How Did the Nazis Secretly Finance Rearmament Before WWII? (MEFO Bills Explained) #OOTF #shorts

How did Nazi Germany massively rearm in the 1930s without officially blowing up its budget? The answer lies in a financial scheme called MEFO bills, one of the most creative (and dangerous) accounting tricks of the interwar period.

In 1934, under finance minister Hjalmar Schacht, the Nazi regime created a dummy company called Metallurgische Forschungsgesellschaft (MEFO). Instead of paying arms manufacturers like Krupp or Messerschmitt in cash, the government paid them in promissory notes — MEFO bills — guaranteed by the German Reich.

These IOUs carried 4% interest and could be redeemed at any bank for Reichsmarks. The banks then passed them to the Reichsbank, which quietly expanded the money supply — all while keeping rearmament spending off the official state budget.

The result?

• Industry got paid

• Germany appeared financially stable

• Foreign observers saw no massive deficit

• Rearmament exploded

By 1938, around 12 billion Reichsmarks had been financed this way.

But the scheme was a ticking time bomb. When the bills began maturing, Schacht warned of a financial crash. Hitler responded by firing him and converting the hidden debt into government bonds.

The MEFO system didn’t solve Germany’s economic problems — it postponed them long enough to launch a war.

This wasn’t economic genius. It was controlled financial deception designed to buy time.

The trick bought time, just enough to prepare for war.
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