The Germans started preparing for war in the late 1920s-early 1930s, if I’m not mistaken. At this point in time, wasn’t the Great Depression in worldwide effect? And also, one of Germany’s motives was the fact that the nation was poor from the aftermath of WWI. So where did all the money come for the massive German buildup? For that matter, where did the raw materials come from. I recall reading that Germany lacked oil and some metals as well.
Well actually Hitler wasn’t really in power until 1933.
A lot of the money the Nazis used came from floating debts and such, it wasn’t a sound economic policy however the Nazi coffers did start to fill in once they conquered and essentialy plundered other nations.
Their financing operations weren’t something sustainable in the long term, if they’d never gone to war they’d have had some extreme economic backlash because of what they were doing. Hitler didn’t seem to interested in that, though. He always believed he was going to die at a moderately young age (before 1950) and he just wanted to have destroyed as many of his enemies as possible before that time at any cost.
An elaborate shell game.
Under Nazi law, it was illegal for banks to own stocks or to loan money for mortgages. As a practical matter, they had to buy government-approved bonds. In the same way, people could not invest in the market (there was no market as we know it), nor in foreign currencies, again only in a limited number of bonds.
Wages and prices were controlled. You got paid, bought your stuff and put the rest in these bonds. When you took your money money out, you could buy stuff or put it into the self-same bonds again. There was no way out.
These bonds were issued by major corporations and were used to finance expansion and to pay wages. The money of course ended up in the same bonds again. And again. And again.
So in truth the workers were paid in money that had no use except minor purchases and bonds that paid back to the corporations. Endlessly.
Economists have a name (which I forget) for this sort of funny money. It is like prison script in that it cannot escape the system that issues it.
A large part of it was through the efforts of Hjalmar Schacht. During the early 20’s, as Germany’s currency commissioner he reigned in the hyperinflation that was undermining the German economy. Although Weimar Germany is often thought of as a complete economic basket case, by the mid-20s the economy was growing and begining to build the industrial infrastructure that Hitler would turn to nerfarious purposes. Schacht’s stabilization efforts played a large part in this, and he had a worldwide reputation as the “banker who saved his country.”
Unfortunately for him and the world, he chose to lend his considerable prestige to the Nazis in the early 30’s. His support gave a sheen of legitimacy to National Socialism, and once the Nazis were in power, he worked tirelessly to ensure that German finances could endure the massive military spending demanded by the Nazis.
To answer your question about oil, some of it they bought from Romania. For the rest of it, the Germans had created a method to make oil from coal, called the “Fischer-Tropsch” method, from its inventors. There are estimates that 92% of Germany’s aviation fuel and 50% of its total petroleum came from synthetic fuels.
A major means for financing the rearmament were the Mefo bills, promissory notes issued since 1934 which were de facto loans from the Reichsbank (the central bank) to the government, but that under accounting regulations could be hidden on the balance sheets of companies that owned them. This secret way of taking on an unacknowledged amount of additional national debt had the advantage of not driving up inflation the way acknowledged extra loans from the Reichsbank would have. I suppose the Nazis counted on being able to pay this secret debt from plundering the economies of defeated enemy states following a successful issue of WWII (during WWII the occupied countries were of course also exploited, but the proceeds were needed for the war economy).
Another measure was to compel the statutory pension insurance (which at the time was partially funded, partly pay-as-you-go) to invest its capital stock in government debt.
After the war this led to the Reichsmark becoming pretty worthless (the Camel and Lucky Strike cigarette brands derive part of their brand value in Germany from their being the de facto currency from 1945-1948), and to the pension insurance scheme becoming wholly pay-as-you-go as the capital stock was lost and pensions still needed to be paid.
Thanks a lot for the answers. They were much more descriptive than I counted on.