the
same man, Churchill, was behind both operations.

At that time the Nazis were told by double-agents like de Ropp that not
until after a major battle, which 'left no doubt about German military
might,' would the Peace Party be in a position to topple the Churchill
Cabinet. 188

And the Nazis believed everything: for years they had looked into the
eyes of this party, a party which appeared to cast an enormous shadow
over the whole of British society: the diplomatic corps, the intelligence
services, the intelligentsia, the upper class. All of them seemed engulfed
in an assortment of Fascist movements bent on overthrowing the throne
should Britain have been invaded and sued for peace. At the grassroots,
these groups were variously called The Link, The Right Club, The Nordic
League... 189 Few, if any, were genuine.

On July 3 Windsor was in Lisbon - there he lay in wait for the Nazis.
He was hosted by rich Portuguese friends, who were linked to the spying
web of the Germans. The prince talked much, and the German embassy in
Lisbon relayed the conversation to Ribbentrop in Berlin. On July 12, Edward


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2SS Conjuring Hitler


was allegedly heard recommending that the Nazis bomb Britain severely
to make her ready for signing an immediate peace with Hitler. 190

Since July 10, the Luftwaffe had been bombing British ports and logistic
positions. Appealing 'once more to reason and common sense', Hitler offered
Britain peace in his address of July 19, 1940. And once more Britain rejected
it. Three days earlier, the Fiihrer had alerted his generals, theatrically, to
'prepare' for the cross-Channel invasion of England - that great Nazi hoax
referred to as Operation Sea Lion (Seelowe): naturally, Hitler would never
make good on it. And Churchill knew it. 191

And then, towards the end of July, the high-level Nazi envoys landed
in Lisbon. The documentation pertaining to this mission was suppressed
by Churchill himself; 192 only a few coded records survived. From one
creditable reconstruction, it emerges that Walter Schellenberg, one of the
top agents of the Nazi intelligence services, was joined in Lisbon by his
chief, Reinhardt Heydrich, to escort none other than the Deputy Fiihrer,
Rudolf Hess, who had flown from Germany to complete a round of secret
preliminary negotiations with the Duke - Hess' old acquaintance from
193 7. 193

What they negotiated on July 28 is not known, though it might be easily
guessed from the subsequent developments of the war and the further
declarations of the Duke to his entourage: namely, that he was not willing to
risk civil war in Britain by reclaiming his throne just yet, but that bombing
sense into Britain at this stage might have prepared the terrain for his swift
return from the Bahamas, whose governorship he had for the time being
accepted at the suggestion of Churchill. On August 1, 1940, the Windsors
embarked in Lisbon on a liner headed for the Caribbean and stepped down
from the stage.

'Unhappy with the Luftwaffe's limited results, [on that very day, Hitler]
announced his intention to accelerate the campaign and ordered a massive
and continuous onslaught, which he code-named Adlerangriff, or Eagle
Attack'. 194 This was staged as some kind of thundering preamble to the
imaginary land-invasion of Britain, which, having always been in the nature
of a bluff, was accordingly postponed by the Fiihrer sine die. The aerial battle
over Britain, which Hitler patently undertook with the greatest reluctance,
began on August 13. He had never wanted to fight Britain, nor was he
cbviously prepared to do so at this time: Germany had but ten submarines
in the Atlantic and her bombers were wholly unsuited for independent
warfare against Britain. 'Clearly [her] aircraft had never been designed for
that purpose. ' ] 95 Not surprisingly, Eagle Attack was a fiasco - it was aborted


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The Reich on the Marble Cliffs 259


on September 17, just 36 days after its beginning, and de facto terminated
on May 10, 1941, after a swap of desultory air raids between enemies.

Windsor had served his purpose in the hands of Chuchill perfectly: he
had provoked Hitler into triggering those 'air massacres' that Churchill had
been invoking like manna from heaven since 1934, and that since the fall
of 1939 he held up to the Americans as the chief lure to drag them into
the war. For almost two years Chuchill tried to blackmail the United States,
threatening that Britain might have had to surrender her fleet to Hitler if
the latter had bombed her into submission. 'Every hour will be spent by
the British,' US Ambassador Kennedy predicted, 'in trying to figure out
how we can be gotten in.' 1 96

The truth was also that the war was costing Britain $1.5 billion per
month - this was World War I all over again: America had to be stirred to
join, once more, Britain's Eurasian intrigues. But Roosevelt and the clubs
behind him needed no persuasion - they had rearmed on a colossal scale
since 1938; whatever the New Deal could not do was solved by rearmament:
after playing the Russian roulette with Montagu Norman in 1929, America
reaped in the subsequent decade 10 million men without work. Eventually,
it picked them up, one at a time, and clothed them in khaki, so that by
1940 the reserve army of the jobless had become a drilled fighting corps
of 11 million GIs. The United States was dying to fight.

After the inglorious end of the German Reparations in 1932, the
Americans had sworn they would sell no weapons to belligerents, and
whatever they sold, they would sell for cash. In 1939, however, they revised
the legislation and resumed the sale of arms to warring nations; and by
the end of 1940, pressured by the British, who were nearly insolvent, they
agreed to do so on credit. 'Suppose my neighbor's house catches fire,'
Roosevelt tauntingly addressed the American public on December 17, 1940,
'I don't say to him. .."my hose cost me $15. ..I don't want $15-1 want my
garden hose back after the fire is over".' 197 This piece of fireside wisdom
was turned into law on January 6 1941, as the Lend-Lease Agreement and
ratified two months later by Congress - Churchill, immensely pleased,
would categorize it as 'the most unsordid act in the history of our nation.'
'We must be,' Roosevelt concurred, 'the great arsenal of democracy.' 198

Afterwards, the US Administration did not even bother to deviate from
the routine of 1916: it insisted, in fact, on establishing American naval
escort of supply ships to Britain with a view to setting off a 'shooting war'
with the Nazi U-boats. 199 This, however, would not be necessary, for Hitler
would declare war on the United States four days after Pearl Harbor, on
December 11, 1941.


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260 Conjuring Hitler


Meantime, between January and April 1941, the fake Peace Party in
England continued to signal to the Nazis. 200

The preparation for Barbarossa was completed by December 18, 1940;
the tentative date for the invasion was set for mid May 1941.

In April 1941, the British informed Stalin of the coming German storm.
'Let them come,' replied the Red Czar, 'we will be ready for them!' 201

Yet between March and June 1941, the German maneuver in the
Mediterranean basin was so successful that the British Foreign Office was
seriously preoccupied by the eventuality of a wholesale collapse of its
Middle Eastern defensive apparatus. In May 1941, victorious with Rommel
in Cyrenaica,* and in Crete, the Germans landed aircraft in Iraq: a further
deployment by Germany of airborne troops across Syria, Iraq, and Iran
would have cut off Britain from her oil supply, and thereby afforded the
Reich, by way of India, a much feared connection to the Japanese armies
battling in the theaters of Asia.

But on May 10, 1941, Rudolf Hess disappeared.

Where he vanished, and how, and what happened to him afterwards, is
not known. The story that fearing a war on two fronts and furiously jealous
of the blooming intimacy between his deputy Bormann, and Hitler, the
lunatic Hess on a whim flew a ponderous jet over Scotland to rendezvous
a cabal of appeasers, strayed off course, ejected himself perilously from the
cockpit, landed on a field nearby, twisted his ankle, and presented himself as
Captain Alfred Horn to a bewildered Scottish plowman, is a cheap myth. A
fabrication which neither the Nazis nor the British, or their loyal archivists,
ever endeavored to dispel.

In fact, there appear to be two Hesses, 202 two planes leaving from
different locations, 203 two uniforms, 204 an alleged impostor in the prison
of Spandau, 205 and an amnesiac, stuporous defendant at Nuremberg, z0&
who was alternatively classified by the Allied staff psychiatrists as a 'dull-
witted, autistic psychopath,' a 'sham,' an 'enigma, 'or 'a schizoid.' 207 A man
who refused to see his wife for 28 years, and who died mysteriously - most
probably strangled by 'specialists' 208 - the day before his release in 1987.

Whatever the truth of the case, the facts speak clearly. After Hess vaporized:

1 . The German deployment in the Far East ceased - Rommel was forsaken
at the gates of Egypt; the directive to march to the southeast and the
expeditions against Malta and Cyprus were rescinded, definitively. All
available German forces were hastily conveyed towards Russia.

Eastern Libya.


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The Reich on the Maible Cliffs 261


Had Rommel succeeded in North Africa... had he reached Suez and
penetrated the Near East to make juncture with Japanese forces... The
global strategy of the Nazi General Staff would have been immensely
advanced towards its goal of global victory... The failure of the Nazi
campaign in North Africa must take its place among the great 'ifs'
of history. 209

2. The night of Hess's disappearance coincided with the final aerial raid
conducted by the Luftwaffe against Britain.

On June 22, 1941, a little over a month after the event, at 3:30 am, while
German planes bombed Byelorussia, Hitler's 'herdsmen' invaded the Russian
forest - they made up a highly mechanized legion of 3 million Germans,
Croats, Finns, Romanians, Hungarians, and Italians - with the SS sting in
the tail. Awaiting them was an equally large pack of 'red dogs', which in
the heat of the clash would grow to be four times as numerous.

The Nazis surrendered Hess as some form of collateral, and the British
'appeasers' appeared to keep their end of the bargain. Churchill and his military
staff would prevent the Americans from opening a western front for a period of
three years of unspeakable carnage; they granted the Nazis their yearned 'free
hand' in the East. 210 They gave the Germans some time to sink in the Russian
quagmire, before coming with the Americans to finish them off and conquer
at last the prized booty of the German Fatherland. 211

Already on July 26, 1941, Stalin requested an immediate Allied intervention
in Western Europe. Churchill refused. 21 2 In April of 1942, General Marshall
of the US Army was in London to discuss the plan of a cross-Channel
invasion; Churchill was 'reluctant.' In January 1943, at Casablanca, the
American generals again pressed the British to act. Not even in November
1943, when the 'big three'* met in Teheran, would Churchill allow discussion
of the western closure before mooting territorial tradeoffs. 213

Sir Alan Brooks, the Chief of the Imperial Staff, opposed all plans for
such an assault, while others, like Churchill, wanted to postpone such an
attack indefinitely. . .The Americans. . .advocated a [cross-Channel attack]
on the largest possible scale at the earliest possible time. 214

Instead, from the Allies the Russians would get $10 billion worth of guns,
and afterwards, as Baldwin had explained to Churchill, who needed no

Roosevelt, Churchill, and Stalin.


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262 Conjuring Hitler


explication, one was to let the 'Bolshies' slowly blow the Nazis to pieces. The
deception was sustained unabatedly for the whole duration of Barbarossa:
in January 1942 Hitler might still be heard wishing that Hoare would take
power, 215 or hoping in the autumn of 1943 that Windsor would overthrow
his brother 21 & The Fiihrer would remain a victim of the most astounding
illusions till the end.

Not until May 1944 would the British agree to open the Western Front
with the cross-Channel operation (Overlord), which had been timidly
prefaced by the Mafia-assisted debarkation of the Americans in Sicily -
Operation Husky of July 1943. By then the Nazis' invading corps had been
so ravaged that 'it became obvious that the Soviet Union was capable of
destroying Nazi Germany on her own.' 217

Then and then only did Britain deem that the time had finally come to
dispatch this Nazi creature, by now mortally wounded, that she had nurtured
for over a quarter of a century for the sake of her Eurasian ambition.


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6 Conclusion


Yet it is necessary... to feign, greatly, and to dissemble, for men are so
simple, and so prone to obey the exigencies of the moment, that he who
deceives will always find someone ready to be deceived.

Machiavelli, The Prince (XVIII, 3)

'E sono tanto semplici gli uomini../

The elimination of the German menace of 1900 cost Britain dearly: her
empire, her military and economic strength. Yet the English-speaking idea,
the imperial creed, and the cultivation of the oligarchic bent were all traits
that she bequeathed upon her natural, insular heir: they live on in the
American establishment. Britain's was a conscious decision; she knew the
risks involved.

The present geopolitical policy of the United States is a direct and wholly
consistent continuation of the old imperial strategy of Britain. It is that
unmistakable cocktail of aggression, subversion and mass murder waged at
the vital nodes of the landmass, from Palestine and Central Asia to the gates
of China, in Taiwan and Korea, that seeks to undermine any movement
towards a confederation of nations capable of turning the continental base
into a Eurasian league of socio-political cooperation and defense (against
Anglo-American assault).

It took two world conflicts to destroy the German threat. World War I
was a conventional siege in which the British empire sacrificed roughly
1 million men - the first bloodletting that shook the establishment to its
foundations. In the second round, which was necessary given that World
War I had in fact left the Fatherland unscathed, no such effusion would
have been tolerable - Britain would sacrifice 400,000 soldiers in World War
II. So deception was employed on a major scale to trip the Nazis into the
inescapable war on two fronts.

That such was the intention at Versailles may not be doubted - the
astonishing prophecy of Veblen is there to attest it. Though this is not to
say that schemers of the Round Table expected the engineers of the Final
Solution. As has been argued throughout this book, they rather conjured
a reactionary movement that could then be attracted into the Russian
swamp. Which was sinister enough.



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264 Conjuring Hitler

The position of Bolshevik Russia is assuredly one of the greatest enigmas
of the affair. Even its origin is most mysterious. But one thing is certain:
never, either during the interwar period or even in the course of the Cold
War, did the Soviet Union play directly against the West - that is why
Egyptian President Anwar Sadat thought it 'an imaginary foe.' Rather, it
appeared to mimic the slow motions of an enormous circus bear, whose
tamer was elsewhere - a buttress in the Orient that slumped studiously,
shifting its weight around to keep the Eurasian union in check. Otherwise
the Trebitsch affair, the German-Bolshevik 'secret' entente, the terrorist
agitprop of the KPD, the sabotage of the common front with the German
Socialists for the ultimate benefit of Hitler, the extraordinary massacre of
the leadership of the Red Army, and Stalin's appeasement, are inexplicable:
Stalin played always in line with the geopolitical designs of Britain. Besides,
the Bolsheviks owed virtually everything to the West: the deposition of the
Czar, the timing of Rasputin's death, the political void after Kerensky, the
slush funds - German and otherwise - the double-crossing of the Whites,
capital equipment, giant investments, military know-how...

When the hyperinflation climaxed in 1923 the natural candidate for
leading the Radikalisierung at home came in full view. Of all the rabble-
rousers of Germany, Hitler was not only the most charismatic but also the
most fervently pro-British: for Britain he was almost too good to be true. That
Professor Karl Haushofer was the inspiration for Hitler's British fancy is by
no means unwarranted. And Haushofer was himself a mysterious character,
of whom we should know infinitely more.* What is certain, however, is
the idiocy behind the claim that Hitler assembled the Nazi philosophy and
geopolitical plans in the raving solitude of his disarrayed bedroom.

The Wall Street Crash triggered by Norman was the signal that Germany
had in fact completed her first informal Five-Year- Plan; thereafter it became
a foregone matter that Hitler would become Chancellor. Yet Germany
was more resilient than what the British stewards could have imagined:
throughout Weimar she would never give the Nazis more than 1 out of 3
votes, and that only under the most catastrophic of social circumstances.
But by 1933, with further 'tightening from outside,' the circle was closed.

The weave of Britain's interaction with the Nazis consisted in fact of
one of history's most astounding exploits of choral dissimulation, which
unraveled for more than a decade (1931-43). The problem, however, was

Like Prisoner No. 7 of the Spandau fortress - the man said to be Rudolf Hess - m
1987, Haushofer, too, seemed to have been assassinated, along with his wife, by the
British Secret Services on the ides of March of 1946 (for instance, this presumption
has reappeared in Martin Allen's The Hitler/Hess Dectption, p. xviii).


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Conclusion 26S


that this was no swanky gimmick but a deliberate tampering with forces
that were 'other' - and Veblen, again, intuited this eerie drift as early as
1915. Britain courted fire and in the end wished for a holocaust - which
came. That of the war, and that of the Jews.

The 'Bolshies' took the shock of the German offensive and paid with
20 million dead, half of them civilians. This was probably a price that
Tukhachevsky was not willing to see his people pay. Nor should it ever be
forgotten that 3.5 million German civilians had perished by the end of
this game.

If it is true that the British stewards intrigued at Versailles to conjure a
reactionary movement that would feed on radicalism and be prone to seek
war in the East; if it is true that the Anglo-Americans traded heavily with
and offered financial support to the Nazis, continuously and deliberately
from the Dawes loans of 1924 to the conspicuous credits via the Bank
of International Settlements in Basle of late 1944; 1 if it is true that the
encounter in Cologne of January 4, 1933, in von Schroder's manse was the
decisive factor behind Hitler's appointment as Chancellor; if it is true that
such financial support was accorded to make Nazism an enemy target so
strong as to elicit in war a devastating response - retribution that would
make the Allied victory clear-cut and definitive; if it is true that appeasement
was a travesty since 1931; if it is true that Churchill refused deceitfully to
open a western front for three years, during which the expectation was that
the Germans would find themselves so hopelessly mired in the Russian
bog as to make the British closing onslaught from the West as painless as
possible; and if it is true that Hess brought with him to Britain plans for
evacuating the Jews to the island of Madagascar, for such was the last policy
pursued by the German government before adopting the Final Solution - z
a plan which clearly was given no sequitur; if all the foregoing is true, then
it is just to lay direct responsibility for incubating Nazism and planning
World War II, and indirect responsibility for the Holocaust of the Jews, at
the door of the Anglo-American establishment.

Clearly, the last 60 years have been devoted by the restless and most
faithful archivists of the empire, seconded by a legion of no less devout
academics, publicists and film-makers, to deny each of the above statements
in the most categorical fashion.

To begin, Veblen 's review is literally ignored: on Versailles Keynes is still
the adopted 'classic'

'It is of course an exaggeration,' we read in textbooks, 'to claim that
the Dawes loans set in motion foreign lending by the United States...'; 3
rather, these loans are depicted as a yet another wave of little nest eggs


10/3/05 12:01:16 pm


266 Conjuring Hitler

from America in search of a good yield, and some 'corporate greed' on the
side - but nothing more.

The Crash and the crisis? Those, intimated an acclaimed Nobel Prize
winner, were but the product of the 'somewhat fortuitous combination of
structural factors and monetary policy errors.'^

On the other hand, we are also told that the collapse of the gold-
exchange standard and the surreal devaluation of the pound were due
to 'an inescapable error.. .of the British who knew [not] the size of the
problem they labored under': 5 that is to say that the British Governor was
too 'intermittently ill' to be able to look after his messy construction, and
'even when well, [he was] distracted by other pressing matters...' 6 Yet one
wonders what those 'other pressing matters' could be...

Thus of Montagu Norman - admittedly the greatest central banker of the
modern era, who spent a quarter of a century leading the most powerful
financial outfit of his age - we should be satisfied with a caricature featuring
him as psychopathic Scrooge of the old school, with only a shaky grasp of
modern financial dynamics.

Von Schroder? Schroder counts for nothing, we hear: 'he was merely a
partner in a medium-sized provincial bank...' 7

As to that revolting show known as British 'appeasement' (of Hitler),
they tell us it was the misguided policy of an 'imbecile Foreign Office' 8 that
sought to combine 'morality and expediency' in reaching an agreement
with what, alas, proved to be an intractable interlocutor. 9 And the latter-
day trumps of the Peace Party who deliberately prolonged the war to gain
time? Their cynicism is excused on the grounds that the empire was fighting
for its own survival, 10 when in fact it was sacrificing millions to extricate
itself from the bloody mess it had forged since 1919.

And the Wehrmacht: was it indeed a strong, luxury item, fitted to
its teeth with materials of the highest quality? Of course not, retorted
the 'American' Schacht: 'Foreign investigations - some conducted with
extreme accuracy- on Germany's financing of warlike expenditure have
shown unanimously how thoroughly inadequate our rearmament, and
thereby how insubstantial the attending financial outlay has been.' 11 This
is from the self-apologetic post-war production of the individual who,
for his sixtieth birthday in 1937, had been hailed by the hebdomadary
publication of the German army, the Militar-Wochenblatt, as 'the man who
made the reconstruction of the Wehrmacht possible.' 12 And the damage
the Wehrmacht could inflict did not escape the record, irrespective of the
falsehoods that Schacht hawked, lying and recanting ignominiously at
Nuremberg to save his skin and the name of his protectors. He hid behind


Pi-epai-ata 03 chap06 2bb


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Conclusion 267


the following lies: (1) The Nazis came to power by means of self-financing,
(2) the army was of a shoddy make, (3) the Hitlerites violated the economy
and (4) the Nazi economic experiment was a failure as a whole.

The professional literature on the topic has latched onto the Schachtian
fabrications with fervor: of the German army it is still said that it was
'a chaos of competing organizations,' worsened by 'Hitler's paranoid
style.' 13 Nazi work creation, instead, is described as a 'fragmented' and
'decentralized' endeavor, which owed nothing to Nazi leadership other
than 'coercion.' 14 Even the obvious commentary to the steep, sudden boost
that Germany experienced after January 1933 in employment, production,
and welfare - namely, that such an exceptional recovery after so much
misery was a willed feat propitiated by the financial elites of Germany
and Anglo-America in collusion with the Hitlerites - has been drowned
in a preposterous and interminable debate as to whether, in fact, the Nazi
boom was more the bitter fruit of luck than of deliberate intervention and
efficient economics. 15

It naturally behooves the establishment to circulate the old superstition
that there had been a 'fortuitous turnaround in the second semester of
1932, ' ] 6 a 'natural economic upswing,' whose wind, so the fantasy goes,
Hitler luckily caught in his own sails. This noxious fable disposes in one
blow of all the thorny issues that bristle in the biennium of 1932-33:
namely, the foreign financing of the Nazis, their rigged election to the
Chancellery, and the decisional forces behind the full-blown resumption
of economic activity under the Third Reich.

Moreover, Nazi economics, fueled by its potent blend of free enterprise,
communitarian appeal, industrial brilliance, deep ecology, redistributive
policies, anti-plutocratic invective, hi-tech virtuosity, tight regulation,
monetary swiftness, and efficient planning, is clearly a phenomenon
that comforts no one: neither the Liberal apologists of business nor the
doctrinaires of the Left, and not even the anarcho-reformers of regionalism -
it is a deep embarrassment for it features too many traits that are dear to them
all and is thus better left unmentioned, or at the very least, distorted.

All the more so as the Allies had sunk massive investments in the Third
Reich. And this was not done for the cynical sake of profits, but in view of
the future reconstruction of Germany under the American aegis - the clubs
were already gazing two steps ahead. That Hitler, in time, would lose the
war, was understood - and this despite the reprieve the Nazis were afforded
by such economic 'help.' Eventually, in 1949, when Germany was torn
along the East-West divide, the new Federal Republic was not asked to
pay any reparations in cash: it surrendered in kind a mere 4 percent of its


Pi-epa-ata 03 chapOfc 267


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268 Conjuring Hitler


industrial capacity. The securities of the German absentees were temporarily
sequestered by the occupying Command; the giant industrial combines
of the past were broken into smaller concerns and reintegrated into the
Common Market of Europe, which was, by way of the new clearings, the
IMF, and Marshall Aid, solidly anchored to the outlets of the American
empire. Now Washington had Germany and the Meditarranean, along
with the Pope, whose absolution it bought by refurbishing the bank of the
Vatican with millions of dollars earmarked for pro-American action. 17

And the Shoah? The Anglo-American elites vetoed the Schacht Plan
of late 1938. In May 1939, the United States - the future home of much
Holocaust museology - would not even offer sanctuary to 1,000 wealthy
Jews whom Hitler had allowed to ship out of Hamburg. 18 Nothing came
out of the Madagascar Plan, and when the SS penetrated the Russian forests,
Churchill allowed them in fact, for his own ends, three long, uninterrupted
years to set out on their 'task,' presumably knowing the intentions of the
black squads even before they began. 19

The sheer amount of lies perpetrated by the Anglo-American establishment
against its public in order to preserve the myth that World War II was a
'good' war, won for a just cause, is incalculable. The proof lies in the myriad
of classified files documenting the vital phases of this intrigue, which to
this day remain unavailable to the public eye - for reasons of 'national
security,' they say.

In sum, the Allied elites have told a story. The story that the Germans
have always been disturbers of the peace; they disturbed it once and were
punished for it, although a little too harshly. Out of such blundering
castigation, an evil force materialized out of nowhere - a force whose evil
greatly exceeded the petty severity of the Allies that caused such evil to
emerge despite themselves. And, the story goes, the evil of this force grew
to be such that a violent global conflict became necessary to uproot it.

More than a cock-and-bull story, this is an insult. And what is worse, every
day more and more people, for the sake of psychological tranquillity, choose
to believe it. Because individuals, as the loathsome Machiavelli put it in his
'classic' vademecum for subhuman conduct, are 'simple' and willing to trust
the word of the constituted authorities. Constituted authorities, which we
think embody our will, when in truth they are nothing but high battlements
hiding oligarchy and lies, both of which must come to an end.


Pi-epai-ata 03 chap06 2bS


10/3/05 12:01:16 pm




Chapter 1

1. Robert Deacon, John Dee. Scientist, Astrologer & Secret Agent to Elizabeth / (London:
Frederick Muller, 1968), pp. 92, 94.

2. Thorstem Veblen, Imperial Germany and the Industrial Revolution (London: Macmillan
&Co., 1915), pp. 50-84.

3. David Fromkm, A Peace to End All Peace. The Fall of the Ottoman Empire and the
Creation of the Modem Middle East (New York: Avon Books, 1989), p. 27.

4. Paul M. Kennedy, The Rise of Anglo-German Antagonism, 1860-1914 (London:
Ashfield Press, 1980), pp. 41-58.

5. Michael Balfour, The Kaiser and His Times (New York: W. W. Norton & Co., 1 972),
pp. 54-5.

6. Paolo Giordani, L'impero coloniale tedesco (Milano: Fratelli Treves, 1915), pp. 30,

7. Balfour, The Kaiser.

8. Kennedy, Anglo-German Antagonism, p. 110.

9. Bemhard von Bulow, La Germania /mpen'(j/e(Prodenone: Edizioni Studio Tesi, 1994
[1914]), p. 87.

10. Veblen, Imperial Germany, pp. 231-2.

11. Michael StUrraer, L'impero inquieto, 1866-1918 (Das ruhelose Reich, Bologna: II
Mulmo, 1993 [1983]), p. 326.

1 2. Kennedy, Anglo-German Antagonism, p. 362.

13. S. L. A. Marshall, World War /(Boston: Houghton Mifflin Company, 1992), p. 1 14.

1 4. Andreas Dorpalen, The World of General Haushofer. Gecpolitics in Action (New York:
Farrar& Rmehart Inc., 1942), p. 52.

15. Ibid., pp. 194, 196, 198, 200; emphasis added.

16. Carlo Jean, Gecpolitica (Bari: Laterza, 1995), pp. 29-31.

1 7. F. von Bernhardi, Germany and the Next War (New York: Longmans, Green & Co.,
1914 [1911]), pp. 18, 25, 52, 90ff.

18. Niall Ferguson, The Pity of War (New York: Basic Books, 1999), pp. 169-73.

19. Robert L. Owen, The Russian Imperial Conspiracy [1892-1914] (New York: Albert
and Charles Boni, 1927), p. vii.

20. Ibid., pp. 3, 25-6.

21. See for instance, Donald Kagan, On the Origins of War, and the Preservation of Peace
(New York: Doubleday, 1995), pp. 206-12.

22. Evgheni Tarle, Breve storia d'Eurcpa (Bologna: Editon Riuniti, 1959 [1928]), p. 354.

23. Stunner, Impero inquieto, p. 440.

24. T. H. Meyer (ed.), Light for the New Millennium. Rudolf Steiner's Association with
Helmuth von Moltke. Letters, Documents and After-Death Communications (London:
Rudolf Sterner Press, 1997), p. 3.

25. Carroll Quigley, Tragedy and Hcpe. A History of the World in Our Time (New York:
Macmillan Company, 1966), p. 100.

26. Dmitri Volkogonov, Trotsky, the Eternal Revolutionary (New York: The Free Press
1996), p. 42.

27. Tarle, Breve storia, p. 143.

28. A. S. Erusalimskij, Da Bismarck a Hitler. L'imperialismo tedesco net XX secolo (Roma:
Editon Riuniti, 1974), p. 185.



P^p^ata 03 chapOfc 2b9


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270 Conjuring Hitler

29. Greg King, The Man Who Killed Rasputin. Prince Felix Youssobpov and Murder That
Helped Bring Down the Russian Empire (New York: Citadel Press, 1995), p. 27.

30. Fromkm, Peace, -p. 31.

31. Erusalimskij, Bismarck, p. 198.

32. Balfour, Jhe Kaiser, p. 328.

33. Ibid, p. 203.

34. Quigley, Tragedy, pp. 226, 228.

35. Leon Degrelle, Hitler: Born at Versailles (Costa Mesa: Institute for Historical Review,
1987), p. 111.

36. Erusalimskij, Bismarck, p. 255.

37. Quigley, Tragedy, p. 221.

38. Owen, Russian Imperial Conspiracy, p. 15.

39. Leon De Poncms, The Secret Powers Behind Revolution (San Pedro, CA: GSG Publishers,
1996 [1929]), p. 78.

40. Degrelle, Hitler, pp. 14-15.

41. Such was one of the several attributes wherewith Timothy McVeigh (the man
convicted of bombing the FBI building in Oklahoma City, April 19, 1995), a
modem-day Prmcip m his own right, was labeled m the public discussion of his
case (Gore Vidal, Feipetual War for Pel petual Peace: How We Got to Be SoHatedNew
York: Thunder's Mouth Press, 2002, p. 121).

42. Erusalimskij, Bismarck, p. 234.

43. Ibid., p. 235.

44. The philosopher Bertrand Russell wrote: T had noticed during the previous years
how carefully Sir Edward Grey lied m order to prevent the public from knowing
the methods by which he was committing us to the support of France in the event
of war' (Fromkm, Peace, -p. 125).

45. Tarle, Breve storia, p. 279.

46. Quigley, Tragedy, pp. 316-1 7.

47. Owen, Russian Imperial Conspiracy, p. 14.

48. Erusalimskij, Bismarck, p. 269.

49. Balfour, The Kaiser, p. 35 1 .

50. Quoted m Gemmello Alvi, Dell'estremo occidente. 11 secolo americano inEurcpa. Storie
economiche (Firenze: Marco Nardi Editore, 1993), p. 75.

5 1 . Degrelle, Hitler, p. 86.

52. Fromkm, Peace, p. 125.

53. Erusalimskij, Bismarck, pp. 255-56.

54. Adolf Hitler, Mein Kampf (Boston: Houghton Mifflin Company, 1971 [1924-26]),
pp. 163-4.

55. Meyer, Millennium, p. 89.

56. Quigley, Tragedy, p. 230.

5 7. Dennis Wheatley, Red Eagle. The Story of the Russian Revolution (London: Book Club,
1938), p. 103.

58. B. H. Liddell Hart, The Real War, 1914-1918 (Boston: Little, Brown, & Company,
1930), p. 113.

59. Richard Pipes, A Concise History of the Russian Revolution (New York: Vintage Books,
1995), p. 77.

60. John Maynard, Russia in Flux (New York: Macmillan Company, 1948), p. 1 73.

61. King, Rasputin, pp. 148-62.

62. R. H. Bruce Lockart, British Agent (London: G. P. Putnam & Sons, 1933), p. 161.

63. For a GNP of 20 billion rubles m 1913 (Paul Gregory, Russian National Income
(1 885-1913) (Cambridge: Cambridge University Press, 1982), p. 56), at 1 7.3 rubles
to the pound in 1917 (Angiolo Forzoni, Rublo. Storia civile e monetaria della Russia
da Ivan a Stalin (Roma: Valeno Levi Editore, 1991), p. 226). Britain by then owed
the United States £497 million (Alvi, Occidente, p. 75).


P^p^ata 03 chapOfc 270


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Notes 271


64. Alvi, Occidente, p. 75.

65. Pietro Zvetereraich, 11 grande Parvus (Milano: Garzanti, 1988), p. 195.

66. Alvi, Occidente, pp. 77ff.

67. Degrelle, Hitler, p. 271.

6S. Henri Vibert, Fronte a I'Inghilterra (Firenze: Beltrami Editore, 1936), p. 111.

69. Z. A. B. Zernan and W. B. Scharlan, TheMerchant of Revolution. TheLife of Alexander
Israel Heiphand (Parvus), 1867-1924 (London: Oxford University Press, 1965),
p. 151.

70. Ibid., p. 152.

71. Ibid., pp. 182, 199.

72. Pipes, Concise History,?. 122.

73. Alvi, Occidente, p. 79.

74. Leon Trotsky, Ihe Russian Revolution. The Overthrow ofTzarism & the Triumph of the
Soviets (New York Doubleday Anchor Books, 1959(1930]), pp. 131-47.

75. Ibid., p. 84.

76. Zvetereraich, Parvus, p. 249.

77. Anthony C. Sutton, Wall Street and the Bolshevik Revolution (New Rochelle, NY:
Arlington House Publishers, 1981), pp. 25-8.

78. N. Gordon-Levm Jr., Woodrow Wilson and World Politics. America's Response to War
and Revolution (Oxford: Oxford University Press, 1968), p. 60.

79. Alfred Doblm, Karl &Rosa (New York: Fromm International Publishing Corporation,
1983 [1950]), p. 50.

80. Sutton, Bolshevik Revolution, pp. 72, 82.

81. Maynard, Russia, p. 190.

82. Pipes, Concise History, p. 120.

83. Maynard, Russia, p. 195.

84. Quigley, Tragedy, p. 250.

85. "TheLusitania was a British merchant vessel... carrying a cargo of 2,400 cases of rifle
cartridges and 1,250 cases of shrapnel, and with orders to attack German submarines
whenever possible. Seven hundred and eighty-five of 1,257 passengers, including
128 of 197 Americans, lost their lives. The incompetence of the acting captain
contributed to the heavy loss, as did also a mysterious "second explosion" after the
German torpedo struck. The vessel, which had been declared "unsinkable", went
down in eighteen minutes. The captain was on a course he had orders to avoid;
he was running at reduced speed; he had an inexperienced crew; the portholes
had been left open; the lifeboats had not been swung out, and no lifeboat drills
had been held...' (Quigley, Tragedy, pp. 250-1).

86. Degrelle, Hitler, p. 267.

87. Tarle, Breve storia, p. 362.

88. Lid dell Hart, Real War, p. 386.

89. Quigley, Tragedy, pp. 249-50.

90. Edward House, The Intimate Papers of Colonel House, Arranged as a Narrative by
Charles Seymour (Boston: Houghton Mifflin Company, 1926), p. 60.

91. Thorstein Veblen, 'Dementia Pracox,' in Thorstem Veblen, Essays in Our Changing
Order (New York: Augustus M. Kelley, 1964 [1922]), p. 424.

92. Thorstein Veblen, An Inquiry into the Nature of Peace and the Terms of Its Perpetuation
(New Brunswick: Transaction Books, 1998 [1917]), p. 38.

93. Veblen, 'Dementia,' p. 434.

94. Degrelle, Hitler, p. 244.

95. Carroll Quigley, The Anglo-American Establishment. From Rhodes to Cliveden (San
Pedro, CA: GSGS & Associates Publishers, 1981), pp. 10, 130, 131.

96. Fromkm, Peace, p. 271.

97. Ibid., pp. 281-2. Five years later, Winston Churchill, taking office as Colonial
Secretary, would reiterate that 'A Jewish State under the protection of the British


Pi-epai-aia03chap06 271


10/3/05 12:01:17 pm


272 Conjuring Hitler


Crown... would be especially in harmony with the truest interest of the British
Empire' (ibid., p. 519).

98. Fromkm, Peace, p. 21 7.

99. Ibid., pp. 217, 312.
100. Quigley, Tragedy, p. 236.

Chapter 2

1. Christopher Marlowe, The Tragedy of Doctor Faustus (New York: Washington Square
Press, 1959 [1588]), pp. 26-7.

2. Volker Berghahn, Imperial Germany, 187 1-191 4 (Providence, RI: Berghahn Press,
1994), p. 336.

3. Sebastian Haffner, TheFailure ofa Revolution. Germany, /9/8-/9/9(Chicago: Banner
Press, 1986 [1969]), p. 16.

4. D. Authier and J. Barriot, La sinistra comunista in Germania (Milano: La Salamandra,
1981 [1976]), p. 40.

5. Thorstein Veblen, The Theory of the Leisure Class (New York: Penguin Books, 1979
[1899]), p. 198.

6. Ibid, p. 204.

7. Thorstein Veblen, The Vested Interests and the Common Man (The Modern Point of
View and the New Order) (New York: B. W. Huebsch, Inc., 1919), p. 165.

8. Thorstein Veblen, 'The Economics of Karl Mar* II,' in Thorstein Veblen, The
Place of Science in Modern Civilization (New York: Capricorn Books, 1969 [1907]),
pp. 453-4.

9. Haffner, Failure, p. 16.

10. Ibid., p. 28.

11. Ibid., p. 57.

1 2. Bemhard von BUlow, 'Revolution in Berlin,' in A. Kaes, M. Jay and E. Dimendberg
(eds), The Weimar Rt public Sourcebook (Berkeley: University of California Press,
1994), pp. 56-7.

13. Morgan Philips Price, Dispatches from the Weimar Republic. Versailles and German
Fascism (London: Pluto Press, 1999 [1919-29]), p. 23.

14. Ernst Toller, I was a German. The Autobicgraphy of Ernst Toller (New York: William
Morrow and Company, 1934), pp. 141-2.

1 5. Klaus Epstein, Matthias Erzberger and the Dilemma of German Democracy (Princeton:
Princeton University Press, 1959), pp. 274-82.

16. Adolf Hitler, Mein Kampf (Boston: Houghton Mifflin Company, 1971 [1925]),
pp. 204-6.

1 7. George F. Kennan, Russia and the West under Lenin and Stalin (Boston: Little, Brown
&Co., 1960), p. 155.

18. Tacitus, Agricola, Germania, Dialcgus (Cambridge, MA: Harvard University Press,
Loeb Classical Library, 1992 [98 AD]), p. 152.

19. Kennan, Russia, p. 158.

20. Ernst Junger, 'Fire' (1922), in Kaes et al., Weimar Sourcebook, p. 19.

21. Ernst Von Salomon, I proscritti (Die Geachteten) (Parma: Edizioni all'msegna del
veltro, 1979 [1930]), p. 49.

22. Ibid., pp. 36-40, 86.

23. Haffner, Failure, p. 161.

24. Freya Eisner, Kurt Eisner: die Politik des libertaren Sozialismus (Frankfurt am Mam:
Suhrkamp Verlag, 1979), p. 1 10.

25. I. Benoist-Mechm, Histoirede I'armee allemande(Y&i\s: Editions Albm Michel, 1966),
Vol. 1, p. 270.


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10/3/05 12:01:17 pm


Notes 273


26. Rudolf Von Sebottendorff, Prima che Hitler venisse. Storia della Societa Thule (Bevor
Hitler kam) (Torino: Ediziom Delta-Arktos, 19S7 [1933]), pp. 73-143.

27. Eugene Lunn, Prcphet of Community. The Romantic Socialism of Gustav Landauer
(Berkeley: University of California Press, 1973), p. 331. Gustav Landauer introduced
his reforms as Commissioner for Enlightenment and Public Instruction. Silvio
Gesell, a former businessman turned anarchist guru and monetary reformer, was
appointed to Munich's Soviet as Finance Minister to launch his radical proposal for
stamped scrip (paper certificates with a maturity date) (Silvio Gesell, Ihe Natural
Economic Order {San Antonio: Free-Economy Publishing Co., 1920), pp. 130ff.).

28. Kennan, Russia, p. 160.

29. Walt Whitman, Leaves of Grass (New York: Penguin Books, 1986 [1855]), p. 42.

30. Von Sebottendorff, Hitler, pp. 121ff.

31. Ian Kershaw, Hitler: 1889-1936: Hubris (New York: W. W. Norton & Co., 1998),
p. 120.

32. Douglas Reed, Nemesi? La storia di Otto Strasser (Roma: Edizioni delle catacombe,
1944), p. 55.

33. Kershaw, Hubris, p. 126.

34. Joachim Fest, Hitler (New York: Vintage Books, 1975 [1973]), p. 1 18.

35. Kershaw, Hubris, p. 140.

36. Benoist-Mechm, Armee allemande, Vol. 2, pp. 225-6.

37. Gustav Meyrmk, The Golem (Sawtry, Cambs: Dedalus, 1995 [1915]), p. 59.

38. Jean-Michel Angebert, The Occult and the Reich. The Mystical Origins of Nazism
and the Search for the Holy Grail (New York: Macmillan Publishing, 1974 [1971]),
p. 165.

39. Fest, Hitler, p. 116, and Rene Alleau, Hitler et les societes secretes. Enquete sur les
sources occultes du nazisme (Paris: Editions Bernard Grasset, 1969), p. 139.

40. Nicholas Goodrick-Clarke, The Occult Roots of Nazism. Secret Aryan Cults and Their
Influence on Nazi Ideology (New York: New York University Press, 1985), p. 151.

41 . Werner Gerson, Le Nazisme societe secrete (Pans: J'ai lu, 1969), pp. 1 76-7.

42. Ernst Junger, Das abenteurliche Herz. Figuren und Capriccios (Hamburg: Hanseatische
Verlaganstalt, 1938), pp. 75-6.

43. Kershaw, Hubris, p. 155.

44. Junger, Herz, p. 66.

45. Dietrich Eckart, 'Jewishness In and Around Us: Fundamental Reflections/ m
B. Miller Lane and L. Rupp (eds), Nazi Ideology Before 1933. A Documentation (Austin:
University of Texas Press, 1978 [1919]), pp. 23-5.

46. Von Sebottendorff, Hitler, p. 55.

47. Ibid., p. 208.

48. Goodrick-Clarke, Occult Roots, p. 152.

49. Ernst Junger, On the Marble Cliffs (Norfolk, CT: New Directions, 1947 [1939]),
p. 28.

50. N. Gordon-Levm Jr., Woodrow Wilson and World Politics. America's Response to War
and Revolution (Oxford: Oxford University Press, 1968), pp. 91-5.

51. Ibid., p. 219.

52. Angiolo Forzoni, Rublo. Storia civile e monetaria delle Russia da Ivan a Stalin (Roma:
Valerio Levi Editore, 1991), p. 342.

53. Richard Pipes, A Concise History of the Russian Revolution (New York: Vintage Books,
1995), p. 235.

54. Gordon-Levm, Woodrow Wilson, pp. 78-80.

55. Peter Fleming, The Fate of Admiral Kolchak (New York: Harcourt, Brace & World,
Inc., 1963), p. 49.

56. Ibid., p. 51.

57. George Stewart, The White Armies of Russia: A Chronicle of Counter-Revolution and
Allied Intervention (New York: Macmillan Company, 1933), pp. 83-91.


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274 Conjuring Hitler


58. Pipes, Concise History, p. 92.

59. Stewart, White Armies, pp. 137-8.

60. Kennan, Russia, p. 108.

61. Stewart, White Armies, pp. 135-6.

62. In Siberia, Britain, France and Italy fielded 1,400, 1,400, and 1,200 men respectively
(ibid., p. 226).

63. Jonathan Smele, Civil War in Siberia. The Anti-Bolshevik Government of Admiral
Kolchak, 1918-1920 (Cambridge: Cambridge University Press, 1996), pp. 72, 97-9,

64. Stewart, White Armies, p. 153.

65. Richard Luckett, Jhe White Generals. An Account of the White Movement in Russia
and the Russian Civil War (Mew York: Viking Press, 1971), p. 231.

66. Pipes, Concise History, -p. 235.

67. 'There must be no attempt to conquer Bolshevik Russia by force of arms... The
anti-Bolshevik armies must not be used to restore the old tsarist regime... [and]
reimpos[e] on the peasants the old feudal conditions [!] under which they held
their land...' (Lloyd George, quoted in ibid., p. 250).

68. Carroll Quigley, Tragedy and Hcpe. A History of the World in Our Time (New York:
Macmillan Company, 1966), p. 261.

69. The high tide of the White movement against the Soviets was reached m September

70. Stewart, White Armies, -p. 166.

71. Pipes, Concise History, -p. 252.

72. Leon Degrelle, Hitler: Born at Versailles (Costa Mesa; Institute for Historical Review,
1987), p. 430.

73. Stewart, White Armies, p. 173.

74. Luckett, White Generals, p. 257.

75. Stewart, White Armies, p. 162.

76. Gordon-Levin, Woodrow Wilson, p. 224.

77. Geminello Alvi, Dell'estremo occidente. 11 secolo americano in Eurcpa. Storie economiche
(Firenze: Marco Nardi Editore, 1993), p. 158.

78. Smele, Civil War, pp. 419-20.

79. Luckett, White Generals, p. 226.

80. Stewart, White Armies, p. 296.

81. Ibid., p. 286.

82. Ibid., p. 314.

83. Smele, Civil War, p. 201.

84. Niall Ferguson, The Pity of War (New York: Basic Books, 1999), p. 337.

85. Margaret Macmillan, Paris 1919. 5a Months that Changed the World (New York:
Random House, 2002), p. 222.

86. Stewart, White Armies, p. 243.

87. Forzom, Rublo, p. 342.

88. Fleming, Kolchak, p. 71.

89. As such did Anwar Sadat, Nasser's lieutenant, and later Egyptian President, refer
to the USSR, whenever the alleged hostility of Russia was factored into any form
of geopolitical analysis (John K. Cooley, Unholy Wars. Afghanistan, America, and
International Terrorism (London: Pluto Press, 2000), p. 33).

90. Gordon-Levin, Woodrow Wilson, p. 231.

91. Ibid., p. 230.

92. Pipes, Concise History, p. 250.

93. Ibid., p. 270.

94. Ibid., p. 250.

95. R. H. Bruce Lockart, British Agent (London: G. P. Putnam & Sons, 1933), p. 222.


P^pa™ 03 chapOfc 274


10/3/05 12:01:18 pm


Notes 275


96. Anthony Sutton, Wall Street and the Bolshevik Revolution (New Rochelle, NT:
Arlington House Publishers, 1981), p. 158.

97. Edward Jay Epstein, Dossier: The Secret Story ofArmand Hammer (New York: Random
House, 1996), pp. 45-85.

98. Giovanni Preziosi, Giudaismo, bolscevismo, plutocrazia e massoneria (Torino: Amoldo
Mondadori, 1941), p. 127.

99. Kennan, Russia, p. 113.

100. Ibid., pp. 117-18.

101. John Maynard Keynes, The Economic Consequences of the Peace (New York: Penguin
Books, 1995 [1920]), p. 153.

102. Ibid., p. 165.

103. Macmillan, Paris 1919, p. 181.

104. Ibid., p. 192.

105. Charles L. Mee Jr., The End of Order, Versailles 1919 (New York: E. P. Dutton, 1980),
pp. 209-210.

106. Quigley, Tragedy, p. 272.

107. Ibid.

108. Macmillan, Paris 19 19, -p. 466.

109. Ibid., p. 472.

110. Epstein, Erzberger, p. 323.

111. Quigley, Tragedy, p. 277.

112. Bernhard von Bulow, Le memorie del Principe di Bulow, Volume HI, 1901-1920
(Milano: Amoldo Mondadori, 1931), p. 322.

113. One million Germans were allotted to Poland, 3 million to Czechoslovakia, half
a million to Hungary and Yugoslavia, and 700,000 to Romania (Quigley, Tragedy,
p. 280).

114. Hans Mommsen, The Rise & Fall of the Weimar Democracy (Chapel Hill: University
of North Carolina Press, 1989), p. 110.

115. Mee, End of Order, p. 222.

116. Keynes, Economic Consequences, p. 1 46.

117. Erich Eyck, Storia della rtpubblica di Weimar, 1918-1933 (Geschichte der weimarer
Rtpublik) (Torino: Giulio Emaudi Editore, 1966 [1956]), p. 131.

118. Keynes, Economic Consequences, p. 200.

119. Mee, End of Order, p. 256.

120. Keynes, Economic Consequences, pp. 289-90, 294.

121. Ibid., pp. 296-7.

122. Alvi, Occidente, p. 141.

123. Keynes, Economic Consequences, pp. 269.

124. Graham Hutton, Is it Peace? (New York: Macmillan Company, 1937), pp. 73-4.

125. Hamilton Armstrong, Peace and Counteipeace. From Wilson to Hitler (New York:
Harper & Row Publishers, 1971), p. 98.

126. Thorstem Veblen, Imperial Germany and the Industrial Revolution (London: Macmillan
&Co., 1915), p. 69.

127. E. W. Jorgensen and H. I. Jorgensen, Thorstein Veblen. Victorian Firebrand (Armonk,
NY: M. E. Sharpe, 1999), p. 149.

128. Thorstein Veblen, The Nature of Peace and the Terms of its Perpetuation (New
Brunswick: Transaction Books, 1998 [191 7]) p. 277.

129. Veblen, Imperial Germany, pp. 54-5.

130. Ibid., p. 58, emphasis added.

131. Jorgensen and Jorgensen, Thorstein Veblen, p. 150.

132. Veblen, Nature of Peace, p. 142.

133. Ibid., p. 150.

134. Ibid., p. 270.

135. Ibid., p. 280


10/3/05 12:01:18 pm


276 Conjuring Hitler

136. Ibid, p. 295.

137. Thorstein Veblen, Ihe Engineers and the Price System (New York: Harcourt, Brace &
World, Inc., 1963 [1921]).

13S. Thorstein Veblen, 'Bolshevism is aMenace-to Whom?' (1919), in Thorstein Veblen,
Essays in Our Changing Order (New York: Augustus M. Kelley, 1964), p. 400.

139. Thorstein Veblen, 'The Economic Consequences of the Peace' (1920), m Veblen,
Essays, pp. 462-3; emphasis added.

140. Ibid., p. 466.

141. Ibid., p. 468; emphasis added.

142. Ibid., p. 469; emphasis added.

143. Ibid.

144. Ibid., p. 470.

145. Quigley, Tragedy, p. 312.

146. Veblen, 'Economic Consequences,' p. 470.

147. Gerald Feldman, Jhe Great Disorder. Politics, Economics and Society in the German
Inflation, 1914-1924 (Oxford: Oxford University Press, 1997), p. 148.

Chapter 3

1. Friedrich Holderlm, Hyperion, Empeddkles (Weimar: Erich Liechenstein Verlag, 1922
[1799]), p. 207.

2. Friedrich Holderlm, Hymns and Fragments (trans. Richard Siebuhr) (Princeton:
Princeton University Press, 1984 [1801-06]), pp. 61-3.

3. Carroll Quigley, Tragedy and Hcpe. A History of the World in Our Time (New York:
Macmillan Company, 1966), p. 418.

4. Peter Gay, Weimar Culture. The Insider as Outsider (New York: W. W. Norton &
Company, 2001), pp. 1-2.

5. I. Benoist-Mechm, Histoire de i'armee allemande, (Paris: Editions Albm Michel, 1 966)
Vol. 3, p. 105.

6. Harry Kessler, Rathenau (Bologna: II Mulino, 1995 [1928]), p. 314.

7. George Kennan, Russia and the West under Lenin and Stalin (Boston: Little, Brown
&Co., 1960), p. 203.

8. Quigley, Tragedy, p. 422.

9. Arthur Moeller van den Bruck, II Terzo Reich (Das dritte Reich) (Roma: Edizioni
Settimo Sigillo, 2000 [1923]), p. 152.

10. D. J. Goodspeed, Ludendorff. Soldier, Dictator, Revolutionary (London: Rupert Hart-
Davis, 1966), pp. 223-4.

1 1 . Paul von Hindenburg, 'The Stab in the Back,' in A. Kaes, M. Jay and E. Dimendberg
(eds), The Weimar Rt public Sourcebook (Berkeley: University of California Press,
1994), p. 15.

1 2. Klaus Epstein, Matthias Erzberger and the Dilemma of German Democracy (Princeton:
Princeton University Press, 1959), p. 54.

13. Ibid., p. 323.

1 4. F. W. Henmng, Das industrialisierte Deutschland 1914 bis 1972 (Paderbom: Ferdinand
Schonmgh, 1974), pp. 42-3.

1 5. Matthias Erzberger, Reden zu Neuordnung des deutschen Finanz-wesens (Berlin: Verlag
von Reimar Hobbing, 1919), pp. 4-6.

16. Ludwig Holtfrerich, L'inflazione tedesca 1914-1923 (Die deutsche Inflation) (Bari:
Laterza, 1989 [1980]), p. 280.

1 7. Epstein, Erzberger, pp. 336-43.

18. Costantino Bresciani-Turroni, The Economics of Inflation (New York: Augustus M.
Kelley Publishers, 1968 [1931]), p. 55.

19. Ibid., pp. 357-9.


P^p^ata 03 chapOfc 276


10/3/05 12:01:19 pm


Notes 277


20. Johannes Erger, Der Kapp-Liittwitz Putsch. Ein Beitrag zur deutschen Innenpolitik.
(DUsseldorf: Droste Verlag, 1967), p. 77.

21. Ibid., p. 78.

22. Epstein, Erzberger, p. 342.

23. Erich Eyck, Storia delta rtpubblica di Weimar, 1918-1933 (Geschichte der Weimarer
Rtpublik) (Torino: Giulo Einaudi Editore, 1966 [1956]), p. 152.

24. Epstein, Erzberger, p. 367.

25. Ernst Troeltsch, La democrazia improwisata, la Germania dal 1918 al 1922 (Napoli:
Guida Editori, 1977 [1924]), p. 111.

26. Arthur Rosenberg, Storia della rtpubblica tedesca {Deutsche Rtpublik) (Roma: Edizioni
Leonardo, 1945 [1934]), pp. 99-100.

2 7. Edward Hallett Carr, Jhe Bolshevik Revolution 1917-1 923, Vol. 3 (London: Macmillan
&Co. Ltd., 1953), p. 310.

28. Eyck, Weimar, p. 150.

29. Morgan Philips Price, Dispatches from the Weimar Rt public. Versailles and German
Fascism (London: Pluto Press, 1999 [1919-29]), p. 66.

30. Erger, Kapp-Luttwitz Putsch, p. 41.

31. Ibid., p. 42.

32. Erwin Kbnnemann, 'Kapp-Putsch gegen die weimarer Republik. Ein Spiel rait den
Roten und den weissen Russen,' in Der Tagesspiel (March 14, 2000), p. 2.

33. E. J. Feuchtwanger, From Weimar to Hitler. Germany, 1918-1933 (New York: St.
Martin's Press, 1995), p. 73.

34. Kbnnemann, 'Kapp-Putsch,' p. 2.

35. Bernard Wasserstem, Jhe Secret Lives ofTrebitsch-Lincoln (New York: Penguin Books,
1988), chapters 1-8.

36. Ibid.

37. Werner Gerson, Le Nazisme societe secrete (Pans: J'ai lu), p. 278.

38. Donald McCormick, The Mask of Merlin. A Critical Study of David Lloyd George
(London: Macdonald, 1963), p. 75.

39. Ibid., p. 80.

40. Wasserstem, Ihe Secret Lives, p. 343.

41. Maurice Laporte, Bouddha contre I' Intelligence Service (Paris: Alexis Redier Editeur,
1933), p. 82.

42. Irare Gyomal, Trebitsch-Lincoln. Le plus grand aventurier [fwsierie (Paris: Les Editions
de France, 1939), p. 100.

43. Wasserstem, Ihe Secret Lives, p. 148.

44. Laporte, Bouddha, p. 82.

45. Felix Gross, I Knew Those Spies (London: Hurst & Blackett, 1940), pp. 81-2.

46. Wasserstem, Ihe Secret Lives, pp. 155, 166.

47. David Larape and Lazlo Szenasi, Ihe Self-made Villain. A Bicgraphy of I. T. Trebitsch-
Lincoln (London: Cassell, 1961), p. 110.

48. Wasserstem, Ihe Secret Lives, p. 336.

49. Sidney T. Felstead, German Spies at Bay. Beingan Actual Record of the German Espionage
in Great Britain during the Years 1914-1918 (Compiled from Official Sources) (London:
Hutchinson & Co., 1920), p. 61.

50. Wasserstem, The Secret Lives, -p. 166, and Gyoraal, Trebitsch, pp. 150-151.

51. Louis Dupeux, National-Bolchevisme en Allemagne, sous la Rtpublique de Weimar
(1919-1933) (Pans: Librairie Honore Champion, 1974), p. 147.

52. Ibid., p. 148.

53. Erger, Kapp-Luttwitz Putsch, p. 105.

54. Konemann, 'Kapp-Putsch,' p. 5.

55. Benoist-Mechm, Armee allemande, Vol. 2, pp. 79-81.

56. Kbnnemann, 'Kapp-Putsch,' p. 6.


P^pa™ 03 chapOfc 277


10/3/05 12:01:19 pm


278 Conjuring Hitler


5 7. John Wheeler-Bennett, The Nemesis of Power. The German Army in Politics 1918-1945

(London: Macmillan & Co., 1961), p. 73.
SS. Alex De Jonge, The Weimar Chronicle. Prelude to Hitler (New York: Meridian Books,

197S), p. 64.

59. Benoist-Mechm, Armee allemande, Vol. 2, p. 96.

60. Wheeler-Bennett, Nemesis of Power, p. 76.

61. Anton Golecki (ed.), Das Kabinett Bauer (2 1 Juni 19 19 bis 27 Marz 192C). Akten der
Reichkanzlei weimarer Rtpublik (Boppard am Rhein: Harald Boldt Verlag, 1980),
p. 6S7.

62. Heinrich August Winkler, La rtpubblica di Weimar, 1918-1933: storia della prima
itpubblica tedesca (Roma: Donzelli Editore, 199S [1993]), p. 135

63. Carr, Bolshevik Revolution, p. 1 72.

64. Hagen Schulze, La rtpubblica di Weimar, la Germania dal 1918 al 1933 (Weimar,
Deutschland 1918-1933) (Bologna: IlMulmo, 1993 [1983]), pp. 262-3.

65. Wasserstem, Ihe Secret Lives, p. 185.

66. Ian Kershaw, Hitler: 1889-1936: Hubris (New York: W. W. Norton & Co., 1998),

67. Gerson, Nazisme, p. 84.

68. Wasserstem, Ihe Secret Lives, p. 186.

69. Ibid., p. 189.

70. Feuchtwanger, From Weimar to Hitler, p. 77.

71. Rosenberg, Rtpublica tedesca, p. 117.

72. L. Riddell, Intimate Diary of the Peace Conference and After, 1918-1923 (New York:
Reynal & Hitchcock, 1934), p. 1 77.

73. Lampe and Szenasi, Self-made Villain, p. 139.

74. Gerson, Nazisme, p. 83.

75. Dupeux, National-Bolchevisme, p. 129.

76. Benito Mussolini, Cpera omnia, Vol. XIV (1919-192C) (Firenze: La Fenice, 1954),
pp. 374-5.

77. Dupeux, National-Bolchevisme, p. 150.

78. Wasserstem, Ihe Secret Lives, p. 182.

79. Sigrid Schultz, Germany Will Try It Again (New York: Reynal & Hitchcock, 1944),
pp. 58-9.

80. Carr, Bolshevik Revolution, p. 160.

81. Dupeux, National-Bolchevisme, p. 149.

82. Wasserstem, Ihe Secret Lives, p. 191.

83. Ibid., p. 183.

84. David Stafford, Churchill and the Secret Service (New York: Overlook Press, 1999),

85. Riddel, Intimate Diary, p. 177.

86. Dupeux, National-Bolchevisme, p. 168.

87. Ibid., p. 157.

88. Lampe and Szenasi, Self-made Villain, p. 148.

89. Ibid., p. 166, and Wasserstem, The Secret Lives, p. 324.

90. Kershaw, Hubris, p. 140.

91. Epstein, Erzberger, p. 387.

92. Quigley, Tragedy, p. 305.

93. Gerald Feldman, The Great Disorder. Politics, Economics and Society in the German
Inflation, 1914-1924 (Oxford: Oxford University Press, 1997), p. 400.

94. Geminello Alvi, Dell'estremo occidente. 11 secolo americano in Eurcpa. Storie economiche
(Firenze: Marco Nardi Editore, 1993), p. 177.

95. Quigley, Tragedy, p. 306.

96. Holtfrerich, Inflation, p. 128.

97. Feldman, Great Disorder, p. 449.


P^p^ata 03 chapOfc 278


10/3/05 12:01:20 pm


Notes 279


98. Alvi, Occidente, p. 1 75.

99. Feldman, Great Disorder, -p. 333.

100. Robert Musil, Jhe Man Without Qualities (Der Mann ohne Eigenschaften) (New York:
Vintage books, 1995 [1930-52]), p. 206.

101. Feldman, Great Disorder, p. 345.

102. Kessler, Rathenau, p. 275.

103. Benoist-Mechm, Armee allemande, Vol. 2, p. 208.

104. Musil, Man Without Qualities, p. 203.

105. Quigley, Tragedy, pp. 231, 235, and Kessler, Rathenau, p. 169.

1 06. Walther Rathenau, In Days to Comet. Von kommenden Dingen) (London: George Allen
&Unwm, 1921[1917]), p. 158.

107. Kennan, Russia, p. 212.

108. Ibid., p. 213.

109. Ibid., p. 219.

110. Kessler, Rathenau, p. 303.

111. Ibid., pp. 280, 305, 306.

112. Von Salomon, Die Geachteten, p. 234.

113. Ibid., 176.

114. Ibid., p. 242.

115. Benoist-Mechm, Armee allemande, Vol. 2, p. 214.

116. Ibid., p. 217.

117. Von Salomon, Die Geachteten, p. 249.

118. Richard Hanser, Putsch! (New York: Pyramid Books, 1970), p. 256.

119. Ibid., p. 257.

120. Ernst von Salomon, The Answers of Ernst von Salomon. The 131 Questions in the Allied
Military Government. 'Fragebcgen' (London: Putnam, 1954 [1951]), p. 56.

121. Hanser, Putsch!, p. 259.

122. Hebert Helbig, Die Triiger der Rapallo Vertrag (Gottmgen: Vandenhoeck & Ruprecht,
1958), p. 123.

123. Carr, Bolshevik Revolution, pp. 310-11.

124. Cecil F. Melville, The Russian Face of Germany (London: Wishart & Co., 1932),
pp. 86-97, and HansW. Gatzke, 'Russo-German Military Collaboration During the
Weimar Republic', in H. W. Gatzke (ed.), Eurcpean Diplomacy Between Two Wars,
1919-1933 (Chicago: Quadrangle Books, 1972), pp. 50-4.

1 25 . Walther Goerlitz, History of the German General Staff 1657- 1945 (New York: Frederick
A Praeger Publishers, 1962), pp. 231-3.

126. Quigley, Tragedy, p. 425.

127. Stephanie Salzmann, Great Britain, Germany and the Soviet Union. Rapallo and After,
1922-1934 (Woodbridge, Suffolk: Boydell Press, 2003), p. 21.

128. Gatzke, 'Russo-German Military Collaboration,' p. 59.

129. Rosenberg, Rtpublica tedesca, p. 126.

130. Benoit-Mechm, Armee allemande, Vol. 2, p. 205, and Andre Fourgeaud, La dtpreciation
et la revalorisation du Mark allemand, et les enseignements de I'expetience monetarire
allemande (Paris: Payot, 1926), p. 11.

131. Max Hermant, Les paradoxes economiques de I'Allemagne moderne 1918-1931 (Paris:
Librane Armand Collin, 1931), pp. 31-3.

132. Holtfrerich, Inflation, p. 14.

133. Ibid., p. 149.

134. Quigley, Tragedy, p. 307.

135. Rosenberg, Rtpublica tedesca, p. 152.

136. Bresciani-Turroni, Inflation, p. 329.

137. Rosenberg, Rtpublica tedesca, p. 155.

138. Fritz K. Ringer, The German Inflation of 1923 (New York: Oxford University Press,
1969), p. 94; emphasis added.


P^p^ata 03 chapOfc 279


10/3/05 12:01:20 pm


280 Conjuring Hitler

139. Viscount D'Abemon, The Diary of an Ambassador (New York: Doubleday, Doran &
Company Inc., 1929), p. 329; emphasis added.

1 40. Holtfrerich, Inflation, p. 132.

141. F. D. Graham, Exchange, Prices and Production in Hyper-Inflation Germany, 1920-1923
(Princeton: Princeton University Press, 1930), pp. 52ff.

142. Fourgeaud, Depreciation, pp. 93-4.

143. Germany's GDP in 1923, m terms of 1913 prices, was 34.9 billion marks; $2 billion
correspond, at the rate of 4.2 marks per dollar, to approximately 9 billion marks,
that is, 25 percent of 1923 GDP.

144. Fourgeaud, Depreciation, pp. 94-6.

145. Jan Van Zanden, The Economic History of the Netherlands, 1914-1995 (London:
Routledge, 1997), pp. 102-4.

146. Ibid., p. 118.

147. Bresciani-Turroni, Inflation, p. 58.

148. Fourgeaud, Depreciation, p. 13.

149. Alvi, Occidente,p. 181, and Hermant, Paradoxes, pp. 54-5.

150. Holtfrerich, Inflation, pp. 290-5.

151. Hermann Jacques, Allemagne, societe a responsabilite limitee (Paris: Editions de la
revue mondiale, 1932), pp. 118, 141.

152. Riddell, Intimate Diary, p. 40.

153. The origin of the meltdown can be discerned from the following statistics:


Table 3.2 Germany's inflationary meltdown







Increase in


of funded

burden of

service +

of the




the Reich



































All figures are m billions of current marks. The first column is obtained by
multiplying the data m gold marks (Graham, Hyper-Inflation, pp. 40-1, Table IV)
by the yearly average exchange rate of the gold mark expressed m paper marks
(Bresciani-Turroni, Inflation, p. 441). In 1922, 23 billion additional marks of
the funded debt were repaid, but by that time, inflation had rendered this last
installment insignificant. So altogether, from 1920 to 1922, 50 percent of the
Kriegsanleihehud been cashed m. The second and fourth columns are derived from
two sets of data provided by Henning (Industrialisierte Deutschland, pp. 59-60),
whereas the net variation m the Reich's discounted bills, reproduced in the fifth
column, is taken from Bresciani-Turroni {Inflation, pp. 439-40). The third column
is the sum of the first and second. After 1922, the private sector, which until then
had absorbed about 50 percent of every issue of state bonds, shunned government
paper altogether, and left the Reichsbank alone in shouldering the Reich's bills,
which the economy was redeeming en masse (Graham, Hyper-Inflation, pp. 60-1,
and Fourgeaud, Depreciation, p. 1 1 8). In 1923, the de-cumulation of Reich bills had
definitively taken over the dynamics of the inflation, and by 1923 the redemption
of bills for cash would surpass the discounting thereof and liquefy the German
mark into annihilation. Thus the sum of interest and refunded debt (that is, the
cashing in of the war loan) between 1919 and 1920 (that is, 5 7.4 billion marks
- the sum of the first two data in column 3) tallied hp to circa 30 percent (28.7) of


10/3/05 12:01:20 pm


Notes 281


the Reich's total outlay (the sura of the first two data m column 4) and corresponded
roughly to 60 percent (58. i) of the total amount of money created during that time (that
is, the bills discounted by the Reichsbank: 97.6 billion marks; the sura of the the
first two data in column 5, assuming that no part of this debt could have been
covered with taxes).

154. Marcel Mauss, Ecrits politiques (Paris: Librairie Artheme Fayard, 1997 [1924]),
p. 665.

155. Adolf Hitler, Hitler's Secret Conversations 1941-1944 (New York: Farrar, Straus &
Young, 1953), p. 54.

156. Holtfrerich, Inflation, p. 155.

157. Qu igley, Tragedy, p. 312.

15S. W. G. Krivitsky, In Stalin's Secret Service (New York: Enigma Books, 2000 [1941]),
pp. 28-38.

159. Konrad Heiden, Der Fuehrer. Hitler's Rise to Power (Boston: Houghton Mifflin
Company, 1944), pp. 130-1.

160. Von Salomon, Jhe Answers, p. 242.

161. Quoted m Louis Kilzer, Churchill's Deception. Jhe Dark Secret that Destroyed Germany
(New York: Simon & Schuster, 1994), p. 100.

162. Hitler, Mein Kampf (Boston: Houghton Mifflin Company, 1971 [1925]), pp. 687.

163. Claus-Ekkehard Barsch, Die politische Religion des Nationalsozialismus (Munchen:
Wilhelm Fink Verlag, 1998), pp. 63-70.

164. Ibid., p. 90.

165. Adolf Hitler, Mein Kampf, pp. 131-43; emphasis added.

166. David Irving, Jhe War Path: Hitler's Germany, 1933-1 939 {London: Michael Joseph,
1978), p. 56.

167. Ian Kershaw, Hubris, p. 151.

168. Arthur Moeller van den Bruck, L'uomo politico (Der politische Mensch) (Roma: Settimo
Sigillo, 1997 [1918]), p. 93.

169. Paul Harrison Silfen, Jhe Volkisch Ideology & Jhe Roots of Nazism. Jhe Early Writings
of Artur Moeller van den Bruck (New York: Exposition Press, 1973), p. 1 1.

170. Ernst Hanfstaengl, Hitler: Jhe Missing Years (New York: Arcade Publishing, 1994
[1957]), p. 64.

171. Alfred Rosenberg, Der Mythus des 20. Jahrhunderts. Eine Wertungder seelisch-geistigen
Gestaltenkampfe unserer Zeit (MUnchen: Honeichen-Verlag, 1934), p. 640.

172. See for instance, Detlev Rose, Die Thule-Gesellschaft. Legende, Mythos, Wirklichkeit.
(Tubingen: Grabert Verlag, 1994), pp. 176-7.

173. Karl Haushofer, Weltmeere und Weltmachte. (Berlin: Zeitgeschichte Verlag, 1937),
p. 284.

174. Woodruff D. Smith, Jhe Ideological Origins of Nazi Imperialism (Oxford: Oxford
University Press, 1986), p. 223.

1 75. Hitler, Mein Kampf, p. 610.

176. Ibid. pp. 615-19.

177. Ibid., pp. 662, 663.

178. Ibid., pp. 660-2.

179. Ibid., pp. 664.


Chapter 4

1. Louis-Ferdinand Celine, Voyage au bout de la nuit (Paris: Gallimard, 1952 [1932]),
p. 26.

2. Erich Kastner, harm im Spiegel (Berlin: Deutsche Verlag-Anstalt, 1929), pp. 70,


P^pa<-ata 03 chapoe 281


10/3/05 12:01:21 pro


282 Conjuring Hitler

3. Erich Kastner, Fabian: The Story of a Moralist (Evanston: Northwestern University
Press, 1990 [1931]), p. 44.

4. Silvio Gesell, The Natural Economic Order (San Antonio: Free Economy Publishing
Co, 1920), Parti.

5. Ibid, pp. 275-8.

6. Jacques Rueff, Be I'aube au crtpuscule. Autobicgraphie de I'auteur. (Paris: Librairie
Ron, 1977), p. 307.

7. Webster G. Tarpley, and Anton Chaitkm, George Bush. The Unauthorized Bicgraphy
(Washington DC: Executive Intelligence Review, 1992), p. 31.

8. Francis Williams, A Pattern of Rulers (London: Longman, 1965), p. 201.

9. Ibid, p. 199.

10. Ibid, p. 203.

11. Henry Clay, Lord Norman (London: Macmillan & Co, 1957), p. 475.

12. Williams, Pattern, p. 203.

13. Andrew Boyle, Montagu Norman (London: Cassell, 1967), p. 67.

14. Ibid, p. 85.

15. Williams, Pattern, p. 204.

16. Ibid.

1 7. Percy Arnold, Ihe Bankers of London (London: Hogarth Press, 1 938), pp. 9, 1 6-1 7.

18. Ibid, p. 11.

19. Boyle, Norman, pp. 129-30.

20. Ibid, p. 133.

21. Ibid, p. 131.

22. Carroll Quigley, Tragedy and Hcpe. A History of the World in Our Time (New York:
Macmillan Company, 1966), p. 326.

23. Boyle, Norman, pp. 133-4, 137-8; emphasis added.

24. William Adams Brown Jr., England and the New Gold Standard, 1919-1926 (New
Haven: Yale University Press, 1929), p. 55.

25. Boyle, Norman, p. 217.

26. Ibid. p. 185

27. G. Balachandran, John Bullion's Empire: Britain's Gold Problem and India Between the
Wars (Richmond, Surrey: Curzon Press, 1996), p. 64.

28. Maxwell S. Stewart, 'Silver - Its International Aspects,' Foreign Policy Reports, Vol.
VII, No. 13 (1931), p. 242.

29. Adams Brown, England, p. 84.

30. Balachandran, John Bullion's Empire, p. 91.

31. Ibid, p. 89.

32. Ibid, pp. 98, 100.

33. Ibid, p. 202.

34. Boyle, Norman, p. 138.

35. Stanley Lebergott, The Americans. An Economic Record (New York: Norton & Co,
1984), p. 396.

36. Clay, Lord Norman, p. 129.

37. Boyle, Norman, p. 68.

38. Clay, Lord Norman, p. 135.

39. Ibid, p. 132.

40. Barry Eichengreen, Golden Fetters. The Gold Standard and the Great Dtpression,
1919-1939 (New York: Oxford University Press, 1992), p. 1 18.

41. Charles O. Hardy, Is There Enough Gold? (Washington DC: Brookings Institution,
1936), pp. 103, 153.

42. Ibid, p. 154.

43. Marcello De Cecco, Moneta e impero. II sistema ftnanziario internazionale dal 1890
al 1914 (Torino: Piccola biblioteca Einuadi, 1979), p. 15 7.

44. Balachandran, John Bullion's Empire, p. 92.


P^pa^Ta 03 chapOfc 282


10/3/05 12:01:21 pro


Notes 283


45. William Adams Brown Jr., The International Gold Standard Reinterpreted, 1914-1934
(New York: National Bureau of Economic Research, Inc., 1940), p. 295.

46. Hardy, Enough Gold?, p. 93.

47. Adams Brown, Gold Standard, p. 294.

48. Ibid., p. 290.

49. Ibid., p. 301.

50. Eichengreen, Golden Fetters, p. 164.

51. Boyle, Norman, pp. 147-8.

52. Melchior Palyi, The Twilight of Gold 1914-1936. Myths and Realities (Chicago: Henry
Regnery Company, 1972), p. 144.

53. Hjalmar Schacht, My First Seventy-six Years. The Autobiography ofHjalmar Schacht
(London: Allen Wingate, 1955), p. 131.

54. Ibid.

55. Anton Chaitkm, Treason in America, fromAaronBurr toAverell Harriman. (New York:
New Benjamin Franklin House, 1985), p. 545.

56. Ibid., p. 546; emphasis added.

57. Schacht, Autobiography, p. 188.

58. Clay, Lord Norman, p. 197.

59. Bank of England, Gl/44-419, p. 123, quote from an article of Carl von Ossietzky
on the Weltbuhne, November 27, 1928.

60. Boyle, Norman, p. 169.

61. Ibid., p. 171.

62. Schacht, Autobiography, p. 194.

63. Boyle, Norman, p. 171.

64. Charles L. Mowat, Britain Between the Wars, 1918-1940 (Chicago: University of
Chicago Press, 1955), p. 373.

65. Boyle, Norman, p. 159.

66. Gemmello Alvi, Dell'estremo occidente. 11 secolo americano in Eurcpa. Storie economiche
(Firenze: Marco Nardi Editore, 1993), p. 195.

67. Ibid., p. 197.

68. Paul R. Leach, That Man Dawes (Chicago: Reilly & Lee Co., 1930), pp. 206-7.

69. Ibid., p. 194.

70. Quigley, Tragedy, p. 308.

71. Alvi, Occidente, pp. 197-8.

72. Ibid., p. 199.

73. Maurice Callot, Le mark allemand dtpuis 1924 (Paris: Librairie Arthur Rousseau,
1934), p. 20.

74. Boyle, Norman, p. 197.

75. Alvi, Occidente, p. 208.

76. Demetre Delivanis, La politique des banques allemandes, en matiere de credit a court
terme (Paris: Librairie du Recueil Sirey, 1934), p. 53.

77. Alvi, Occidente, p. 198.

78. Louis T. McFadden, Collected Speeches of Congressman Louis T. McFadden, as Compiled
from the Congressional Record (Hawthorne, CA: Omni Publications, 1970), p. 204.

79. Quigley, Tragedy, p. 308.

80. Theo Balderston, The Origins and Causes of the German Economic Crisis, November
1923 toMay 1932 (Berlin: Haude & Spener, 1993), p. 134.

81. Carl T. Schmidt, German Business Cycles, 1924-1933 (New York: National Bureau
of Economic Research, 1934), p. 71.

82. Balderston, Origins and Causes, p. 140.

83. Garet Garrett, The Rescue of Germany &As Noble Lenders (New York: The Chemical
Foundation, 1931), p. 3.

84. McFadden, Collected Speeches, -p. 57.


10/3/05 12:01:21 pro


284 Conjuring Hitler

SS. Derek Aldcroft, From Versailles to Wall Street, 19 19-1929 (New York: Penguin Books,
1978), p. 90, and Quigley, Tragedy, p. 309.

86. Paul Oesterfeld, La leggende dell'oro (Roma: Casa Editnce Mediterranea, 1943),
pp. 171, 182-3.

87. Garrett, Rescue of Germany, pp. 36-40.

88. Arthur Rosenberg, Storia della rtpubblica tedesca (Deutsche Rtpublik) (Roma: Edizioni
Leonardo, 1945 [1934]), p. 193.

89. Kastner, Fabian, p. 33.

90. Rosenberg, Storia della rtpubblica tedesca, pp. 198, 199, 210.

91. Delivanis, Politique des banques, p. 52.

92. Joseph Eorkm, The Crime and Punishment of I. G. Farben (New York: The Free Press,
1978), p. 7.

93. Richard Sasuly, J. G. Farben (New York: Boni & Gear, 1947), p. 40.

94. Borkm, Crime and Punishment, p. 21.

95. Ibid., p. 1.

96. Ibid., p. 28.

97. Anthony C. Sutton, Wall Street and the Rise of Hitler (Sudbury, Suffolk: Bloomfield
Books, 1976), p. 33.

98. "William Manchester, The Arms ofKrupp, 1857-1968 (Boston: Little, Brown and
Company, 1968), pp. 348-50.

99. Borkm, Crime and Punishment, p. 45.

100. Ibid., p. 54.

101. Sasuly, /. G. Farben, p. 148.

102. Sutton, Rise of Hitler, p. 35.

103. Sasuly, J. G. Farben, p. 149.

104. Sutton, Rise of Hitler, pp. 35, 36.

105. Ibid., p. 22; emphasis added.

106. Andrej Gromyko, L'eipansione internazionale del capitale, storia e attualita (Roma:
Editori Riuniti, 1985 [1982]), p. 139.

107. Sutton, Rise of Hitler, pp. 51-66.

108. Palyi, Twilight of Gold, p. 155.

1 09. Quigley, Tragedy, p. 308.

110. Garrett, Rescue of Germany, p. 29.

111. Stephen V. O. Clarke, Central Bank Cocperation, 1924-1931 (New York: Federal
Reserve Bank of New York, 1967), p. 85.

112. Adams Brown, England, p. 206.

113. Ibid., pp. 213-14, 220-1, and Adams Brown, Gold Standard, 1940, p. 368.

114. As a result of the particular dispositions of the Gold Act of 1925 with regard to
convertibility, gold m circulation would amount by 1928 to 8 percent of the total
monetary stock worldwide, whereas, barring Chinese and Indian hoards, it had
been 45 percent in 1913 (Edwin F. Gay, "The Gold Problem,' Foreign affairs, Vol. 9,
January 1931, p. 198).

115. Quigley, Tragedy, p. 322.

116. Rueff, Be I'aube au crtpuscule, p. 313.

117. Hardy, Enough Gold?, -p. 101; emphasis added.

118. Emile Moreau, Souvenirs d'un Gouverneur de la Banque de France, histoire de la
stabilisation du franc (1926-1928). Paris: Librairie deMedicis, 1954), p. 48.

119. Boyle, Norman, p. 194.

120. Quigely, Tragedy, p. 326.

121. Felix Somary, Die Ursache der Krise (Tubingen: J. C. B. Mohr, 1932), p. 1 1.

122. Ibid., pp. 4, 11-13.

123. Moreau, Souvenirs d'un Gouverneur, p. 40; 'Norman is a very tough businessman,
and very astute.'

124. Ibid., pp. 48-9.


10/3/05 12:01:22 pm


Notes 285


125. Alfred Sauvy, Histoire economique de la Fiance entre les deux guerres (Paris: Fayard,
1965), p. 158.

126. McFadden, Collected Speeches, p. 158.

127. Moreau, Souvenirs d'un Gouverneur, p. 308.

128. Boyle, Norman, p. 228.

129. Clay, Lord Norman, p. 486.

130. Boyle, Norman, p. 135.

131. Ibid., p. 228.

132. Moreau, Souvenirs d'un Gouverneur, pp. 329-31.

133. Ibid., p. 333.

134. Aldcroft, From Versailles to Wall Street, pp. 165-6.

135. Clay, Lord Norman, p. 484.

136. Clarke, Central Bank Cocperation, p. 124.

137. George B. Robinson, Monetary Mischief (New York: Columbia University Press,

1935) , p. 30.

138. Hardy, Enough Gold?, p. 155.

139. Adams Brown, Gold Standard, p. 487.

140. Clarke, Central Bank Cocperation, pp. 130, 134.

141. Moreau, Souvenirs d'un Gouverneur, p. 383.

142. Diane Kunz, The Battle for Britain's Gold Standard in 1931 (London: Croom Helm,
1987), p. 18.

143. Bank of England, Gl/453, Norman to Schacht, 11 December 1928.

144. Clarke, Central Bank Cocperation, p. 157.

145. Robinson, Monetary Mischief, p. 43.

146. J. R. Levien, Anatomy of a Crash - 1929 (New York: Traders Press, 1966), p. 45.

147. Alexander Dana Noyes, TheMarket Place. Reminiscences of a Financial Editor (Boston:
Little, Brown & Company, 1938), pp. 329, 330.

148. Francis W. Hirst, Wall Street and Lombard Street. The Stock Exchange Slump of 1929 and
the Trade Dtpression of 1930 (New York: Macmillan Company, 1931), pp. 6, 9.

149. Robinson, Monetary Mischief, p. 37.

150. Frank Simonds, Can Eurcpe Keep the Peace? (New York: Blue Ribbon Books, Inc.,
1934), p. 307.

151. Lago Gil Aguado, 'The Creditanstalt Crisis of 1931 and the Failure of the Austro-
German Customs Union Project,' Historical Journal, Vol. 44, No. 1 (2001), p. 201.

152. Lionel Robbms, The Great Depression i^New York: Macmillan Company, 1934), p. 28,
and Rueff, De I'aube au crtpuscule, p. 301.

153. R. J. Truptil, British Banks and the London Money Market (London: Jonathan Cape,

1936) , p. 289.

154. Walter A. Morton, British Finance, 1930-1940 (New York: Arno Press, 1978),
pp. 32-4.

155. Clay, Lord Norman, p. 396.

156. Boyle, Norman, p. 263.

157. Clarke, Central Bank Cocperation, p. 203.

158. Kunz, The Battle, p. 84.

159. McFadden, Collected Speeches, p. 229.

160. Kunz, The Battle, p. 91.

161. Ibid., pp. 122, 130.

162. Paul Einzig, The Tragedy of the Pound (London: Kegan, Paul, Trench, Trubner & Co.,
Ltd., 1932), pp. 90-1.

163. Adams Brown, Gold Standard, p. 1015.

164. Clarke, Central Bank Cocperation, p. 214.

165. Ibid.

166. Palyi, Twilight of Gold, p. 155.


P^pa^Ta 03 chapOfc 28b


10/3/05 12:01:22 pm


286 Conjuring Hitler

167. D. E. Moggridge, British Monetary Policy, 1924-193 1. The Norman conquest of $ 4.86
(Cambridge: Cambridge University Press, 1972), pp. 184, 185.

168. Morton, British Finance, p. 45; emphasis added.

169. "Williams, Pattern, p. 210.

1 70. Morton, British Finance, p. 46.

171. Boyle, Norman, p. 275.

1 72. Palyi, Twilight of Gold, p. 272.

1 73. Kmdleberger, The World inDtpression, 1929-1939 (New York: Penguin Books, 1987),
p. 157.

1 74. Robert Wolff, Economie et finances de la France, passe et avenir (New York: Brentano's,
1943), p. 175.

1 75. Hardy, Enough Gold?, p. 92.

1 76. Francis W. Hirst, Money, Gold, Silver and Paper (New York: Charles Scribner's Sons,
1934), p. 162, and Balachandran, John Bullion's Empire, p. 152.

1 77. Balachandran, John Bullion's Empire, p. 177.

1 78. Alvi, Occidente, p. 3 76.

179. Balachandran, John Bullion's Empire, p. 181.

180. Clarke, Central Bank Cocperation, p. 218.

181. John Hargrave, Montagu Norman (New York: Greystone Press, 1942), pp. 308-10.

1 82. I. Benoist-Mechin, Histoire del'armee allemande (Paris: Editions Albm Michel, 1 966),
Vol. 3, p. 11.

183. Chaitkin, Treason in America, p. 541.

184. Martin Broszat, Hitler and the Collapse of Weimar Germany (Leamington Spa: Berg,
1987 [1984]), p. 65.

185. Schacht, Autobiography, pp. 230-1.

186. Broszat, Hitler and the Collapse, p. 66.

187. Ian Kershaw, Hitler: 1889-1936: Hubris (New York: W. W. Norton & Co., 1998),
p. 318.

188. Edward H. Carr, German-Soviet Relations between the Two World Wars, 1914-1939
(Baltimore: Johns Hopkins University Press, 1951), p. 36.

189. Dimitri Volkogonov, Trotsky, the Eternal Revolutionary (New York: The Free Press),
p. 270-2.

1 90. George F. Kennan, Russia and the West under Lenin and Stalin (Boston: Little, Brown
&C, 1960), p. 286.

191. Ibid.

192. Simonds, Can Eurcpe Keep the Peace?, p. 306.

193. Hjalmar Schacht, Eas Ende der Rtparationen (Oldenburg: Gerhard Stalling, 1931),
pp. 97-127.

1 94. Alvi, Occidente, p. 3 1 8.

195. Rosenberg, Storia della rtpubblica tedesca,-p. 204.

196. Broszat, Hitler and the Collapse, p. 83.

197. Balderston, Origins and Causes, p. 313.

198. Eichengreen, Golden Fetters, p. 272.

199. Simonds, Can Eurcpe Keep the Peace?, pp. 151-2.

200. Karl Erich Born, Die deutsche Bankenkrise 1931, Finanzen und Politik (Munchen:
R Piper & Co. Verlag, 1967), p. 100.

201. Boyle, Norman, p. 260.

202. Clarke, Central Bank Cocperation, -p. 196.

203. Adams Brown, Gold Standard, p. 1045.

204. Alvi, Occidente, pp. 512-13, and Rene Alleau, Hitler et les societes secretes. Enquete
surles sources occulted du nazisme (Pans: Editions Bernard Grasset, 1969), p. 209.

205. Eustace Mullms, Secrets of the Federal Reserve. The London Connection (Staunton, VA:
Bankers Research Institute, 1991), pp. 81, 98.


10/3/05 12:01:23 pm


Notes 287


206. Paul M. Kennedy, The Rise of Anglo-German Antagonism, 1860-1914 (London:
Ashfield Press, 1980), p. 304.

207. Arnold, The Bankers, p. 23.

208. Tmptil, British Banks, p. 148.

209. David Williamson, The British in Germany, 1918-1933. The Reluctant Oca, piers (New
York: Berg Publishers, 1991), p. 43.

210. Broszat, Hitler and the Collapse, p. 90.

21 1. Leon Trotsky, The Struggle Against Fascism in Germany (New York: Pathfinder Press,
1971 [1931-33]), p. 338.

212. Aldcroft, From Versailles to Wall Street, p. 95.

213. Garrett, The Rescue of Germany, p. 72.

214. Hans Mommsen, The Rise & Fall of the Weimar Democracy (Chapel Hill: University
of North Carolina Press, 1989), p. 339.

215. Udo Kissenkoetter, Gregor Strafier und die NSDAP (Stuttgart: Deutsche Verlags-
Anstalt, 1978), p. 120.

216. Quigley, Tragedy, p. 433.

21 7. Henry A. Turner Jr., German Big Business and the Rise of Hitler (Oxford: Oxford
University Press, 1985), p. 117.

21 8. Qui gley, Tragedy, pp. 429-30.

21 9. Tarpley and Chaitkm, Bush Bicgraphy, pp. 29-31; information recently reconfirmed
in the Sarasota Herald Tribune, November 12, 2000.

220. Robert Dell, Germany Unmasked (London: Martin Hopkins Ltd., 1934), pp. 61-70.

221. Kershaw, Hubris, p. 404.

222. Benoist-Mechm, Armee allemande, Vol. 3, p. 77.

223. Heinrich August Winkler, In rtpubblica di Weimar, 1918-1933: storia della prima
tepubblica tedesca (Roma: Donzelli Editore, 1998 [1993]), pp. 651-652

224. Ivan Maisky, Who Helped Hitler? (London: Hutchinson, 1964 [1962]), pp. 16, 19.

225. Quigley, Tragedy, p. 433.

226. James Pool and Suzanne Pool, Who Financed Hitler. The Secret Funding of Hitler's
Rise to Power, 1919-1933 (London: MacDonald and Jane's), p. 444.

227. KarlR. Bopp, Hjalmar Schacht: Central Banker {University of Missouri Studies, 1939),
p. 62.

228. Stewart A. Stehlin, Weimar and the Vatican, 1919-1933 (Princeton: Princeton
University Press, 1983), p. 365.

229. Winkler, Weimar, p. 671.

230. John Gunther, Inside Eurcpe (New York: Harper and Brothers, 1938), p. 41.

231. Hargrave, Montagu Norman, pp. 219-20.

Chapter 5

1. Remhold Hoops, Englands Selbst-tauschung{Redm: Zentralverlag NSDAP Franz Eher
Nachfolger Gmbh, 1940), p. 37.

2. Adolf Hitler, Hitler's Secret Conversations 1941-1944 (New York: Farrar, Straus &
Young, 1953), pp. 166, 259, 534, 507.

3. Ernst JUnger, On theMarble Cliffs (Norfolk, CT: New Directions, 1947), p. 93.

4. Johann Wolfgang von Goethe, Goethe's Faust Part Two (Prose translation by Max
Dietz) (Pennsylvania: Bryn Mawr, 1949), p. 191.

5. Klaus Fischer, Nazi Germany. A New History (New York: Continuum, 1996),
p. 268.

6. Carroll Quigley, Tragedy and Hcpe. A History of the World in Our Time (New York:
Macmillan Company, 1966), p. 430.

7. I. Benoist-Mechm, Histoire del'armee allemande (Paris: Editions Albin Michel, 1966),
Vol. 3, p. 87.


P^pa^Ta 03 chapOfc 287


10/3/05 12:01:23 pm


28S Conjuring Hitler

S. Jacques Delarue, Gestapo. A History of Horror {New York: Dell, 1964), p. 65.
9. Ibid.

10. John Toland, Adolf Hitler (Garden City, NY: Doubleday & Co., 1976), p. 569.

11. Fischer, Nazi Germany, p. 272.

1 2. Joseph Eorkm, The Crime and Punishment of I. G. Farben (New York: The Free Press,
197S), p. 56.

13. John Comwell, Hitler's Pcpe. TheSecret History of Pius XJ/(New York: Viking, 1999),
p. 154.

14. Hans Mommsen, "The Reichstag Fire and Its Political Consequences,' in Hajo
Holbom (ed.), Rt public to Reich. TheMaking of the Nazi Revolution. Ten Essays (New
York: Vintage, 1972), p. 147.

15. Andre Francois-Poncet, The Fateful Years. Memoirs of a French Ambassador in Berlin,
1931-1938 (London: Victor Gollancz, 1949), p. 55.

16. Mommsen, 'Reichstag Fire,' p. 150.

17. Delarue, Gestapo, p. 67.

IS. Max Gallo, The Night of the Long Knives (New York: Da Capo Press, 1997 [1972]),
pp. 41-2.

19. John Weitz, Hitler's Banker: Hjalmar Horace Greeley Schacht (Boston: Little, Brown
& Company, 1997), p. 140.

20. Delarue, Gestapo, pp. 70-71.

21. Francois-Poncet, Fateful Years, p. 55.

22. Fischer, Nazi Germany, p. 2S5.

23. Ibid.

24. Gallo, Long Knives, p. 1 00.

25. Delarue, Gestapo, -p. 141.

26. Douglas Reed, The Prisoner of Ottawa, Otto Strasser (London: Jonathan Cape,

27. Ian Kershaw, Hitler: 1889-1936: Hubris (New York: W. W. Norton & Co., 199S),
p. 515.

28. Francois-Poncet, Fateful Years, p. 133.

29. Ibid., p. 153.

30. Edmond Vermeil, Germany's Three Reichs. Their History and Culture (London: Andrew
Dakers Limited, 1945), p. 291.

31. Paul Maquenne, L'heresie economique allemande (Paris: Guerre 39, Union Latme,
1940), p.115.

32. Francois-Poncet, Fateful Years, p. 221.

33. Hans Ulnch Thamer, 11 Terzo Reich (Verfiihrung und Gewalt, Deutschland 1933-1945)
(Bologna: II Mulino, 1 993 [ 1 986]), p. 222.

34. Hjalmar Schacht, My First Seventy-six Years: The Autobicgraphy of Hjalmar Schacht
(London: Allen Win gate, 1955), p. 295.

35. Karl Erich Bom, Die Deutsche Bankenkrise 193 1, Finanzen und Politik (MUnchen: R.
Piper & Co. Verlag, 1967), p. 1 18.

36. N. J. Johannsen, A Neglected Point in Connection with Crises (New York: Augustus
M. Kelley Publishers, 1971 [1908]), pp. 35, 80; emphasis added.

37. Bom, Deutsche Bankenkrise, pp. 1 74ff.

38. Karl Schiller, Arbeitsbeschajfung und Finanzordnung in Deutschland (Berlin: Junker
und Diinnhaupt Verlag, 1936), pp. 35-67.

39. Jan Marczewski, Politique monetaire et financiers du Hie Reich (Pans: Librairie du
Recueil Sirey, 1941), p. 58.

40. Ken yon Poole, German Financial Policies 1932-1939 (Cambridge, MA: Harvard
University Press, 1939), p. 37.

41. Marczewski, Politique monetaire, pp. 32-3.

42. Poole, German Financial Policies, p. 47.

43. Schacht, Autobicgraphy, p. 297.


P^pai-ata 03 chapOfc 238


10/3/05 12:01:23 pm


Notes 289


44. Gallo, Long Knives, p. 158.

45. Schacht, Autobiography, p. 320.

46. Weitz, ft'tier's Banker, p. 157.

47. Norbert Muhlen, Schacht: Hitler's Magician. The Life and Loam of of Dr. Hjalmar
Schacht (New York: Alliance Book Corporation, 1939), p. 157.

48. Schacht, Autobiography, p. 302.

49. Peter Padfield, Himmler, Reichsfuhrer-SS (London: Macmillan, 1990), p. 115.

50. Hitler, Secret Conversations, -p. 350.

51. Edward Norman Peterson, Hjalmar Schacht: For and Against Hitler (Boston:
Christopher Publishing House, 1954), p. 149; emphasis added.

52. Poole, German Financial Policies, p. 29.

53. R. J. Overy, War and Economy in the Third Reich (Oxford: Clarendon Press, 1994),
p. 38.

54. Otto Nathan, Nazi War Finance and Banking (MEEK Paper No. 20, 1944), p. 43.

55. Samuel Lurie, Private Investment in a Controlled Economy (New York: Columbia
University Press, 1947), p. 15.

56. Ibid., pp. 58-9.

5 7. Thamer, Terzo Reich, p. 41 4.

58. Avraham Barkai, Nazi Economics. Ideology, Theory and Policy (New Haven: Yale
University Press, 1990), p. 165.

59. Hitler, Secret Conversations, -p. 372.

60. Poole, German Financial Policies, p. 111.

61. Lurie, Private Investment, p. 36, and Barkai, Nazi Economics, p. 255.

62. Marczewski, Politique monetaire, p. 88.

63. Poole, German Financial Policies, pp. 118-20.

64. Lurie, Private Investment, p. 158.

65. Ibid., p. 59.

66. Ibid., pp. 57-8, 154.

67. Barkai, Nazi Economics, p. 158.

68. Bank of England, OV 34/9, from two memoranda, respectively, by G. H. S. Pmsent,
6 December 1938 (p. 79), and C. F. Cobbold, 24 August 1939 (p. 231).

69. Overy, War and Economy, p. 42.

70. David Schoenbaum, Hitler's Social Revolution. Class and Status in Nazi Germany,
1933-1939 (New York: W. W. Norton & Company, Inc., 1980 [1966]), pp. 145-8.

71. Schacht, Autobiography, p. 31 7.

72. Fischer, Nazi Germany, p. 377.

73. Stephen Roberts, TheHouseThatHitlerBuilti^ew/Yoik: Harper & Brothers Publishers,
1938), p. 172.

74. H. W. Amdt, The Economic Lessons of the Nineteen Thirties (London: Oxford University
Press, 1944), pp. 187-8.

75. Bruno Bettelheim, L'economie allemande sous le nazisme: un aspect de la decadence
du capitalisme (Paris: Librairie Marcel Riviere et Cie., 1946), p. 180.

76. Muhlen, Schacht, pp. 120-35.

77. Weitz, Hitler's Banker, p. 206.

78. Neil Forbes, Doing Business With the Nazis. Britain's Economic and Financial Relations
With Germany, 1931-1939 (London: Frank Cass, 2000), p. 97.

79. Ibid., p. 107.

80. Cleona Lewis, NaziEurcpe and World Trade (Washington DC: Brookings Institution,
1941), p. 16.

81. Forbes, Doing Business, p. 181.

82. Bank of England, OV 34/201, p. 10, a memorandum dated October 14, 1934,
speaks of 'Standstill bills' being drawn 'under credit lines granted before July 1931'
(emphasis added), which can only be understood as a provision for initiating a


P^pai-ata 03 chapOfc im


10/3/05 12:01:24 pm


290 Conjuring Hitler

new cycle of fresh lending to German importers by these specific short-term bills,
which were renewed as soon as they were paid off.
S3. John Gunther, Inside Eurcpe (New York: Harper & Brothers, 193S), p. 99.

84. Forbes, Doing Business, pp. 113, 116.

85. Ibid., pp. 173, 174.

86. Muhlen, Schacht, p. 35.

87. Martin Gilbert, The Roots of Appeasement (New York: New American Library, 1 966),
p. 155.

88. Henry Clay, Lord Norman (London: Macmillan & Co., 1957), pp. 318-22.

89. Dorothy Woodman, Hitler Rearms. An Exposure of Germany's War Plans (London:
John Lane; Bodley Head Limited, 1934), p. 201.

90. John Hargrave, Montagu Norman (New York: Greystone Press, 1942), p. 218.

91. Ernst Hanfstaengl, Hitler: The Missing Years (New York: Arcade Publishing, 1994
[1957]), p. 204.

92. Anthony Sutton, Wall Street and the Rise of Hitler (Sudbury: Suffolk: Bloomfield
Books, 1976), pp. 15-16.

93. William Dodd, Ambassador Dodd's Diary, 1933-1938 (New York: Harcourt, Brace
and Company, 1941), pp. 166, 170, 176.

94. Bettelheim, L'economie allemande, p. 78.

95. Charles Higham, Trading With the Enemy: An Expose of the Nazi-American Money
Plot, 1933-1949 (New York: Delacorte Press, 1983), p. xvi.

96. Andrej Gromyko, L'espansione interna zionale del capitate, storia e attualita (Roma:
Editon Riumti, 1985 [1982]), p. 151.

97. Padfield, Himmler, p. 206.

98. Schacht, Autobicgraphy, p. 3 70.

99. Ibid. pp. 366ff.

100. Padfield, Himmler, p. 208.

101. Hitler, Secret Conversations, pp. 5 1 4-1 5 .

102. Weitz, Hitler's Banker, p. 240.

103. Schacht, Autobicgraphy, pp. 383-4.

1 04. Ron Chemow, The Warburgs. The Twentieth-Century Odyssey of a Remarkable Jewish
Family (New York: Random House, 1993), pp. 480-5.

105. Gilbert, Appeasement, pp. 138-50.

1 06. Quigley, Tragedy, p. 5 8 1 .

107. Gunther, Inside Eurcpe, p. 278.

108. Carroll Quigley, The Anglo-American Establishment. From Rhodes to Cliveden (San
Pedro, CA: GSG & Associates Publishers, 1981), pp. 227-8.

109. Quigley, Tragedy, p. 653.

110. Ibid., p. 582.

111. Gilbert, Appeasement, pp. 79-80.

112. Ibid., p. 120.

113. Louis Kilzer, Churchill's Deception. TheDark Secret that Destroyed Germany (New York:
Simon & Schuster, 1994), p. 1 1 7.

114. Francois-Poncet, Fateful Years, pp. 152-3.

1 15. Quoted m Clement Leibovitz and Alvin Finkel, In Our Time. The Chamberlain-Hitler
Collusion (New York: Monthly Review Press, 1998), p. 23.

116. Ivan Maisky, Who Helped Hitler? (London: Hutchinson, 1964 [1962]), p. 55.

117. David Irving, Churchill's War: Vol. 1, The Struggle for Power (Bullsbrook, Australia:
Veritas Publishing Company, 1987), pp. 39-40.

118. Charles Higham, The Duchess of Windsor. The Secret Life (New York: McGraw & Hill,
1988), p. 109.

119. Peter Allen, The Windsor Secret. New Revelations of the Nazi connections (New York:
Stem & Day Publishers, 1984), p. 34.

120. Paul Schmidt, Da Versaglia a Norimberga (Roma: L'amia, 1951), pp. 271-80.


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Notes 291


121. Benoist-Mechin, Armee allemartde, Vol. 3, p. 263.

122. Schmidt, Da Versaglia, p. 291.

123. Benoist-Mechin, Armee allemartde, Vol. 3, p. 267.

124. Hanfstaengl, Missing Years, p. 228.

125. Higham, Duchess of Windsor, p. 117.

126. Schmidt, Da Versaglia, p. 293.

127. Higham, Duchess of Windsor, p. 130.

128. Allen, Windsor Secret, p. 68.

129. Maisky, Who Helped Hitler?, p. 5 7.

130. Hitler, Secret Conversations, pp. 556-7.

131. Hajo Holbom, A History of Modern Germany (Princeton: Princeton University Press,
1969), p. 769.

132. Allen, Windsor Secret, p. 69.

133. Benoist-Mechin, Armee allemande, Vol. 3, pp. 286-95.

134. Irving, Churchill's War, pp. 54-5.

135. Alfred Smith, Rudolf Hess and Germany's Reluctant War, 1939-194] (Sussex: Book
Guild Ltd., 2001), p. 61.

136. George Lentm, Lloyd George and the Lost Peace. From Versailles to Hitler, 1919-1940
(Basingstoke: Palgrave Macmillan, 2001), p. 103.

137. Ibid., p. 99.

138. Lord Beaverbrook, The Abdication ofKingEdward VM(New York: Atheneum, 1966),
p. 63.

139. Higham, Duchess of Windsor, p. 188.

140. Allen, Windsor Secret, p. 97.

141. Greg King, The Duchess ofWindsor. The UncommonLife of Wallis Simpson (New York:
Citadel Press, 1999), p. 280.

142. Quigley, Tragedy, p. 583.

143. Ibid., p. 777.

144. Benoist-Mechin, Armee allemande, Vol. 5, p. 307.

145. Ibid, Vol. 5, pp. 340-5.

146. Quigley, Anglo-American Establishment, pp. 286-8.

147. Qu igley, Tragedy, p. 631.

148. Ibid, p. 627.

149. Ibid, p. 633.

150. Leibovitz and Finkel, In Our Time, p. 144.

151. Ibid, p. 182.

152. Allen, Windsor Secret, p. 253.

153. Quigley, Tragedy, pp. 642-3.

154. Ibid, p. 646.

155. Ibid, p. 648.

156. Benoist-Mechin, Armee allemande, Vol. 6, p. 1 79.

157. David Irving, The War Path: Hitler's Germany, 1933-1 939 {London: Michael Joseph,
1978), p. 193.

158. Leibovitz and Finkel, In Our Time, p. 208.

159. Ibid, pp. 256, 232.

160. Irving, Chuchill's War, pp. 167-8.

161. Kilzer, Churchill's Deception, p. 124.

162. Simon S. Montefiore, Stalin, the Court of the Red Tsar (New York: Alfred Knopf,
2004), p. 307.

163. Angiolo Forzoni, Rublo. Storia civile e monetaria delle Russia da Ivan a Stalin (Roma:
Valerio Levi Editore, 1991), p. 533.

164. Irving, Chuchill's War, p. 61.

165. Ibid, p. 162.

166. Edvard Radzinsky, Stalin (New York: Doubleday, 1996), p. 323.


P^pa<-ata 03 chapoe 291


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292 Conjuring Hitler

167. Montenore, Statin, p. 222.

168. Benoist-Mechm, Armee allemande, Vol. 4, pp. 210-70.

169. W. G. Knvitsky, In Stalin's Secret Service (New York: Enigma Books, 2000 [1941]),
pp. 205-8.

170. Ibid., p. 12.

1 71. Edward E. Encson, Feeding the German Eagle. Soviet Economic Aid to Nazi Germany,
1933-1941 (Westport, CA: Praeger, 1999), p. 182, and Tharaer, Terzo Reich,
p. 793.

1 72. David Irving, Hitler's War (New York: Avon Books, 1990), p. 360.

1 73. Quigley, Anglo-American Establishment, p. 298.

1 74. Maisky, Who Helped Hitler?, p. 1 71 .
1 75. Montenore, Stalin, p. 312.

1 76. Jiinger, Marble Cliffs, 1 947.

177. For a study of Jiinger 's Mauretanians, see Julien Hervier, Deux individus contre
I'histoire: Pierre Drieu la Rochelle, Ernst Junger (Pans: Editions Klmcksieck, 1978),
p. 191.

1 78. Benoist-Mechm, Armee allemande, Vol. 3, p. 23.
1 79. Irving, Chuchilis War, p. 193.

180. Smith, Rudolf Hess, p. 109.

181. Quigley, Tragedy, p. 667.

182. Comwell, Hitler's Pcpe. p. 236.

183. Ibid., p. 238.

184. Smith, Rudolf Hess, p. 138.

1 85. Leibovitz and Finkel, In Our lime, p. 23 1 .

186. Higham, Duchess of Windsor, p. 276.

187. Kilzer, Churchill's Dectption, p. 231.

188. Ibid., p. 229.

189. Higham, Duchess of Windsor, p. 265.

190. Allen, Windsor Secret, p. 200.

191. Irving, Churchill's War, p. 379; Irving, Hitler's War, p. 306.

192. Irving, Churchill's War, p. 376.

193. Allen, Windsor Secret, pp. 224-33, and Smith, Rudolf Hess, p. 245.

194. Michael Veranov (Ed.), The Mammoth Book of the Third Reich at War (New York:
Carroll & Graf Publishers Inc. 1997), p. 141.

195. Smith, Rudolf Hess, p. 55.

196. Irving, Churchill's War, p. 193.

197. Quigley, Tragedy, p. 715.

198. Irving, Churchill's War, pp. 483-9.

199. Quigley, Tragedy, p. 720.

200. Kilzer, Churchill's Dectption, p. 270.

201. Irving, Hitler's War, p. 358.

202. Hugh Thomas, The Murder of Rudolf Hess (New York: Harper & Row Publishers,

203. Richard Deacon, A History of the British Secret Service (London: Frederick Muller,
1969), p. 319.

204. Allen, Windsor Secret, p. 261.

205. Gordon Thomas, Journey into Madness. The True story of Secret CIA Mind Control and
Medical Abuse (New York: Bantam Books, 1989), pp. 152-3.

206. International Military Tribunal, Trial of the Major War Criminals, 14 November 1945-
1 October 1946, Vol. XAW (Nuremberg, 1948), pp. 368-72.

207. John K. Lattimer, Hitler & the Nazi Leaders. A Unique Insight into Evil (New York:
Hippocene Books, Inc., 2001), pp. 109-17.

208. Smith, Rudolf Hess, pp. 457-8.


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Notes 293


209. Edmund Walsh, Total Power. A Footnote to History (New York: Doubleday & Company,
194S), p. 9.

210. Kilzer, Churchill's Deception, p. 283.

211. A recent book by Martin Allen entitled The Hitler/Hess Deception (London:
HarperCollins, 2004) claims to have at long last solved the Hess mystery. We
wish it were so. Allen has 'discovered' additional archival documents that prove
that the Peace Party that signaled to the Germans until the departure of Hess was
indeed a pretense, the creation of Britain's Secret Service. Allen further argues
that all the diplomatic feints, shams, and wiles performed in 1940 and 1941 by
'eminent marionettes' (p. 219) such as Hoare, Halifax & Co. to entice the Nazis
formed the essential complement to the deception orchestrated from the secret
retreat at Woburn Abbey, the headquarters of a shady branch of the intelligence
division for Special Operations. The deception was m fact aimed at diverting the
Nazis' urge for devastation away from the Middle East and the Mediterranean
seaboard, and reorienting it towards Soviet Russia. So it appears that Allen's findings
do nothing but confirm what had been an ensysupposition in this field of research
for at least a couple of decades. For instance, Louis Kilzer had already guessed this
much in Churchill's Deception, which Allen duly ignores. Moreover, Kilzer, most
importantly, wondered whether those three terrible years of unhampered Nazi
activity in the East (1941-44) were not in fact the British reward for the surrender
of Hess. Allen broaches none of these key problems, nor does he explain how the
Nazis were in fact duped if the Hess mission m the end proved to be a failure,
which is what the author, not deviating from the standard account of Hess's
Scottish impromptu, contends. In other words, it is not at all clear why Hitler
resolved nonetheless to push ahead with Barbarossa, even though he had not
received any token reassurance from Britain that his back would be covered in
the West if he attacked in the East. We don't know why the author has dragged
us one more time into a retelling of the story of 'the Nazi bigwig that parachuted
himself over the Dungavel estate' if we are to rate that episode, ever anew, as a
diplomatic fiasco. Finally, Allen is careful to circumscribe this admittedly horrible
deception (it would cost the lives of tens of millions of people) to the 'desperate'
circumstances afflicting the British empire in the spring of 1941; we are to take it
as the cynical policy of self-defense resorted to by the stewards of the empire to
'survive the fighting season' (pp. 72, 140). The thesis of The Hitler/Hess Deception
appears to be that such a deception, which worked god knows how, was the worthy
price to pay for keeping the British empire standing until Nazism, other than which
nothing is worse (the ever-present tacit caption), would be defeated with the prop
of America in the West, and that, somewhat less willing, of Russia in the East. To
this we may respond that even if the situation in 1941 had been truly critical for
the British empire, it was nonetheless a situation entirely of Britain's making - and
clearly not an accidental one. It was a terrifying turn of events that had arisen
from a mad bet placed at Versailles in 1919, and which Britain managed as best as
she could (very well indeed), until she finally crowned her western ambition by
destroying Germany and subjecting Europe to Anglo-American domination.

212. Dmitri Volkogonov, Stalin. Triumph and Tragedy (New York: Grove Weidenfeld,
1991), p. 4SS.

213. Radzinsky, Stalin, p. 497.

214. Quigley, Tragedy, p. 758.

215. Hitler, Secret Conversations^. 208.

216. Michael Bloch, Cperation Willi. The Plot to Kidnap the Duke of Windsor, July 1940
(London: Weidenfeld and Nicolson, 1984), p. 223.

21 7. Volkogonov, Stalin, p. 485.


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294 Conjuring Hitler


Chapter 6

1. Charles Higham, Trading With the Enemy: An Expose of the Nazi-American Money
Hot, 1933-1949 (New York Delacorte Press, 1983), pp. 8-20.

2. Alfred Smith, Rudolf Hess and Germany's Reluctant War, 1939-1941 (Sussex: Book
Guild Ltd., 2001), pp. 341-391.

3. Charles Kmdleberger, The World in Dtpression, 1929-1939 (New York: Penguin
Books, 1987), p. 39.

4. Paul Samuelson quoted m Kenneth Moure, The Gold Standard Illusion. France, the
Bank of France, and the International Gold Standard, 1914-1939 (Oxford: Oxford
University Press, 2002), p. 4; emphasis added.

5. Kindleberger, World in Depression, pp. 32, 52; emphasis added.

6. Stephen Clarke, Central Bank Cocperation, 1924-1931 (New York: Federal Reserve
Bank of New York, 1967), p. 142.

7. Henry Ashby Turner Jr., German Big Business and the Rise of Hitler (Oxford: Oxford
University Press, 1987), pp. 314-15; emphasis added.

8. R. H. Knickerbocker, Is Tomorrow Hitler's? (New York: Reynal & Hitchcock, 1941),
p. 271.

9. Martin Gilbert, The Roots of Appeasement (New York: New American Library, 1 966),
p. 187.

1 0. Martin Allen, The Hitlei/Hess Deception{London: HarperCollins, 2004), pp. xvin, 72.

11. Hjalmar Schacht, 1933: Wie eine Demokratie stirbt (DUsseldorf: Econ-Verlag, 1968),
p. 88.

1 2. Peter Allen, The Windsor Secret. New Revelations of the Nazi Connections (New York:
Stein & Day Publishers, 1984), p. 98.

13. Klaus Fischer, Nazi Germany. A New History (New York: Continuum, 1996),
p. 443.

14. Dan P. Silverman, Hitler's Economy. Nazi Work Creation Programs, 1933-1936
(Cambridge, MA: Harvard University Press, 1998), pp. 146, 243.

15. F. W. Hennmg, 'Die zeitliche Emordnung der Uberwindung der Wirtschaftskrise
in Deutschland,' m Harald Winkel (ed.), Finanz- und Wirschaftspolititische Fragen
der Zwischenkriegszeit, Band 73 (Berlin: DunckerSc Humblot, 1973).

16. Pierre Aycoberry, Jhe Social History of the Third Reich, 1933-1945 (New York: The
New Press, 1999), p. 158.

1 7. John Com well, Hitler's Pcpe. The Secret History of Pius XII (New York: Viking, 1 999),
p. 328.

18. John Weitz, Hitler's Banker: Hjalmar Horace Greeley Schacht (Boston: Little, Brown
& Company, 1997), p. 243.

19. According to the American military attache at the London embassy, who claimed
to have spoken with Hess after the latter arrived in England, the Deputy FUhrer
supposedly confessed to a British psychiatrist sent to examine him that the Nazis
were on the verge of obliterating the Jews (Louis Kilzer, Churchill's deception. The
Dark Secret that Destroyed Germany (New York: Simon & Schuster, 1994), pp. 60-2).
Moreover, author Alfred Smith relates that on May 13, 1 941 , only three days after
Hess landed, Churchill sent a memo to his colleague, Anthony Eden. ..It concludes
with the words 'Like other Nazi leaders this man is potentially a war criminal and
he and his confederates may well be declared outlaws at the close of the war. In
this his repentance stands him m good stead.' Smith raises the question: 'Why
did Churchill describe Hess as a potential war criminal?... The "Crimes against
humanity," and m particular the Holocaust, did not take place until after the
launch of Operation Barbarossa in June 1941, a month after Hess's flight.' Smith
concludes: 'The only construction that makes sense of Churchill's remarks is that
he was aware of the war crimes that were going to be committed in the future' (Smith,
Rudolf Hess, p. 341).


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