Mefo bills
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A Mefo bill (sometimes written as MEFO bill), named after the company
Mefo bills followed the scheme for which the Öffa bills were the blueprint.
As Germany was rearming against the terms of the Treaty of Versailles, the Nazi government needed a form of money that one, did not leave a paper trail, and two, allowed them to spend extravagantly on military rearmament.[1] Billions of MEFO bills were issued throughout the regime's time in power, though the records are not precise.[2]
Funding rearmament
The German government needed to spend a large amount of money to fund the
The government would normally borrow extra funds on the money market by offering a higher interest rate. However, because of the limit it was unable to do so. Additionally, a large, visible government deficit would have attracted attention. MEFO bills could be traded between companies, allowing for increased circulation of currency.[3]
An imaginary company
Mefo bills were issued to mature in six months, initially, but with a provision for indefinite 90-day extensions. To further entice investors, Mefo bills carried an annual interest rate of 4%, higher than that of other trade bills at the time.
To make sure that the bills were never exchanged for Reichsmarks, which would lead to inflation, the 90-day maturation period bills was extended until the actual maturation period became five years by 1939.[4] The total volume of Mefo bills issued was kept secret.
Essentially, Mefo bills enabled the German Reich to run a greater
Economic Consequences
The Nazi governments continued use of debt funding created a large financial deficit. However, MEFO bills were very effective in providing funds. Previous to the MEFO program, the Reichsbank was not allowed to loan more than 100 million reichsmarks to the government.[6] MEFO bills allowed billions in military and public-works funding. Effectively, Germany, through MEFO bills, began printing money. However, inflation did not increase. This is because the Nazi government rarely redeemed MEFO bills.[6] In addition, the interest rate and security of the MEFO bills meant most were kept in circulation and rarely cashed.[2]
Political Implications
The use of MEFO bills allowed Hitler and the top Nazi leaders to consolidate power. As MEFO bills became more prevalent throughout the Third Reich, the economy became ever more reliant on military expansion and conquest at the expense of consumer goods.
Fueling growth
This strengthened the German economy by providing the government with goods and services that it was able to reinvest in the economy, fueling growth and preparing for Hitler's aggressive foreign and domestic policies. Not only did the bills serve the above functions, but they also concealed military spending forbidden by the Treaty of Versailles.
References
- ^ William L., Shirer (1960). The Rise and Fall of the Third Reich: A History of Nazi Germany. New York: Simon & Schuster. p. 260.
- ^ OCLC 71266549.
- ISBN 978-0-521-55767-2.
- ^ Kopper, Christopher (April 1998). "Banking in National Socialist Germany, 1933–39". Financial History Review. 5 (1): 59.
- ^ Kopper, Christopher (April 1998). "Banking in National Socialist Germany, 1933–39". Financial History Review. 5 (1): 60.
- ^ a b "Avalon Project : Nazi Conspiracy and Aggression - Volume 2 Chapter XVI Part 12". avalon.law.yale.edu. p. (C)(1)(A). Retrieved 2024-04-12.