Hitler’s plans to revitalize the German economy by spending on infrastructure and rearmament were financed by issuing off-balance-sheet paper claims to suppliers–which in theory were redeemed by reichsmarks but in practice were allowed to mount up. The practice was potentially highly inflationary, but in the short term it worked wonders. Unemployment fell from six million to less than one million by 1937. Germany’s economy outperformed all others in recovery from the Depression.
That is from When Globalization Fails, by James MacDonald, reviewed here. I think Tyler would like this book.
I think of QE as analagous. QE finances deficit spending with off-balance-sheet “paper” (bank reserves) which in theory are money but in practice are allowed to mount up in banks without acting as money–yet.
Have you read Tooze’s “The Wages of Destruction: The Making and Breaking of the Nazi Economy”? The book goes into great detail, and makes clear that Nazi Germany avoided using market mechanisms even where they were suggested by highly-placed officials (Hjalmar Schacht, particularly) on the basis of greater efficiency. Private firms and banks still existed, but they were very tightly regulated and faced with binding price controls, such that they were in most cases simply the operational end of central planning.
I’d hesitate thus to make any comparison to modern day QE, as even with the substantial public sector intervention and diversion of credit in the United States and elsewhere, we don’t even come close to the situation in ’30s Germany.
“…we don’t even come close to the situation in ’30s Germany”
In many ways no, we don’t.
1930’s Germany: A great many Germans were out of work and wanted a job.
2015 America: Many Americans are leaving the labor force and don’t want to work regardless of the availability of jobs. Both old and new policies make this an easier and more comfortable decision.
That’s what financial planners and politicians take for granted is that the times have drastically changed. The call for “work programs” and “shovel-ready” jobs are pastiche. The more they try to resurrect an economy that doesn’t exist, the more QE will be needed to sustain the illusion that workers and wages are still the heart of our economy.
We are, indeed, a custodial society.
But we still organize things around the idea of workers and wages. That seems pretty fundamental for modern humans. I’m not sure what other method of organization could replace it. Maybe an ethnic spoils system; or religion; or a combination of the two.
Go Godwin early, I always say.
Are statistics like “Unemployment fell from six million to less than one million by 1937” meaningful for that time period?
I expect during the war proper, many Germans were conscripted into the war, and very few were unemployed. Heck, by that point they were enslaving people! That hardly means that living standards were high.
Perhaps some less-extreme version of that analysis applies to 1937.