Mefo bills – QE in the Third Reich

Since the Politclowns of the EUSSR are desperately looking for new sources of finance to bailout bankrupt EU countries, I thought it is a good time to take a look at the clever tricks of Nazi Germany to finance the re-arming of the Wehrmacht.

Mefo bills From Wikipedia, the free encyclopedia

In May 1933 four German companies, i.e. Siemens, Gutehoffnungshütte,Krupp und Rheinmetall founded with 1 million Reichsmark the limited liability company Metallurgische Forschungsgesellschaft m.b.H., or “MEFO” for short. The company’s “mefo bills” served as bills of exchange, convertible into Reichsmark upon demand. MEFO had no actual existence or operations and was solely a balance sheet entity.

The arms industry issued the bills of exchange, which then were being accepted by Metallurgische Forschungsgesellschaft m.b.H.  Since the MEFO shareholders were highly regarded members of German industry, the Reichsbank was allowed to discount the bills.

Time to payment was up to 5 years. The bills were guaranteed by the Reich ( reminds me of Fannie and Freddie btw ) and paid 4% interest. They were used as money. Because they paid 4% interest, holders were not interested to present them to the Reichsbank for cash. From 1934 until 31. March 1938 Mefo-bills in nominal value of  12 bill. Reichsmark were issued. They financed ca. 45 % of all military spending to this date. Eight of those twelve bill. RM were absorbed by the market. They were not presented to the Reichsbank for payment. In other words the Reichsbank did not have to print the money and therefore avoided inflation. Hjlmar Schachts plan had worked and the German Reichswehr was-  until 1935 –  secretly re-armed.