Simultaneously, the Four Year Plan would lower imports through an increase in iron ore and synthetic fuel and rubber production by 1940. Iron ore was contentious: in 1937 there were still unused low grade deposits within Germany. Industrialists, who previously preferred to import high grade Scandinavian ore, were now willing to gradually assimilate the deposits into the existing plants. Yet Goering and Paul Pleiger (of the Four Year Plan’s staff) wished to build new steel foundries, dismissing fears of excessive capacity with the expectation that demand wouldn’t stop growing. In the end Goering’s surveillance and police apparatus won him the power struggle and the Reischwerke Hermann Goering was formed. It was hoped to give the state a dominant stake in the steel industry but became just another company among several.
France and Britain began military expansion at the same period.

This accelerated rhythm brought to fore the question of what was to be done with the Wehrmacht. To produce everything by 1940 factories would have to be built or retooled. Once rearmament ended, the transition to civilian production would be slow, produce unemployment (though Tooze doesn’t mention that with the high demand for labor that wasn’t that much of a problem) and a transition back to military production in case of a war would also be slow. To avoid such troubles it now made the most sense to put the armed forces to use once they were ready.

This armaments drive demanded ever greater resources, and though the Four Year Plan would help with that in a few years, initially it was also a burden. In 1937 the scarcity of steel log jammed all of rearmament: as the Wehrmacht’s steel rations stagnated, so did armaments production.
In response, steel mills raised production by using all available capacity, labour, scrap and more ore imports, while the Anschluss and the lull in rearmament relieved the foreign exchange situation. This allowed a new phase in early 1938. Now the time horizon was set for April 1939 and war was expected to happen soon. Stocks of ammunition were to be built. Todt was charged with building the Westwall; as he cared about results but not finance production involved a lot of overpricing and inefficiently spent money. The Luftwaffe, having found its bomber workhorse in the Ju 88, ordered 7,000 of them.
More raw materials were allocated, with over 40% of available steel going to the military. Defense spending could, if plans went through, exceed 20% of national income and relied on unsafe funding. No other capitalist economy reached this level of mobilization in peacetime and Germany’s was feeling the strain.

In late 1938-early ’39 even more ambitious plans were laid. The Luftwaffe wanted a fleet of staggering 21,750 aircraft in four years, far more than its historical peak strength of <5,000. The Kriegsmarine received first priority from January to September and wanted 797 vessels by 1948. The army would receive heavy tanks and artillery. Armaments production in general would triple.
Such aims fell flat. With a general feeling of uncertainty the government found it hard to get credit and resorted to emergency measures, even covering some of its deficit by printing banknotes. The gold standard was formally abandoned. On the balance of trade, exports were on a downwards trend. There was no choice: the Wehrmacht’s steel quotas were reduced. Once again armaments production stagnated through 1939.