This shorter article builds on last weeks with a more in depth example of historical war funding (not how it is done now through central bank deficit spending, but the MEFO bills are a similar mechanism).
More theological/philosophical articles are coming next though, but I just thought this was an interesting and illustrative piece of history.
Pre-War (1933–1939): Creative Debt via the Reichsbank
Hjalmar Schacht (Reichsbank President) engineered MEFO bills. This was a secret financing trick. A dummy company (Metallurgische Forschungsgesellschaft) issued promissory notes to pay arms manufacturers. Banks discounted them, and the Reichsbank guaranteed/rediscounted them, effectively printing money off the official budget books.
This bypassed legal limits on direct government borrowing from the central bank and funded massive rearmament without immediate inflation or visible deficits (the bills were rolled over and rarely redeemed).
The Reichsbank was brought under tighter Nazi control to enable this deficit spending.
By 1939, the system was straining as MEFO bills were maturing, gold reserves were low, and Schacht was sidelined/opposed further expansion.
Wartime Funding: Conquest → Plunder Central Banks → Repeat
Hitler’s strategy shifted to plunder as the primary "repayment" mechanism. The war was designed to be self-financing through rapid conquests. The Reichsbank played a central role in absorbing and laundering the loot:
Austria (Anschluss, 1938): Seized ~90+ tons of central bank gold (plus private/Jewish assets). This gave the Reichsbank immediate hard currency reserves when they were nearly broke.
Czechoslovakia (1939): Took the National Bank’s gold reserves (some transferred via the BIS and even facilitated by the Bank of England under duress). Provided another major influx of gold.
Subsequent Invasions (Poland 1939, Western Europe 1940, etc.): Upon occupying a country, Nazi forces immediately targeted the central bank to seize gold bullion, foreign currency, and reserves. The Reichsbank incorporated looted monetary gold into its holdings (often remelted to hide origins). This gold was used to:
Buy critical war materials (oil, metals, etc.) from neutral countries like Switzerland, Sweden, or Portugal.
Pay for imports that Reichsmarks alone couldn’t cover.
Occupied Territories:
Forced "occupation payments" or clearing accounts where the conquered central banks effectively printed local currency or credited Germany.
Reichskreditkassen (Reich Credit Banks) issued special notes as a form of forced financing.
The Reichsbank laundered and redistributed much of the gold (e.g., to the BIS or Swiss National Bank).
In short: The Reichsbank was the financial nerve center. Pre-war, it enabled hidden money creation. During the war, it systematically absorbed gold and assets stolen from one central bank after another, turning military conquest into the fuel for the next invasion. Plunder from central banks (and Jewish assets) was essential because Germany’s own economy and currency couldn’t sustainably fund a prolonged total war.
This created a vicious cycle: conquest funded more conquest, until it didn’t. The system relied on continuous victories; once the tide turned, the house of cards collapsed.
This ties into broader historical patterns of metallic money’s vulnerabilities (centralization + seizure risk), which are mentioned in the article from yesterday.