Economic Collapse and Hitler’s Rise #
- By 1933, Germany faced 25% unemployment (6 million people) and complete national bankruptcy following the 1929 stock market crash.
- Hyperinflation in 1923 had already wiped out the middle class's savings, creating a fertile ground for radical political movements.
- Hitler prioritized the elimination of unemployment as a means to solidify political power and prepare for future warfare.
Hjalmar Schacht and the New Plan #
- Hitler appointed Hjalmar Schacht, a brilliant economist and former head of the Reichsbank, to fix the economy despite Schacht not being a Nazi.
- Schacht implemented "The New Plan," which shifted Germany toward autarky (national self-sufficiency).
- The government strictly controlled imports, prioritizing raw materials necessary for the military over consumer goods.
- Trade was conducted through "bilateral clearing," essentially a barter system with Balkan and South American countries to avoid using scarce foreign gold or currency.
The Mefo Bills: Secret Financing #
- To bypass the Treaty of Versailles' limits on military spending and mask the national debt, Schacht created "Mefo Bills."
- The government formed a shell company called "Metallurgische Forschungsgesellschaft" (MEFO) to issue these bills.
- Mefo bills acted as a "shadow currency," allowing the government to pay industrial contractors for tanks and planes without the debt appearing in the official national budget.
- By 1939, 12 billion Reichsmarks worth of Mefo bills were in circulation, functioning as a legalized Ponzi scheme that deferred payment to a later date.
Eliminating Unemployment through Public Works #
- The Nazis launched massive infrastructure projects, most notably the construction of the Autobahn.
- While promoted as a civilian project, the Autobahn was designed with the dual purpose of moving military forces rapidly across Germany.
- The "Reich Labour Service" required young men to perform manual labor for low wages, effectively removing them from unemployment statistics while providing cheap labor for state projects.
Transition to a War Economy #
- In 1936, Hermann Göring replaced Schacht’s influence by heading the "Four-Year Plan."
- The goal shifted entirely to making Germany "war-ready" within four years.
- Heavy investment was placed in "Ersatz" (substitute) materials, such as synthetic rubber and fuel made from coal, to ensure the military could survive a British naval blockade.
- Labor unions were abolished and replaced by the German Labor Front (DAF), giving the state total control over the workforce and wages.
The Inevitability of War #
- By 1938, the German economy was overheating; the Mefo bills were coming due, and the nation faced a massive deficit.
- Inflation began to rise, and the country was running out of raw materials and food.
- The Nazi leadership viewed territorial expansion (Lebensraum) not just as an ideological goal, but as an economic necessity to plunder the resources, gold, and labor of neighboring nations to prevent domestic collapse.
Summary #
The Nazi "economic miracle" was a facade built on sophisticated financial deception, forced labor, and unsustainable debt. By using Hjalmar Schacht’s Mefo bills to secretly fund rearmament and the New Plan to monopolize resources for the military, Hitler transformed a bankrupt nation into a military powerhouse in six years. However, this system functioned like a Ponzi scheme; by the late 1930s, Germany was on the brink of another economic crash. This forced the regime into a policy of "predatory economics," where the invasion of other nations became the only way to seize the assets needed to pay off their massive debts and sustain the war machine.
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