Cross-posted from Anthony Migchels’ Real Currencies:
There is the widespread notion that Hitler was fighting the Money Power and that he was a problem for the Bankers because he created a Usury free economy. But there was no Usury free Third Reich economy. The German taxpayer continued to pay interest over the substantial national debt and commercial banking received interest for its fractional reserve banking based loans, which to a large extent financed the war.
“Our greatest social task is the abolition of interest slavery. This responsibility to abolish interest slavery towers above all other issues of the day. It is the only solution to the greatest problem of our time. The breaking of interest slavery is the most important moral imperative in social terms, it rises in its general significance far beyond all questions of the day, it is the solution of social questions, it is the only way out of the terrible confusion of the time. The abolition of interest slavery will deliver us from ultra-capitalist domination while avoiding both Communist destruction of the human spirit and Capitalist degradation of labour. The abolition of interest slavery opens the way to a truly social economy, by liberating us from the overwhelming domination of money. It opens the way to a state based on creative work and genuine accomplishment.” – Gottfried Feder 1919
By Anthony Migchels
Where does Hitler’s reputation for anti-Usury activism come from? It was more Nazi propaganda to get him to power than his actual policies after he did. It was not Hitler, but Gottfried Feder who was the anti-Usury man of the Nazi. Hitler in Mein Kampf:
“For the first time in my life I heard (through Feder, AM) a discussion which dealt with the principles of stock exchange capital and capital which was used for loan activities. After hearing the first lecture delivered by Feder, the idea immediately came into my head that I had found a way to one of the most essential prerequisites for the founding of a new party.
To my mind, Feder’s merit consisted in the ruthless and trenchant way in which he described the double character of the capital engaged in stock exchange and loan transactions, laying bare the fact that this capital is ever and always dependent on the payment of interest.”
“The struggle against international finance capital and loan capital has become one of the most important points in the program on which the German nation has based its fight for economic freedom and independence.”
Point 11 of the NSDAP 25 point program, a manifesto that officially (but not in practice) expressed Nazi policy:
“Abolition of unearned (work and labour) incomes. Breaking of debt (interest)-slavery.”
Hitler put it this way:
“Our financial principle: Finance shall exist for the benefit of the state; the financial magnates shall not form a state within the state. Hence our aim to break the thralldom of interest.
Relief of the state, and hence of the nation, from its indebtedness to the great financial houses, which lend on interest.
Nationalization of the Reichsbank and the issuing houses, which lend on interest.”
But as we shall see, Hitler did not implement any serious monetary reform after he came to power. He did make finance completely subservient to the State and, more specifically, rearmament. But he did not nationalize any banks and the Reichsbank was already nationalized by the Weimar Republic by the time he came to power. He did not end interest payments to ‘the issuing houses’, who must have made an uncanny fortune throughout the war. He did nothing to decouple the Stock Exchange from the economy.
Feder was made Secretary of State for Economic Affairs, but was from day one sabotaged by Reichsbank President Hjalmar Schacht and replaced by him in August 1934. It was Schacht who was to manage the Nazi economy, not Feder.
Schacht’s and Hitler’s policies allowed full control of the economy, which was used to maximize production for the sake of war. But it did absolutely nothing to limit in any way massive war profiteering by the financial and industrial classes that brought him to power.
The Reichsmark was created 1924 after its predecessor, the Papiermark, had been inflated into oblivion. 1 Reichsmark was 1 Trillion Papiermark. The Reichsmark lasted until 1948, when it was replaced by the Deutsche Mark. So Hitler simply used the monetary system that he inherited from the Weimar Republic. The Reichsmark, like any other banking unit, was lent into circulation. It was a Gold backed unit until 1931, when the depression forced the Reichsbank (the Central Bank) to implement exchange controls, which effectively took Germany off the Gold Standard. A Gold peg remained in place. There were 1, 2 and 5 Reichsmark silver coins.
Hitler inherited the official Weimar 4,5% maximum interest rate. He ruled by decree, but never changed this. In fact, after the Nazi economy began to boom due to heavy spending on rearmament, it seems interest rates were raised to combat inflation. I’ve been unable to find any data on real interest rates during the Nazi era.
Who was Hjalmar Schacht?
Schacht was born in 1877 as the son of an aristocratic family. He joined Dresdner Bank in 1903 and already in 1905 was meeting people like JP Morgan and Theodore Roosevelt. He studied Hebrew to advance his career. In 1908 he joined Freemasonry. He oversaw the financing of Belgian/German trade during WW1 and used his former employer Dresdner Bank for this. This blatant conflict of interest led to his dismissal, but the revolving door was not invented recently and he was taken back by Dresdner Bank after this.
In 1923 he joined the Reichsbank and played a key role in ending the hyperinflation of the day. A little later he was made President of the Reichsbank and remained in this post until 1930. Since at least 1923 he was actively resisting the war reparations that were destroying the German economy and called for resurrection of German power. In 1926 he became involved with the NSDAP and supported their rise to power, although he never became a member.
He oversaw the formation of I.G. Farben in the twenties.
Schacht was a member of the Keppler Circle, a small group of businessmen that were at the heart of the Nazi movement and which financed Hitler’s rise to power. Wall Street was very influential in this group and contrary to what many Hitler apologists claim, played a heavy role in both financing him and war profiteering.
Shortly after Hitler came to power he was reinstated as President of the Reichsbank and when he replaced Feder as Reichscommissar for the Economy, he basically gained full control over the economy. This lasted until he was fired in 1939, when the German economy was overheating and Schacht wanted to limit spending on rearmament and was accused of ‘mutiny’ by Hitler.
Banking in Nazi Germany before the war
After becoming President of the Reichsbank, Schacht immediately started implementing policies aiming at giving the State full control of financial markets. This was known as ‘the New Plan’:
“(1) restriction of the demand for such foreign exchange as would be used for purposes unrelated to the conspirators’ rearmament program; (2) increase of the supply of foreign exchange, as a means of paying for essential imports which could not otherwise be acquired; and (3) clearing agreements and other devices obviating the need for foreign exchange. Under the “New Plan”, economic transactions between Germany and the outside world were no longer governed by the autonomous price mechanism; they were determined by a number of Government agencies whose primary aim was to satisfy the needs of the Nazi’s military economy.”
Foreign exchange controls were implemented to manage shortages in foreign currencies. Rules for credit creation by the Reichsbank were cancelled, aimed at potentially limitless credit creation to provide the economy with the liquidity it needed to get back at full employment.
All policies were aimed at 1) making sure the Government was basically the only borrower at domestic capital markets and 2) to make sure there was always enough credit available.
Price and wage controls and indeed rising interest rates were used to combat rising prices that would have resulted from these inflating policies.
Between 31 December and 30 June 1938, the national debt of the Reich rose from 10.4 billion Marks to 19 billion Marks.
There was no nationalization of banks. In fact: some banks that the Weimar republic had nationalized during the early days of the depression, were again privatized. Private banks played a crucial role in financing the rearmament effort. They were put under close Reichsbank control to make sure their lending was what the State wanted, but nothing was done to limit their profitability.
The Stock Exchange
While railing against this typical exploitative instrument of finance during his rise to power, Hitler did nothing to limit the stock exchange’s scope and operations once he had the chance. The stock exchange system in the Reich was superficially reformed: a number of its outlets were merged and the number of exchanges declined from 25 to 9 as a result. But volume of trading was never threatened and during the early Hitler years it saw annual double digit rises until 1937, when the Reich’s economy started faltering and the stock exchange lost about 10% of its capitalization between 1937 and 1939. After the war broke out the stock market saw a massive boom, rising 50% between the falls 1939 and 1941.
In 1934 heavy taxes were levied on dividend payments higher than 6%, but the aim of this was not to limit profiteering, but to enhance self-financing of publicly traded corporations. They were expected to recycle more of their profits into their own operations, to make them independent of capital markets, which the State intended and managed to completely dominate for its own financing needs. There were loopholes to evade this measure and shareholders were not damaged, as it implied deferment of dividend payments and not real limitations.
The Reich’s policies also made sure the common man did not enter the stock market, as they were expected to lend to the Government and not to speculate. But still, the amount of funds being diverted to the stock market were not invested in the war and “It was then (1942, AM) that the government stepped in and destroyed the last relatively free market in the economy. Loans for the purchase of stocks were prohibited. Shareholders had to file a declaration with the government of all shares purchased since the outbreak of war if their market value exceeded 100,000 Reichsmark. The government could, at any time, request that any of these shares be delivered to it for cash and that the proceeds be invested in securities to be specified by the government. (Nathan)”
While every effort was made to assure the State’s domination of capital markets, there was simply not enough liquidity in the economy to create full employment and unlock the German Folk’s full productive capacity for rearmament. This could have been solved by having the State go massively into debt, in typical Keynesian fashion. But this would have created both political and economic problems and, equally important, would have shown the full extent of rearmament to the Reich’s enemies.
Instead, Hitler, right after coming to power, fired Reichsbank President Hans Luther and reinstated Hjalmar Schacht, who was willing to build on Luther’s Oeffa’s: Government promissory notes aimed at creating employment that would create the extra liquidity needed to finance Hitler’s plans.
Schacht created a special purpose vehicle (SPV, a dummy corporation) called MEtallurgische FOrschungsgesellschaft (MEFO), which was used to accept bills of exchange drawn by German weapons manufacturers and received by all German banks for possible re-discounting by the Reichsbank. The bills were guaranteed by the Reich for five years and were thus (indirectly) convertible to Reichsmark.
MEFO bills of exchange were a pure bookkeeping operation and there were no actual paper certificates. They circulated between MEFO, the Reichsbank, commercial banks and manufacturers, not in the wider economy. At its peak there were about 12 billion worth in circulation. Key was that they were kept off the Reich’s books as all transactions were logged at the MEFO SPV. Because of this, nobody really knew the extent of spending on weaponry.
While they solved the depression and allowed for the Nazi war machine, they also created fairly serious inflationary pressures. And while this kind of construct may sound ‘innovative’ to the uninitiated, they would have been a no brainer for an experienced banker like Schacht. As said, they were based on certificates (called Oeffa) that the Weimar Republic was already circulating and national treasuries had been circulating their own certificates routinely, when pressing political issues forced them to increase their financial clout. The US Treasury had its Treasury notes before the Civil War. The UK printed ‘Bradbury Pounds’ (debt free notes) to finance WW1. The Canadian Treasury printed its own debt free money as of 1935 and during the twenties and thirties advanced monetary reform programs were widely discussed throughout the West.
Hitler was heavily indebted to Feder’s anti-Usury stance in coming to power. But early on during his reign he got rid of Feder and relied on Schacht for the financing of his war plans. Unlike Schacht, Feder was not heavily involved with the top bankers and industrialists of the age. The German economy was directed completely to rearmament. Consumption levels were kept low through taxation and wage controls. Imports and production of luxuries were severely restricted.
Schacht made sure the financial industry was focused solely on war preparation and in effect allowed only the State to borrow on the domestic capital markets. International trade was primarily reliant on (scarce) foreign currencies and while there was some international bartering, it was far from dominant. The Reich’s financial industry did not decouple entirely from international finance, although foreign exchange controls were strict. For instance: the Bank of International Settlements continued dealings with the Reich.
There was no usury free economy. The common man or small business actually would have next to no access to credit at all. Even manufacturers were forced to become self financing, so the State could monopolize borrowing on the capital markets. The stock market boomed like never before.
Instead, all policies were directed at securing sufficient funds for rearmament, not at minimizing financial exploitation by the parasitical class that Hitler so vehemently attacked with his rhetoric. Finance was a matter of volume, not cost. Schacht’s MEFO bills have been wrongly jumped upon to claim Hitler was an anti banker man, while Schacht himself has the typical bio of a high level Money Power operative. He was a life long friend of BoE chief Montague Norman and was acquitted at Neurenberg, where the Soviets wanted a conviction while the British made sure he was released.
The myth of Nazi anti-Usury activism is damaging, not only because of its mythological character, but because it allows the Money Power to defame anti-Usury activism through ‘guilt by association’. In fact, many Austrians and Mainstreamers, call usury-free monetary reform programs ‘fascist’. Fascism itself is being rehabilitated because of its supposed stance against finance capitalism. But as we have learned from Bolton’s ‘The Banking Swindle’, the twenties and thirties saw many monetary reform programs throughout the West, far from all associated with fascism. After the war they were relegated to a memory hole because of this false association with fascism.
War profiteering by the industrial and financial class was in no way restricted. As a result, they profited immensely from the war. This was indeed the main reason for them to enable Hitler’s rise to power and their loyal support of his policies during the rearmament and the war. Even today, the main culprits like the Thyssen family, Krupp and the Goebbels step-children owning BMW are among the richest people in Germany. The same banks that financed the Reich’s war are now among the biggest in the world.
(with special thanks to Niels Verduijn and Ad Broere)
Let me be the first to admit I, until recently, believed much of what was said about Hitler’s ‘usury-free’ economy and have inadvertently contributed to the harnessing of this meme.
I agree with much of revisionist history. Post war historiography is just wartime propaganda. The Holocaust needs serious revaluation. Stalin, Roosevelt and Churchill were psychopaths who committed horrible crimes, against the Japanese, their own people, the people the colonized and against the Germans.
I do feel that at this point many in the Alternative Media go overboard, making Hitler a hero. This is unwarranted. The current article shows, in spite of what many believe, he was far from a renegade in a financial sense. There is also the Hunger Plan: Hitler and the Wehrmacht High Command intended to have the Wehrmacht live of the Russian land they were to occupy by robbing the farmers of their harvests. They cynically calculated this would starve 30 million Russians. Thankfully they never had the chance to fully implement this, but still millions of Russians starved because of the Wehrmacht taking their supplies.
The fact is that Hitler always wanted to invade Russia and his explanation that it was to save the world of Marxism, which he well analyzed to be a Jewish front, is irreconcilable with his take that Britain was a nation of Aryan brothers and the British Empire ‘necessary’ and a great civilizing force in the world: even at that time it was well known that the British Aristocracy had merged with Jewish Money and that the City of London was the Money Power’s capital.
Hitler was an imperialist who wanted to conquer Russia for the third Reich and intended to kill untold millions of Russians to take their land. His rise and fall gave the Money Power everything it wanted, including the war itself, the Zionist Entity in Palestine, the EU, Soviet domination of Eastern Europe, the destruction of the British Empire, the UN and the Cold War.
We will probably never know whether he was a useful idiot or willing stooge, but while he may have been no worse than his antagonists, he certainly also was no better.
Hitler and the Banksters, by Ingrid Rimland
Nazi War Financing and Banking, by Otto Nathan
Ziopedia on MEFO’s
Jewish Virtual Library on Schacht
Wall Street and the Rise of Hitler, by Antony Sutton