Was foreign gold the key to everything?

Discussions on the economic history of the nations taking part in WW2, from the recovery after the depression until the economy at war.
NeoVisionist
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Was foreign gold the key to everything?

Postby NeoVisionist » 29 Apr 2017 21:17

When a nation undergoes frenetic re-arming and mobilization, it stands to reason that all those soldiers, expensively trained and equipped, in all those trucks, tanks, planes and ships, are going to define your national economy, ultimately becoming its raison d'être. The economy exists to support the military, but the military is now in a position to support the economy; hence Germany had no choice but to attack by 1940 at the latest, else economic collapse would follow.

Germany was always short of foreign currency, which proved an Achille's heel for vital imports; oil, rubber, grain, tungsten from Portugal- Germany was blockaded and in any case outbid for all these by the western powers. After Austria and Czechoslovakia; Poland, Denmark, Norway, Belgium, Luxemburg, France, Yugoslavia, Greece were all potential sources of precious bullion which could reinforce the Reich treasury. Many nations dispatched their gold overseas, straight into the Allied hands.

What did Germany do to help secure foreign gold when invading? What more could have been done? How useful or even vital was this gold to Germany and would making it a priority, over for instance, the holding of territory have made sense? Would potential peace deals with conquered nations have collapsed without Germany returning the gold to its rightful owners?

Sid Guttridge
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Re: Was foreign gold the key to everything?

Postby Sid Guttridge » 30 Apr 2017 17:35

Hi Neovisionist,

Gold wasn't altogether necessary.

As I understand it, much of German rearmament in the late 1930s was based on credit, both internal and external. For example, the money German workers were saving for Volkswagens was spent on it. Germany also acquired raw materials from South America in exchange for Aski Marks, which could only be spent on discounted German manufactured goods, including armaments. At the outbreak of war large amounts of raw materials had been imported, but few of the reciprocal German manufactuured goods had been sent in return.

Germany's rearmament started earlier than that of its opponents and, in order to build up large armed forces quickly, it took up an inordinately high propoprtion of German investment in the late 1930s. Rearmament would have been completed by the early 1940s, at which point Germany's relative advantage over its opponents would have peaked. Germany then either had to use this temporary military advantage in war or return to a peacetime economy that was more consumer based in order to pay for it, both at home and abroad.

Cheers,

Sid.

thestor
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Re: Was foreign gold the key to everything?

Postby thestor » 02 May 2017 04:53

I doubt the importance of gold, particularly for Germany during WWII. Remember, gold is mostly a medium of (commercial) exchange, its inherent value as a material is not extraordinary. What I mean, someone can perform the same service or deliver the same goods whether he gets paid in gold or silver or is forced to do so at gunpoint, it isn't like coal you need to to feed into a furnace to get heat.
At least later in the war, there were few neutral countries with which Germany could trade, while countries and people under its immediate control could (and were) coerced into doing and delivering for any payment (if any) that the Reich decreed.

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henryk
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Re: Was foreign gold the key to everything?

Postby henryk » 02 May 2017 20:10

Foreign gold was important.
https://en.wikipedia.org/wiki/Nazi_gold
The draining of Germany's gold and foreign exchange reserves inhibited the acquisition of materiel, and the Nazi economy, focused on militarisation, could not afford to deplete the means to procure foreign machinery and parts. Nonetheless, towards the end of the 1930s, Germany's foreign reserves were unsustainably low. By 1939, Germany had defaulted upon its foreign loans and most of its trade relied upon command economy barter.[1]

However, this tendency towards autarkic conservation of foreign reserves concealed a trend of expanding official reserves, which occurred through looting assets from annexed Austria, occupied Czechoslovakia, and Nazi-governed Danzig.[2] It is believed that these three sources boosted German official gold reserves by US $71m between 1937 and 1939.[2] To mask the acquisition, the Reichsbank understated its official reserves in 1939 by $40m relative to the Bank of England's estimates.[2]

During the war, Nazi Germany continued the practice on a much larger scale. Germany expropriated some $550m in gold from foreign governments, including $223m from Belgium and $193m from the Netherlands.[2] These figures do not include gold and other instruments stolen from private citizens or companies. The total value of all assets allegedly stolen by Nazi Germany remains uncertain.

During the war, Portugal, with neutral status, was one of the centres of tungsten production and sold to both Allied and Axis powers. Tungsten is a critical metal for armaments, especially for armour-piercing bullets and shells. Much of the Axis tungsten was purchased with Nazi gold bullion, which was looted from the countries they had invaded as well as their dead victims. It is estimated that nearly 100 tons of Nazi gold were laundered through Swiss banks, with only four tons being returned at the end of the war.[20]

During the war, Portugal was the second largest recipient of Nazi gold, after Switzerland; this came through the sale of tungsten, with the German armaments industry nearly entirely dependent on the supplies from Portugal.[21] Initially the Nazi trade with Portugal was in hard currency, but in 1941 the central Bank of Portugal established that much of this was counterfeit and Portuguese leader António de Oliveira Salazar demanded all further payments in gold.[22] Presumably the counterfeit currency were the infamous banknotes produced by Sachsenhausen concentration camp victims in Operation Bernhard.
The Swiss National Bank, the largest gold distribution centre in continental Europe before the war, was the logical venue through which Nazi Germany could dispose of its gold.[10] During the war, the SNB received $440m in gold from Nazi sources, of which $316m is estimated to have been looted.[11]

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Guaporense
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Re: Was foreign gold the key to everything?

Postby Guaporense » 03 May 2017 07:49

NeoVisionist wrote:When a nation undergoes frenetic re-arming and mobilization, it stands to reason that all those soldiers, expensively trained and equipped, in all those trucks, tanks, planes and ships, are going to define your national economy, ultimately becoming its raison d'être. The economy exists to support the military, but the military is now in a position to support the economy; hence Germany had no choice but to attack by 1940 at the latest, else economic collapse would follow.


No. It just mean that they would keep a huge force in the defensive.

Germany was always short of foreign currency, which proved an Achille's heel for vital imports; oil, rubber, grain, tungsten from Portugal- Germany was blockaded and in any case outbid for all these by the western powers. After Austria and Czechoslovakia; Poland, Denmark, Norway, Belgium, Luxemburg, France, Yugoslavia, Greece were all potential sources of precious bullion which could reinforce the Reich treasury. Many nations dispatched their gold overseas, straight into the Allied hands.

What did Germany do to help secure foreign gold when invading? What more could have been done? How useful or even vital was this gold to Germany and would making it a priority, over for instance, the holding of territory have made sense? Would potential peace deals with conquered nations have collapsed without Germany returning the gold to its rightful owners?


It was almost irrelevant. The German sphere of power was mostly blocked from trading with the rest of the world, hence, there was no actual use for money in the form of gold: inside the German sphere of power the resources of conquered countries were simply taxed and confiscated. Why buy stuff with gold when you can confiscate it?
"In tactics, as in strategy, superiority in numbers is the most common element of victory." - Carl von Clausewitz

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henryk
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Re: Was foreign gold the key to everything?

Postby henryk » 03 May 2017 19:08

Guaporense wrote:
NeoVisionist wrote:It was almost irrelevant. The German sphere of power was mostly blocked from trading with the rest of the world, hence, there was no actual use for money in the form of gold: inside the German sphere of power the resources of conquered countries were simply taxed and confiscated. Why buy stuff with gold when you can confiscate it?

There was Sweden, Switzerland, Spain and Portugal, that required gold.

NeoVisionist
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Re: Was foreign gold the key to everything?

Postby NeoVisionist » 07 May 2017 13:22

I've been reading up on the British blockade and the German counter. Britain had the capital and the tonnage to pay cash for US exports, whereas Germany did not. The first world war merchant U boats would have come in handy for smaller, high value cargoes whilst Germany and the US were nominally at peace- if Germany could secure foreign capital.

thestor
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Re: Was foreign gold the key to everything?

Postby thestor » 08 May 2017 05:31

The cargo space of the u-boats was grossly limited. Even restricting themselves to high value cargoes, I doubt that procuring payment was a limiting factor.

NeoVisionist
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Re: Was foreign gold the key to everything?

Postby NeoVisionist » 08 May 2017 22:59

I was under the impression the Deutschland and other U freighters were very useful before the Americans turned on Germany?

Sid Guttridge
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Re: Was foreign gold the key to everything?

Postby Sid Guttridge » 10 May 2017 12:02

Mostly from a PR point of view.

Only two U-freighters were used. Deutschland did two round trips. The other, Bremen, was lost on her only voyage.

Deutschland's capacity was only 700 tons.

Sid.


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