This paper reports on the themes and process of a conference organised by Thomas Kohut and the author through the Erikson Institute of the Austen Riggs Center. The title of the conference was “The Legacy of Perpetrator Trauma in Groups and Families” as experienced by descendants of Nazis, generations not guilty in deed but inevitably caught up in powerful feelings of guilt, shame, and horror by association. In this paper, I examine the nature of the transmission of this trauma, the forms it takes, and some of the group dynamics that play out in relation to it. I also explore dream processes of the perpetrators' era through a remarkable dream journal from the 1930s. A natural experiment in “social dreaming”, this record of ordinary German citizens' dreams illuminates the steady assault on a person's inner life and the way that massive social trauma and malignant authoritarianism contribute to profound, collective dissociation and the licensing of horrific destructiveness.