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Schacht, Mefo Bills and the Restoration of the German Economy 1933-39 (2013)

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Re: Schacht, Mefo Bills and the Restoration of the German Economy 1933-39 (2013)

#11

Post by realusername »

Svip wrote: post #2

The first figure is a bit obfuscating. It says 1922-1939, but only shows 1926 through 1939. Which is probably a good thing, because then it doesn't include the hyperinflation of the early 1920s, which might undermine the point of 'Nazis stabilising the economy'. By 1933, most Western economies were moving out of the Great Depression, even if the Netherlands - only economy compared here (wouldn't the UK or France be m…

> (wouldn't the UK or France be more interesting comparisons?)

France wasn't affected much by the Great Depression because it had an economy centralised around the colonies, it affected a lot Germany but in France not that much.

Re: Schacht, Mefo Bills and the Restoration of the German Economy 1933-39 (2013)

#12

Post by yorwba »

ngcc_hk wrote: post #3

Interesting. China also foreign control currency in one stage and only do armament but go nowhere then. I suppose it is also a wonder how a totalitarian communist country can dominate the world by being a chain in the production then get the money and influence as a large consumer market. All bend their ip to get in. Would be a lesson her for those under re-education.

I wonder whether you read dang's previous warning. https://news.ycombinator.com/item?id=19471290

Re: Schacht, Mefo Bills and the Restoration of the German Economy 1933-39 (2013)

#13

Post by wuschel »

paganel wrote: post #9
roenxi wrote: post #5

Such articles are fascinating in the way they expose how primitive our conception of the economy is. > "This is an incredible story from an economic point-of-view. After Hitler’s election in 1933 the Nazis were able to sustain between about 8-10% GDP for five years running with an inflation rate that would be the envy of the Bank of England and other inflation-targeters today." It is so hard to know what to ask for t…

> Did any of the benefit from those rosy figures help any one in any way I guess we'd need to define what the end-game was for different regimes/governments back then. For the Nazi regime their end-game/target (or one of their main ones, in any way) was to reverse the post-WW1 Versailles humiliation against France and its allies, to gain some extra territorial space further East and to wipe out an entire populace bas…

Your approach to defining an endgame is interesting, but I think more thought has to be put into the deconstruction of the goals, and looking at the cost of policies long term.

IMHO,

A) Too much credit is given to the leadership when it comes to economic decisions. For instance, the plan to build Autobahns comes out of the drawer of the monarchy oriented authorities of Prussia, and was adapted to the economic situation by the NSDAP after they took power.

B) The goals for territorial gains (not "some", but substantial) and extermination and enslavement of Jewish and Slavic populace were rooted in an inhuman ideology. Of course, the restoration of Germany's power was their goal - but the communists, monarchists etc wanted the same, just in another manner.

-

Looking at the results, the NSDAP leadership, it's party followers, and the majority population that went along took a leading tier-1 state by scientific advances, technologic level and infrastructure, and by industrial potential, with a more or less intact culture from the historic perspective, and transformed it into a pile of rubble, and Europe along it. I think that is not really good long term leadership, but the result of a mass phenomenon that had roots in imperialism, obedience of authority, revanchism of prior wars, racism, change from an agricultural to an industrial society, poverty and misery.

I always wonder how an EU might have looked like at the time, and how much more prosperity it might have brought (partly at the cost of it's exploited colonies) - but then again, this is not a historic question.

Re: Schacht, Mefo Bills and the Restoration of the German Economy 1933-39 (2013)

#14

Post by sprash »

Interesting tidbit: Schacht was also one of the founding members of the BIS (Bank for International Settlement) in Switzerland along with Warburg, J.P. Morgan and Rockefeller representatives which are coordinating the monetary policies of all major central banks to this day since 1930.

Some people say the restoration of the German economy 1933-39 was only possible because it was arranged by those major central banks. The actual economic policies are rather secondary to that.

Re: Schacht, Mefo Bills and the Restoration of the German Economy 1933-39 (2013)

#15

Post by dvfjsdhgfv »

The chart presented in the article [0] should be put in context of the previous years. The inflation values look very nice when you compare them to what was going on before 1923 [1].

[0] https://fixingtheeconomists.files.wordpress.com/2013/12/nazi...

[1] http://web.nli.org.il/sites/NLI/English/collections/personal...

Re: Schacht, Mefo Bills and the Restoration of the German Economy 1933-39 (2013)

#16

Post by atq2119 »

danmaz74 wrote: post #10
atq2119 wrote: post #6

Earlier quoted context omitted.

I'm not so sure about the "hidden debt" story. I have a feeling that that's a story popularized by people who want to believe that everything done under the Nazi regime was bad. The truth is that the rise of authoritarian extremism tends to be facilitated by economic uncertainty (yes, racism and xenophobia tends to play a big role as well, but immigration is always easier to stomach when jobs are plenty etc.). Stavin…

If you use a lot of borrowed money, you need that money to be invested in a way that will generate wealth that you can use to pay interests on the debt you created. The nazis used most of that money to build their army. If they hadn't used that army, it would have been wasted money, which in no way could have repaid the debt. Democratic governments can - and should - borrow to invest if they see an opportunity for fu…

What you're saying applies to private households and companies. It doesn't necessarily apply to a government that issues its own currency.

Just look at the debt ratio of Japan. For that matter, look at the modern day US which also uses a lot of debt to build up its army.

The point is, blanket statements such as yours have been shown again and again to be false, at least in that generality. I can only reiterate that you have to look more closely at the details to judge each situation.

Re: Schacht, Mefo Bills and the Restoration of the German Economy 1933-39 (2013)

#17

Post by pjc50 »

atq2119 wrote: post #7
roenxi wrote: post #5

Such articles are fascinating in the way they expose how primitive our conception of the economy is. > "This is an incredible story from an economic point-of-view. After Hitler’s election in 1933 the Nazis were able to sustain between about 8-10% GDP for five years running with an inflation rate that would be the envy of the Bank of England and other inflation-targeters today." It is so hard to know what to ask for t…

Just one point to keep in mind is that Germany hadn't been through hyperinflation recently . The hyperinflation was in 1923, so it had ended almost 10 years before the Nazis came to power. That should be plenty of time to get the economy back on track. The first years of the Nazi boom can of course be explained as recovery from the recent depression, but it seems that the boom went beyond that. And it's important to…

> the job of democracy is to foster the well-being of the people

The basic "social democrat" mission statement, rarely heard these days even in Europe.

> why were democratically-oriented politicians unwilling or unable to take similar measures?

The short answer is that while politicians are dependent on the public for votes, they're dependent on a much smaller group of opinion formers, media organisations, and donors for everything else including winning those votes. And the small group tends to be wealthy, conservative, and not willing to have their economic freedom restricted.

Re: Schacht, Mefo Bills and the Restoration of the German Economy 1933-39 (2013)

#18

Post by matt4077 »

atq2119 wrote: post #7
roenxi wrote: post #5

Such articles are fascinating in the way they expose how primitive our conception of the economy is. > "This is an incredible story from an economic point-of-view. After Hitler’s election in 1933 the Nazis were able to sustain between about 8-10% GDP for five years running with an inflation rate that would be the envy of the Bank of England and other inflation-targeters today." It is so hard to know what to ask for t…

Just one point to keep in mind is that Germany hadn't been through hyperinflation recently . The hyperinflation was in 1923, so it had ended almost 10 years before the Nazis came to power. That should be plenty of time to get the economy back on track. The first years of the Nazi boom can of course be explained as recovery from the recent depression, but it seems that the boom went beyond that. And it's important to…

The causality between any one adminstration/regime and economic development is far weaker than than your comment implies, at least in the short and middle term (say, a decade).

Specifically, all industrialised countries saw very similar developments, even though their politics differed vastly: https://en.wikipedia.org/wiki/Great_Depression#/media/File:G...

The US and United Kingdom happen to be rather close analogs to Germany. This isn't too surprising, considering they were already economically coupled, especially the financial sector.

In absolute terms, growth would seem to be roughly in line with making up not just the absolute losses during the Great Depression, but also factors in some modest growth that would have happened during that time. Population growth, for example, continued almost unabated during the 1920s.

Re: Schacht, Mefo Bills and the Restoration of the German Economy 1933-39 (2013)

#19

Post by Spooky23 »

atq2119 wrote: post #16
danmaz74 wrote: post #10

Earlier quoted context omitted.

If you use a lot of borrowed money, you need that money to be invested in a way that will generate wealth that you can use to pay interests on the debt you created. The nazis used most of that money to build their army. If they hadn't used that army, it would have been wasted money, which in no way could have repaid the debt. Democratic governments can - and should - borrow to invest if they see an opportunity for fu…

What you're saying applies to private households and companies. It doesn't necessarily apply to a government that issues its own currency. Just look at the debt ratio of Japan. For that matter, look at the modern day US which also uses a lot of debt to build up its army. The point is, blanket statements such as yours have been shown again and again to be false, at least in that generality. I can only reiterate that y…

The US certainly hides debt well. The reserve status of the currency keeps money out of circulation, keeping inflation at bay, and we “borrowed” trillions of dollars by overcollecting payroll taxes in exchange for future social security payments.

Hopefully things play out well.

Re: Schacht, Mefo Bills and the Restoration of the German Economy 1933-39 (2013)

#20

Post by subjectHarold »

roenxi wrote: post #5

Such articles are fascinating in the way they expose how primitive our conception of the economy is. > "This is an incredible story from an economic point-of-view. After Hitler’s election in 1933 the Nazis were able to sustain between about 8-10% GDP for five years running with an inflation rate that would be the envy of the Bank of England and other inflation-targeters today." It is so hard to know what to ask for t…

I would read the article and the source it links to again. If you do, it answers most of your questions.

Yes, the performance of the German economy was considerable. But the point with Schacht for all economic historians is that the German economy was operating under immense constraints. And what impresses is the way Schacht created endless devices to keep production growing despite these challenges.

And yes, they did measure things the same way. The way of the world today is to look at historical statistics and assume that no-one had a clue about economic policy before the 1980s (Germany was actually one of the most earliest adopters of stats in policymaking). But if you actually look at the primary sources, it is apparent that there was actually a great deal of knowledge. And, in some ways, that understanding was far more deep than today (as it was often based on practice and experience). As the article says, Schacht is an example of this.

More broadly: the job of the economic historian is not to work out whether things were "good or bad ideas". Historians realised many decades ago that the answer to these questions is subjective. You have to look at these decisions within the conditions that existed at the time.

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