Human history becomes more and more a race between education and catastrophe.

20th Century Germany

Hjalmar Schacht

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Hjalmar Schacht was an economist of the Weimar Republic and for the Nazis until his dismissal in 1937 due to his opposition to German rearmament. He was known for working with or developing several schemes that the Germans used throughout the interwar period.

The first scheme he was known for was the introduction of the Rentenmark. The currency of the Weimar Republic was normally the Reichsmark, but several things happened after World War I that caused great turmoil in the German economy. Many Germans considered the reparations to be a great outrage (as reparations are paid in “defeat,” and in the view of many Germans, Germany had not lost the war). To that extent, the Germans were willing to sabotage their own economy in an attempt to get the reparations waived or dismissed, due to a supposed German inability to pay it. This is all documented in Sally Marks’ “Myths of Reparations.”

One mechanism of their attempts to sabotage the reparations was to print large amounts of their currency. While there were several relatively sane ways that the Germans could purchase the gold and goods necessary for reparations, such as issuing bonds, raising taxes, or even taking on foreign currency debt, the Germans instead deliberately chose to print Reichsmarks, in an effort to wreck the German economy, thus bringing the Entente to the table to renegotiate the reparations. And it worked-the Dawes and Young Plans, created in the wake of the ensuing Weimar Hyperinflation, allowed to Germans to restructure and reduce the amount of reparations. This was of course at the expense of two years of German economic growth, which resulted in gross wealth destruction and was only fixed by the introduction of the Rentenmark. The Rentenmark, which Schacht was one of several economist that developed the scheme, was a substitute Reichsmark that used German land (real estate) as collateral, much in the lines several other countries used gold or silver to back their currencies. This was introduced into the German economy and helped to restore stability.

It should be noted that during this time, Schacht was only one of a handful of economists and political figures that assisted in the Weimar Republic’s return to economic growth. Hans Luther and Karl Helfferich were the main economists responsible for the Rentenmark.

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Schacht in Nazi Germany, because of his political support and his rather sketchy if not outright illegal financial maneuvering to support the Nazis, was able to become Minister of Economics. During this time, he continued the programs of the previous German administration (namely, public works to artificially lower unemployment numbers, such as the autobahn) and expanded them into a general plan for German autarky. The two main issues he had to deal with were the lack of foreign reserves (caused by the German sell off due to the Great Depression) and the means of rearmament.

Simply put, if Germany ran out of foreign reserves, it would not only be hard pressed to trade with other countries but it would also severely weaken the strength of the German mark. To get around this, Schacht helped structure several trade transactions with South American, European, and even a handful of Asian countries whereby German could acquire strategic materials necessary for rearmament in exchange for either German marks or German goods, which would allow time for the Nazis to balance the foreign reserves deficit (which they never did, instead doubling down on it to increase the rate of rearmament).

The Mefos bills that he created were another tool whereby the Germans could secretly rearm themselves using economic tricks. As president of the Reichsbank, Schacht in theory was only supposed to be a lender of last resort-namely, his job was to be independent of the government and only to step in to preserve monetary stability. However, by issuing Mefos bills, he was able to secretly (if not fraudulently) loan money directly to the German government through a dummy corporation.

This allowed the German government to take on far more debt than any sane investor would have bought on, at a lower rate of interest. For a simple finance lesson, the more debt a country has, the greater the risk. An investor would demand a higher interest rate in return for taking on this higher risk. Since the interest rate for Germany was essentially fixed around 4.50%, this meant there was a theoretical ceiling after which nobody would be willing to buy German government bonds. Through the use of the Mefos bills, in addition to hiding arms purchases from Britain and France, they were also able to bypass this ceiling.

Of course, this would have been completely unsustainable, and would have required the acquisition of large amounts of foreign reserves to balance out the fact that the ostensibly independent Reichsbank was in fact loaning money to the German government, which would otherwise cause rapid inflation as it turned out German currency wasn’t worth what people thought it was. This was part of the reason why the Nazi government chose to invade many countries-one of their most important objectives was the seizure of all the currency and reserves in the various banks, to feed the gaping maw in the German economy left by Schacht and the Nazis’ policies.

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At the end of the day, Schacht wasn’t a particularly brilliant economist, but he did participate in both legitimate economic schemes (as the Rentenmark) as well as some more fraudulent ones (like the Mefos bills) in order to keep Germany’s economy afloat. Still, the fact remains that despite his willingness to fund German rearmament, Nazi rearmament was still too fast even for him, which eventually led to his resignation and collaboration with the German resistance. This should show that he was not in fact some lone genius, but rather one of several German economists that happened to be in a position of leadership during the Weimar Republic and later the Nazi regime.


Sources:

Sally Marks, The Myth of Reparations

Adam Tooze, Wages of Destruction

 

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Newly liberated inmates at Bergen-Belsen concentration camp chase down and beat a former kapo (a prisoner assigned by the SS guards to supervise forced labor in the camp). Kapos were picked for their brutality towards fellow prisoners and received additional privileges; ca. April 16th, 1945

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“A kapo or prisoner functionary was a prisoner in a Nazi concentration camp who was assigned by the SS guards to supervise forced labor or carry out administrative tasks in the camp. Also called “prisoner self-administration”, the prisoner functionary system minimized costs by allowing camps to function with fewer SS personnel. The system was designed to turn victim against victim, as the prisoner functionaries were pitted against their fellow prisoners in order to maintain the favor of their SS guards. If they were derelict, they would be returned to the status of ordinary prisoners and be subject to other kapos. Many prisoner functionaries were recruited from the ranks of violent criminal gangs rather than from the more numerous political, religious and racial prisoners; those were known for their brutality toward other prisoners. This brutality was tolerated by the SS and was an integral part of the camp system.”


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German soldiers moving a 17cm medium minenwerfer into position in France; ca. 1917

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The nine European Monarchs who attended the funeral of Edward VII, photographed at Windsor Castle; May 20, 1910

I always enjoy identifying where people are situated to identify who was perceived to be the most powerful. Obviously UK front and center, flanked by Spain and Denmark with Germany behind and Belgium relegated to the outside...

I always enjoy identifying where people are situated to identify who was perceived to be the most powerful. Obviously UK front and center, flanked by Spain and Denmark with Germany behind and Belgium relegated to the outside…


Dog with German soldier equipment; ca. 1939

How bored were soldiers on the front lines in WWI and WWII that they had time to take cute pics of dogs?

I love that who ever did this placed the grenades in the boots with the tops sticking out in order to hold the rifle, German ingenuity!!!


A few reasons why the Hundred Days Offensive was so successful:

  1. The Kaiserschlacht offensives had massively overstretched the Germans. Ludendorff had aimed to use reinforcements from the now defunct Eastern Front to smash through the Allied defences and end the war before the Americans could arrive in large enough numbers to turn the tide of the war. Instead what the Kaiserschlacht achieved was giving the Germans control of large swathes of tactically unimportant land in exchange for their last reserves and the deaths of many of their best soldiers who had been grouped into the stormtrooper brigades and suffered disproportionate losses. Furthermore as Operation Michael et al were smashing through the Allied positions, the Germans came across Allied supply dumps and started looting and getting drunk, seeing how well the British and French soldiers were still living compared to conditions on the German side and how even after all the efforts of the Kaiserschlacht the war continued, German morale started to suffer serious degradation. This combined with the almost disastrous conditions of the German Home Front where the British blockade was destroying the Home Front and people were coming close to starvation. Unrest and political upheaval grew with every month and although the German Army would fight until the very end it was suffering from serious morale problems by the end as commented upon by British soldiers when capturing Germans during this period.
  2. Allied tactical improvement. The operations planned during the Hundred Days were so much more sophisticated than the blundering at the Somme or the Nivelle Offensive. The BEF (British Expeditionary Force) had been on a ‘learning curve’ since ’14 adapting to the modern state of war and increasing their tactical ability with every battle fought and every lesson learned. Although battles such as the Somme had been a disaster they had taught the British important lessons and even by early ’17 you can see a clear improvement in British tactical planning. By ’18 the Allied armies (especially the British) had absorbed these lessons and developed the beginnings of true combined arms tactics. Infantry tactics had become devolved to the men on the ground and focused around the platoon rather than large formations of men. This allowed the infantry to be much more efficient and reactive compared to the botched large formation basic orders of the Somme for instance. Each infantry platoon was also far more heavily equipped than their equivalent in ’14-’17 with more machine guns and grenades than ever before. Behind the lines the artillery had mastered its art, was able to fire bombardments without being able to see the enemy to maximise surprise (using maths to calculate their position), was now extensively using hurricane bombardments to further maximise the surprise and was heavily using creeping barrages and leaping barrages. It had become so effective at co-operating with the infantry that a barrage could timed to perfectly match the advance of the infantry, covering their attack on the German trenches and giving the Germans no time to react until the advancing infantry were upon them before then lifting forwards to the German rear lines to prevent the Germans from reinforcing their positions under attack. Elsewhere tanks were present in ever increasing numbers supporting the infantry and enabling them to break through trenchworks while providing mobile heavy fire. It’s important to note these were not the speedy panzer divisions of ’39-’45 and still performed a support role to the infantry. Finally aircraft were being used in increasing numbers, doing innovative things such as air-dropping supplies, dropping smoke bombs over the battlefield and chasing and strafing retreating German soldiers preventing them from regrouping once a breach had been made in the German lines. At the same time Whippet Tanks, which were more mobile versions of the main British tank (although still far from what we’d consider mobile) were also involved in widening and exploiting any breaches made. All these factors combined: improved infantry tactics, massively improved artillery tactics and increased and innovative usage of tanks and aircraft combined to give the Allies almost the precursor of modern warfare and something that the Germans had no reply to. They could now easily break into German lines and make advances of 5/6 miles a day in some cases but this would be useless if it wasn’t tied to improved strategic decision making.
  3. At the same time strategic decision making improved massively. Rather than simply batter the same positions for months at a time even though the chance for breakthrough had ended, as soon as the first few days of an assault were over and the breakthrough slowed down the Allies switched their point of attack. While this was happening all the Allied armies were attacking at the same time, the British from Flanders and Northern France, the French in the centre, the Americans in the south in the Meuse-Argonne Offensive. This constant stream of hammerblows across the entire front and the constant switching of the focus prevented the Germans from reinforcing their positions and no sooner had one breakthrough been halted, another would open up somewhere else on the front. This stretched the Germans so much that by late October it had broken them into a full on fighting retreat. Behind this huge exertion of resources and manpower was the sheer materiel superiority of the Allies, to enable such a concerted and continuous chain of offensives required a huge amount of resources and by this point of the war the Allies (now with America on full war footing) were massively outproducing the Germans in almost every metric possible.

So the reasons why the Hundred Days was so effective was the declining state of the German Army and it’s failure to win the war with the Kaiserschlacht, the sheer materiel superiority of the Allies and finally their ability to put together the lessons of the past four years into true battle winning tactics that look more like the tactics of ’39-’45 than they do the tactics of ’16 and before. America’s entry into the war wasn’t so much the ‘turning point’ in terms of their military contribution, that was still relatively speaking lesser than the British and French even in November ’18 but more in terms of forcing the Germans to launch the Kaiserschlacht in early 1918 and gamble on victory before the Americans could arrive in large numbers. Unfortunately that gamble failed for them and weakened the German Army, then when the Allied launched the Hundred Days, the culmination of four years of bloody lessons, there was only going to be one result.


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From his mount a German horseman views an early airplane at Tempelhofer Feld (Tempelhof’s Airfield) Berlin; ca. 1900s

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Kaiser Wilhelm II of Germany riding through the streets of Berlin with Tsar Nicholas II of Russia; ca.1900

"How are ya, cousin!!!"

We shan’t see the likes of those mustaches again.

It would be tough to squeeze any more incompetent decision makers into this photo.


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A German soldier of the Alpenkorps (Alpine Corps) engaged in a conversation with a Romanian villager; photograph probably taken sometime between December of 1917 and the end of WWI in November, 1918.

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Nine European Kings; May 20th, 1910.

This photo was taken at the funeral of British King Edward VII, May 20, 1910.

"So...what do you all think about having a little tussle with the French in a couple years?" "Only if the Russians join in..."

“So…what do you all think about having a little tussle with the French in a couple years?”
“Only if the Russians join in…”

Standing from Left –

Haakon VII, King of Norway
Ferdinand I, Tsar of Bulgaria 
Manuel II, King of Portugal
Wilhelm II, German Emperor 
George I, King of Greece 
Albert I, King of the Belgians

Seated from the Left –

Alfonso XIII, King of Spain
George V, King of Great Britain
Frederick VIII, King of Denmark