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Nazi Economics

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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SA (Sturm Abteilung or “Brownshirts”) call for the boycott of Jewish shops in Friedrichstraße, Berlin; April 1, 1933.

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The sign says: “Germans, Attention! This shop is owned by Jews. Jews damage the German economy and pay their German employees starvation wages. The main owner is the Jew Nathan Schmidt.”


Photo of sentencing from the Nuremburg trials. The name of the offender and their punishment next to them, Hess is hidden because Goering was standing up, he received life imprisonment; Oct 1st 1946.

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Pretty much all of them served their sentences, and a couple were apparently repentant.

Sentenced to hang:

  • Hermann Goering: Committed suicide on the 15/10/46, the day before his execution. (He took a potassium cyanide pill the night before his execution was to take place. He had requested a firing squad like a soldier would receive instead of hanging like a commoner and was denied.)
  • Fritz Sauckel: Hanged on the 16/10/46.
  • Alfred Jodl: Hanged on the 16/10/46. (One of the three French judges later declared that Jodl should not have been found guilty and hanged. In 1953, the denazification courts in Germany reversed the verdict and returned all of his confiscated property to his widow.)
  • Arthur Seyss-Inquart: Hanged on the 16/10/46. (Interesting point, his reaction to the sentence was “Death by hanging… well, in view of the whole situation, I never expected anything different. It’s all right.” He was the last to be hanged and remarked: “I hope that this execution is the last act of the tragedy of the Second World War and that the lesson taken from this world war will be that peace and understanding should exist between peoples. I believe in Germany.”)
  • Joachim von Ribbentrop: Hanged on the 16/10/46.
  • Wilhelm Keitel: Hanged on the 16/10/46. (Last words “I call on God Almighty to have mercy on the German people. More than 2 million German soldiers went to their death for the fatherland before me. I follow now my sons – all for Germany.”)
  • Ernst Kaltenbrunner: Hanged on 16/10/46.
  • Alfred Rosenberg: Hanged on 16/10/46. (He was asked if he had any last words and replied “No”.)
  • Hans Frank: Hanged on 16/10/46. (He was reportedly very calm and quiet, viewed his sentence as atonement for his sins and gave the last words: “I am thankful for the kind treatment during my captivity and I ask God to accept me with mercy.”)
  • Wilhelm Frick: Hanged on 16/10/46. (He was the most afraid and unsteady, and his last words were “Long live eternal Germany”)
  • Julius Streicher: Hanged on 16/10/46. (He was entirely unrepentant, and gave 4 last statements: “Heil Hitler” at the foot of the gallows, a mocking reference to the Jewish festival Purim as the noose was secured, “The Bolsheviks will hang you one day!” as the bag was put on his head and “Adele, meine liebe Frau!” as he was dropped.)

Sentenced to life

  • Erich Raeder: Freed on 26/9/55 after nearly 9 years due to ill health. Died 6/11/60.
  • Rudolf Hess: Committed suicide by hanging on 17/08/87, aged 93. (He spent his last 41 years in prison, presumably well. He lived a long time, after all. And then one day, after four decades of confinement, he finally just said, “Whelp, this is it,” and did himself in at 93.)
  • Walther Funk: Freed 16/5/57 after 10 years due to ill health. (Died of diabetes three years later.)

Sentenced to 10-20 years

  • Karl Doenitz: Served his 10 year sentence, (and died 24 years later.)
  • Baldur von Schirach: Served his 20 year sentence, (retired alone due to his wife divorcing him in prison, and died 8 years later.)
  • Albert Speer: Served his 20 year sentence. (He chose not to return to architecture, but instead became an author. He personally accepted responsibility for the Nazis crimes, and anonymously donated most of his book royalties to Jewish charities (Up to 80%). Died of a stroke in 1981 while visiting London to appear on the BBC. *He is quite an interesting character. He’s known by some as “The Nazi Who Said Sorry” because he seemed to genuinely regret being involved with the whole thing. His testimony at the Nuremberg Trials is a fascinating read, if you’ve got the time.)
  • Konstantin von Neurath: Released 7 years early from his 15 year sentence due to ill health. (He returned to his family home and died of a heart attack 2 years later.)