Web of Debt - Thinking Outside The Box: How A Bankrupt G...

Home

Order Here

Blog

Public Banking Institute

http://www.webofdebt.com/articles/bankrupt-germany.php

Articles by Author

Interviews

Model-Economy Wiki

THINKING OUTSIDE THE BOX:

HOW A BANKRUPT GERMANY SOLVED ITS
INFRASTRUCTURE PROBLEMS
Ellen Brown, August 9th, 2007
http://www.webofdebt.com/articles/bankrupt-germany.php
Post your comments here

"We were not foolish enough to try to make a currency [backed by] gold of which we had none, but for
every mark that was issued we required the equivalent of a mark's worth of work done or goods
produced. . . .we laugh at the time our national financiers held the view that the value of a currency is
regulated by the gold and securities lying in the vaults of a state bank."
- Adolf Hitler, quoted in "Hitler's Monetary System," www.rense.com, citing C. C. Veith,
Citadels of
Chaos (Meador, 1949)
Guernsey wasn't the only government to solve its infrastructure problems by issuing its own money. (See E. Brown,
"Waking Up on a Minnesota Bridge," www.webofdebt.com/articles/infrastructure-crisis.php, August 4, 2007.) A
more notorious model is found in post-World War I Germany. When Hitler came to power, the country was
completely, hopelessly broke. The Treaty of Versailles had imposed crushing reparations payments on the German
people, who were expected to reimburse the costs of the war for all participants costs totaling three times the
value of all the property in the country. Speculation in the German mark had caused it to plummet, precipitating one
of the worst runaway inflations in modern times. At its peak, a wheelbarrow full of 100 billion-mark banknotes
could not buy a loaf of bread. The national treasury was empty, and huge numbers of homes and farms had been lost
to the banks and speculators. People were living in hovels and starving. Nothing quite like it had ever happened
before - the total destruction of the national currency, wiping out people's savings, their businesses, and the economy
generally. Making matters worse, at the end of the decade global depression hit. Germany had no choice but to
succumb to debt slavery to international lenders.
Or so it seemed. Hitler and the National Socialists, who came to power in 1933, thwarted the international banking
cartel by issuing their own money. In this they took their cue from Abraham Lincoln, who funded the American
Civil War with government-issued paper money called "Greenbacks." Hitler began his national credit program by
devising a plan of public works. Projects earmarked for funding included flood control, repair of public buildings
and private residences, and construction of new buildings, roads, bridges, canals, and port facilities. The projected
cost of the various programs was fixed at one billion units of the national currency. One billion non-inflationary bills
of exchange, called Labor Treasury Certificates, were then issued against this cost. Millions of people were put to
work on these projects, and the workers were paid with the Treasury Certificates. This government-issued money
wasn't backed by gold, but it was backed by something of real value. It was essentially a receipt for labor and
materials delivered to the government. Hitler said, "for every mark that was issued we required the equivalent of a

1 of 4

13-11-16 11:29 AM

Web of Debt - Thinking Outside The Box: How A Bankrupt G...

http://www.webofdebt.com/articles/bankrupt-germany.php

mark's worth of work done or goods produced." The workers then spent the Certificates on other goods and services,
creating more jobs for more people.
Within two years, the unemployment problem had been solved and the country was back on its feet. It had a solid,
stable currency, no debt, and no inflation, at a time when millions of people in the United States and other Western
countries were still out of work and living on welfare. Germany even managed to restore foreign trade, although it
was denied foreign credit and was faced with an economic boycott abroad. It did this by using a barter system:
equipment and commodities were exchanged directly with other countries, circumventing the international banks.
This system of direct exchange occurred without debt and without trade deficits. Germany's economic experiment,
like Lincoln's, was short-lived; but it left some lasting monuments to its success, including the famous Autobahn, the
world's first extensive superhighway.1
Hjalmar Schacht, who was then head of the German central bank, is quoted in a bit of wit that sums up the German
version of the "Greenback" miracle. An American banker had commented, "Dr. Schacht, you should come to
America. We've lots of money and that's real banking." Schacht replied, "You should come to Berlin. We don't have
money. That's real banking."2
Although Hitler has rightfully gone down in infamy in the history books, he was quite popular with the German
people, at least for a time. Stephen Zarlenga suggests in The Lost Science of Money that this was because he
temporarily rescued Germany from English economic theory the theory that money must be borrowed against the
gold reserves of a private banking cartel rather than issued outright by the government.3 According to Canadian
researcher Dr. Henry Makow, this may have been a chief reason Hitler had to be stopped: he had sidestepped the
international bankers and created his own money. Makow quotes from the 1938 interrogation of C. G. Rakovsky, one
of the founders of Soviet Bolsevism and a Trotsky intimate, who was tried in show trials in the USSR under Stalin.
According to Rakovsky, Hitler had actually been funded by the international bankers, through their agent Hjalmar
Schacht, in order to control Stalin, who had usurped power from their agent Trotsky. But Hitler had become an even
bigger threat than Stalin when he had taken the bold step of printing his own money. Rakovsky said:
[Hitler] took over for himself the privilege of manufacturing money and not only physical moneys, but
also financial ones; he took over the untouched machinery of falsification and put it to work for the
benefit of the state . . . . Are you capable of imagining what would have come . . . if it had infected a
number of other states . . . . If you can, then imagine its counterrevolutionary functions.4
Economist Henry C K Liu writes of Germany's remarkable transformation:
The Nazis came to power in Germany in 1933, at a time when its economy was in total collapse, with
ruinous war-reparation obligations and zero prospects for foreign investment or credit. Yet through an
independent monetary policy of sovereign credit and a full-employment public-works program, the
Third Reich was able to turn a bankrupt Germany, stripped of overseas colonies it could exploit, into the
strongest economy in Europe within four years, even before armament spending began.5
In Billions for the Bankers, Debts for the People (1984), Sheldon Emry commented:
Germany issued debt-free and interest-free money from 1935 and on, accounting for its startling rise
from the depression to a world power in 5 years. Germany financed its entire government and war
operation from 1935 to 1945 without gold and without debt, and it took the whole Capitalist and
Communist world to destroy the German power over Europe and bring Europe back under the heel of
the Bankers. Such history of money does not even appear in the textbooks of public (government)
schools today.

Another Look at the Weimar Hyperinflation

What does appear in modern textbooks is the disastrous runaway inflation suffered in 1923 by the Weimar Republic

2 of 4

13-11-16 11:29 AM

Web of Debt - Thinking Outside The Box: How A Bankrupt G...

http://www.webofdebt.com/articles/bankrupt-germany.php

(the common name for the republic that governed Germany from 1919 to 1933). The radical devaluation of the
German mark is cited as the textbook example of what can go wrong when governments are given the unfettered
power to print money. That is what it is cited for; but in the complex world of economics, things are not always as
they seem. The Weimar financial crisis began with the impossible reparations payments imposed at the Treaty of
Versailles. Schacht, who was currency commissioner for the Republic, complained:
The Treaty of Versailles is a model of ingenious measures for the economic destruction of Germany. . . .
[T]he Reich could not find any way of holding its head above the water other than by the inflationary
expedient of printing bank notes.
That is what he said at first. But Zarlenga writes that Schacht proceeded in his 1967 book The Magic of Money "to
let the cat out of the bag, writing in German, with some truly remarkable admissions that shatter the 'accepted
wisdom' the financial community has promulgated on the German hyperinflation."6 Schacht revealed that it was the
privately-owned Reichsbank, not the German government, that was pumping new currency into the economy. Like
the U.S. Federal Reserve, the Reichsbank was overseen by appointed government officials but was operated for
private gain. What drove the wartime inflation into hyperinflation was speculation by foreign investors, who would
sell the mark short, betting on its decreasing value. In the manipulative device known as the short sale, speculators
borrow something they don't own, sell it, then "cover" by buying it back at the lower price. Speculation in the
German mark was made possible because the Reichsbank made massive amounts of currency available for
borrowing, marks that were created with accounting entries on the bank's books and lent at a profitable interest.
When the Reichsbank could not keep up with the voracious demand for marks, other private banks were allowed to
create them out of nothing and lend them at interest as well.7
According to Schacht, then, not only did the government not cause the Weimar hyperinflation, but it was the
government that got it under control. The Reichsbank was put under strict government regulation, and prompt
corrective measures were taken to eliminate foreign speculation, by eliminating easy access to loans of bank-created
money. Hitler then got the country back on its feet with his Treasury Certificates issued Greenback-style by the
government.
Schacht actually disapproved of this government fiat money, and wound up getting fired as head of the Reichsbank
when he refused to issue it (something that may have saved him at the Nuremberg trials). But he acknowledged in
his later memoirs that allowing the government to issue the money it needed had not produced the price inflation
predicted by classical economic theory. He surmised that this was because factories were sitting idle and people were
unemployed. In this he agreed with John Maynard Keynes: when the resources were available to increase
productivity, adding new money to the economy did not increase prices; it increased goods and services. Supply and
demand increased together, leaving prices unaffected.
___________________
1
Matt Koehl, "The Good Society?", www.rense.com (January 13, 2005); Stephen Zarlenga, The Lost Science
of Money (Valatie, New York: American Monetary Institute, 2002), pages 590-600.

3 of 4

John Weitz, Hitler's Banker (Great Britain: Warner Books, 1999).

S. Zarlenga, op. cit.

Henry Makow, "Hitler Did Not Want War," www.savethemales.com (March 21, 2004).

Henry C. K. Liu, "Nazism and the German Economic Miracle," Asia Times (May 24, 2005).

Stephen Zarlenga, "Germany's 1923 Hyperinflation: A 'Private' Affair," Barnes Review (July-August 1999);
David Kidd, "How Money Is Created in Australia," http://dkd.net/davekidd/politics/money.html (2001).

13-11-16 11:29 AM

Web of Debt - Thinking Outside The Box: How A Bankrupt G...

http://www.webofdebt.com/articles/bankrupt-germany.php

S. Zarlenga, "Germany's 1923 Hyperinflation," op. cit.

Ellen Brown, J.D., developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of
Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and "the money trust." She shows
how this private cartel has usurped the power to create money from the people themselves, and how we the people
can get it back. Brown's eleven books include the bestselling Nature's Pharmacy, co-authored with Dr. Lynne
Walker, which has sold 285,000 copies.

Home | Also by Ellen Brown | Links | Contact Us | Order Now

Select Language
Powered by

Translate

Site by Phoenix Development.

Copyright 2007 Ellen Brown. All Rights Reserved.

4 of 4

13-11-16 11:29 AM