The Wages of Destruction: The Making and Breaking of the Nazi Economy

by Adam Tooze

The problem that now posed itself with ever greater urgency, however, was how to sustain German exports without a devaluation. A solution was found in the autumn of 1933 through a variety of schemes, all of which made use of the advantage that Germany had gained through the oratorium on its foreign debts. Either through a complicated system of buy-backs, or through manipulating the blocked accounts of the foreign creditors in Germany, the Reichsbank found ways of subsidizing Germany’s exporters at the expense of its creditors, earning Hjalmar Schacht his dubious reputation in the 1930s as the dark wizard of international finance. The leverage that Germany had gained over its creditors was represented most succinctly in the depressed value of German bonds (IOUs) on financial markets in New York and London. In January 1933, before Hitler took power, bonds owed by German municipalities and corporate borrowers traded on average at 62 per cent of face value.31 Hitler’s accession to power lowered that by twelve points to 50 per cent. After the announcement of the partial moratorium in June 1933 they fell to around 40 per cent. One system of subsidy, therefore, involved German exporters using their foreign earnings to buy up the heavily discounted German bonds in London and New York. A bond with a face value of $100 (valued at 350 Reichsmarks, at the prevailing exchange rate of 3.50 Reichsmarks to the dollar) could be purchased in New York in April 1934 for roughly $50 (175 Reich...