… A somewhat attenuated version of monetary reform was introduced. In order to finance the state’s work and rearmament programs, two dummy corporations … were established…
In January 1939 matters came to a head when Schacht refused extension of RM3 billion worth of Offa and Mefo bills, because of fears of “inflation”. On January 7, 1939, he sent Hitler the following memorandum:
“1) The Reich must spend only that amount covered by
2) Full financial control must be returned to the Ministry of Finance. (Then forced to pay for anything the army desired.)
3) Price and wage control must be rendered effective. The existing mismanagement must be eliminated.
4) The use of money and investment markets must be at the sole discretion of the Reichsbank. (This meant a practical elimination of Goering’s Four Year Plan)”(14)
By these means Schacht intended to collapse the German economy, which during the period 1933-39 had increased its gross national product by 100 percent. From being a ruined and bankrupt nation in January 1933 with over six million unemployed persons, Hitler had transformed Germany into a socialist paradise and the most powerful and prosperous state in the history of Europe. He angrily rejected the recommendations of the Reichsbank, describing them as “mutiny”.(15)
On January 19, 1939 he sacked the impudent lackey of international finance.(16) Without further ado he instructed the Reichsbank to issue all credits requested by the state. A form of Federgeld (Feder money) was now in circulation, although the bills of exchange still attracted nominal interest.
A new Reichsbank law, which was promulgated on June 15, 1939, made the bank “UNCONDITIONALLY SUBORDINATED TO THE SOVEREIGNTY OF THE STATE.”(17) Article 3 of the law decreed that the bank should be “directed and managed according to the instructions and under the supervision of the Fuehrer and Reich Chancellor.”(18) Hitler was now his own banker,…
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