HOW A BANKRUPT GERMANY SOLVED ITS INFRASTRUCTURE PROBLEMS

[zgrams at zgrams.zundelsite.org]

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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


"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 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 (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:

"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."

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.

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

3	S. Zarlenga, op. cit.

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

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

6	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).

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