German armaments spending in WW2 by sector

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HistoryGeek2019
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Re: German armaments spending in WW2 by sector

Post by HistoryGeek2019 » 19 Oct 2019 06:25

It's a question of timing. Britain couldn't suddenly start producing enough equipment for a massive army until a much later date. Maybe 1942, maybe later. Germany needed to use this time while Britain was not a threat on land to make their army as strong as possible to knock out the Soviet Union.

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Re: German armaments spending in WW2 by sector

Post by TheMarcksPlan » 20 Oct 2019 18:06

HistoryGeek2019 wrote:Britain couldn't suddenly start producing enough equipment for a massive army until a much later date. Maybe 1942, maybe later.
Just like in WW1, Britain could have started producing equipment for a massive army whenever it wanted. The Empire's economy - dominions and UK alone - was second only to the U.S., larger than Germany's prior to Hitler's conquests. But again, they didn't want that fight. As late as 1945 Churchill capped the ground forces at 2.5mil men or about a quarter of Germany's. Whereas Britain had to shoulder ~40% of the WW1 Western Front fight and still barely contained the Germans despite a second front, in 1940 British forces constituted ~9% of the good guys in the Battle of France.

I know my points here are bleeding into discussions elsewhere about British willingness to fight on land...
HistoryGeek2019 wrote:Germany needed to use this time while Britain was not a threat on land to make their army as strong as possible to knock out the Soviet Union.
Britain basically wasn't a threat on land and wasn't going to be; Hitler had his eye on America. For some reason during Barbarossa planning he identified 1942 as the timeline for powerful U.S. forces to invade Europe. Basically his spasms of contempt/fear of the U.S. were in the fear cycle in 1940 at just the wrong time. Fear in December 1941 would have served him far better.
https://medium.com/counterfactualww2
"The whole question of whether we win or lose the war depends on the Russians." - FDR, June 1942

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Re: German armaments spending in WW2 by sector

Post by HistoryGeek2019 » 21 Oct 2019 14:47

Another chart from Overy showing German spending on different armaments:

Overy Armaments Spending.png

This chart again makes it clear that the Heer got the short shrift in German military spending, while the Kriegsmarine and Luftwaffe saw their budgets bloated for minimal (and often negative) returns.
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Re: German armaments spending in WW2 by sector

Post by glenn239 » 28 Oct 2019 21:13

HistoryGeek2019 wrote:
19 Oct 2019 03:17
Britain had the infrastructure in place before the war to sink any ship the Germans built. It was not in any condition to equip an army that could contend with the Heer. Germany should have focused on exploiting its own strengths and Britain's weaknesses. Instead it did the opposite.
So, other than the really big successful thing the KM achieved in the war at sea by conquering Norway, it did nothing else? Which begs the question - exactly how much more could the KM have accomplished than that?

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Re: German armaments spending in WW2 by sector

Post by HistoryGeek2019 » 29 Oct 2019 01:58

The KM didn't conquer Norway. The British won and held the only port that mattered - Narvik. They only withdrew from Narvik when France fell, by which point the KM was reduced to a couple of light cruisers and 4 destroyers, so it's not like the KM is what forced them to leave.

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Re: German armaments spending in WW2 by sector

Post by Peter89 » 29 Oct 2019 12:28

HistoryGeek2019 wrote:
29 Oct 2019 01:58
when France fell, by which point the KM was reduced to a couple of light cruisers and 4 destroyers
Absolutely not right.

You constantly claim this statement, but this isn't the truth.

The proper wording is very important here: There was a certain point after the Weserübung, when the operationally ready and available ships were reduced to few light cruisers and destroyers.

Prior to the Weserübung:
- Graf Spee was lost
- Nürnberg and Leipzig was torpedoed (underwent repairs until 10th June and 1st December 1940 respectively)
- Admiral Scheer underwent repairs and reconstruction (ready for combat on 27th July 1940)

In the Weserübung, the KM lost Blücher (a heavy cruiser), Karlsruhe and Königsberg (light cruisers) permanently.

Scharnhorst, Gnisenau, Admiral Hipper and the Deutschland suffered more or less damage. They were back in service in December 1940 and in March 1941 respectively.

Also, the KM could finish a few more capital ships in the pipeline:
- Prinz Eugen (a heavy cruiser like the Blücher) ready for combat on 1st August 1940
- Bismarck commissioned on 27th August 1940, ready for combat on 24th January 1941
- Tirpitz commissioned on 25th February and ready for combat in early June 1941.

As you can see, the damage suffered in the Operation Weserübung was not fatal to the Kriegsmarine.

In 5 months, all the capital ships were operational, and the loss of the Blücher was compensated by the Prinz Eugen. In early to mid 1940 the KM surface fleet has reached its operational height.

The 10 lost German destroyers were compensated by the production of another 19. Not as if they've played any significant role later in the war. The 6 lost U-Boats were even more easily replaced.

Not to mention that the RN lost 4 submarines, 9 destroyers, 2 cruisers and an aircraft carrier in the Weserübung, the latter with full of airplanes.
“And while I am talking to you, mothers and fathers, I give you one more assurance. I have said this before, but I shall say it again, and again and again. Your boys are not going to be sent into any foreign wars." - FDR, October 1940

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Re: German armaments spending in WW2 by sector

Post by Peter89 » 29 Oct 2019 13:32

As for the destroyers, the losses in the Weserübung were even more marginal.

Prior the Weserübung, the KM tried to launch a sortie in cooperation with the LW, called Operation Wikinger on 19 February 1940. The ships opened fire on the bombers, and the bombers (and sea mines) sank 2 1934-class destroyers (Z1 & Z3), and 1 more 1934A-class (Z6) was damaged when she dropped depth charges.

Beached or scuttled by own crews at Narvik: Z2, Z9, Z11, Z13, Z17, Z18 and Z19.

The Z35 and Z36 ran into a German-laid minefield on 19 December 1944. The Z43 barely get away, but it also hit a mine later and was scuttled.

Destroyers ran aground and seriously damaged: Z4, Z10, Z15, Z20. Maybe more I am not aware of.

Z16 mistook HMS Sheffield for Admiral Hipper, which proved to be fatal. Sunk without a shot.

Z5 hit herself with a torpedo during a training in January 1945.

It seems that most of the German destroyers were lost because of poor command. The destroyers escorting the Admiral Hipper ran out of fuel, and only the general situation saved them.

So once again, the loss of 10 destroyers at Narvik did not really influenced the KM.
“And while I am talking to you, mothers and fathers, I give you one more assurance. I have said this before, but I shall say it again, and again and again. Your boys are not going to be sent into any foreign wars." - FDR, October 1940

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Re: German armaments spending in WW2 by sector

Post by glenn239 » 29 Oct 2019 17:44

HistoryGeek2019 wrote:
29 Oct 2019 01:58
The KM didn't conquer Norway. The British won and held the only port that mattered - Narvik. They only withdrew from Narvik when France fell, by which point the KM was reduced to a couple of light cruisers and 4 destroyers, so it's not like the KM is what forced them to leave.
The Allies evacuated Narvik because with Trondheim, Bergen and Oslo solidly in German possession, there was little to no chance they could hold Narvik against an land-sea offensive northward from Trondheim under Luftwaffe cover. This was true whatever the situation in France.

Your argument about the German navy would be better made that the Germans should not have attempted to take Narvik at all in their initial offensive. They'd have saved themselves 10 destroyers and the possession of the south would allow them to scoop up the port at their leisure later.

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Re: German armaments spending in WW2 by sector

Post by glenn239 » 29 Oct 2019 18:15

HistoryGeek2019 wrote:
17 Oct 2019 10:36
I agree 100%. That is the main thesis of this thread, that Germany's spending priorities made no sense in light of their strategic needs. Germany was a continental power surrounded by powerful enemy armies, so the Heer needed to be the top priority in the war. When you're spending more on your navy and air force in the same year that you're undertaking the largest ground invasion in human history, your priorities are completely out of whack.
Agreed. The notion that Germany would invade the Soviet Union while at war with Britain was amongst the stupidest decisions in the history of warfare. Any industrial division of resources is a second tier consideration - there was no industrial solution to the coalition war that Hitler willingly initiated against himself. War with Stalin was an avoidable own goal.
You don't fight your enemy where he is strongest and you are weakest. The Royal Navy was vastly superior to the Kriegsmarine and dispatched both U-boats and surface ships alike with ease from the earliest days of the war.
Germany's U-boats were a good investment. If anything the problem there was too much centralization of the evolution of this arm such that the KM fell behind the curve in the ASW vs. U-boat technology race, opening up a window of vulnerability around 1943. Crews in 1943 that should have been converting over to faster, more modern designs were still being saddled with the older technology. In addition, the U-boat arm was too focused on ship attack at the expense of other means of offensive warfare, easing the Allied burden.

In terms of the Royal Navy being 'vastly superior' to the KM, it's hard to argue that the German navy didn't get good mileage out of their limited surface forces investment. They conquered Norway, undertook numerous raids in the Atlantic, dominated the Baltic, and threatened the Lend Lease communications to Russia.
On the other hand, the British army was pitiful compared to the Heer, so the correct strategic choice was to spend as much as possible on ensuring the success of ground operations to make it impossible for Germany to be conquered by land. The question is then one for the British: How can they fight the Germans?
It was impossible for Britain to conquer Germany on land anyways. Not, at least, without an ally or two. Why waste too much investment on a war already won? (As before, if invading the USSR the main error was initiating an avoidable land war against a large opponent, not the industrial allocations in response to such a broken strategy).
Germany was never going to come close to breaking the blockade
I thought you just said Germany was supreme on land? If so, in 1940 after the fall of France, use that land power to force Spain into the war, conquer Gibraltar, and effect the union of the German and Italian fleets at the gates of the Atlantic. Build Sealion for 1941 so that the RN has to be in the Atlantic to protect its SLOC and also at the same time in England to guard against Sealion, and also in the Med guarding Egypt.

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Re: German armaments spending in WW2 by sector

Post by HistoryGeek2019 » 29 Oct 2019 19:04

So you're proposing that Germany try to keep peace with the Soviet Union, and focus everything on trying to knock Britain out of the war? The problem is that Germany had even less chance of knocking out Britain than it did the Soviet Union. There was no way to get across the English Channel, so a land invasion was out of the question. The Luftewaffe was comprised primarily of weak medium bombers that were easy fodder for Britain's fighters, so trying to bomb Britain into submission was also out of the question. The only route left is to try to defeat Britain at sea. The German surface fleet was puny in comparison to the Royal Navy, so that just leaves the flimsy U-boats to try "blockade" the blockaders.

If the answer is "just make more U-boats", the British and Americans can (and did) counter that by making more destroyers, escorts and maritime patrol aircraft. British and American dockyard capacity far exceeded anything the Germans could churn out. German U-boat losses were horrendous throughout the war, and they never came close to sinking the amount of tonnage that Dönitz estimated would be necessary to knock Britain out. The U-boats failed to sink a single troop transport, and there is no indication in any of the literature that British or any Allied war production was diminished in any amount by the merchant losses inflicted by the U-boats. So the U-boats accomplished ... nothing, other than to waste German resources and send 60,000 Germans to their death at the bottom of the sea.

Even if Germany successfully avoided war with the Soviet Union, its best strategy against Britain would have been to go strictly defensive, try to find ways to smuggle imports through the British blockade, and hope the British eventually lose interest in the war. A strictly defensive strategy after the fall of France would have also helped to appease the United States, and counter the perception in the American public that Germany was an all-conquering behemoth out for world domination.

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Re: German armaments spending in WW2 by sector

Post by Peter89 » 29 Oct 2019 21:27

HistoryGeek2019 wrote:
29 Oct 2019 19:04
The Luftewaffe was comprised primarily of weak medium bombers that were easy fodder for Britain's fighters, so trying to bomb Britain into submission was also out of the question
Do you actually read your quoted sources or do you cherrypick the parts that support your statements? To bomb a nation like Britain into submission is impossible regardless the quality / quantity of medium bombers.
HistoryGeek2019 wrote:
29 Oct 2019 19:04
The U-boats failed to sink a single troop transport,
False again...

HistoryGeek, you should really read some basic sources about the KM before you start to criticise her.

The U-Boats sunk at least the following troopships:
- Aconia
- Arandora Star
- Nova Scotia
- Léopoldville
- Shuntien
- Ceramic
- Yoma
- Abosso
- Calabria
- Almeda Star
- Oropesa

You can argue that this was a minor contribution, but the U-Boats sunk at least 10+ troopships.
[/quote]
HistoryGeek2019 wrote:
29 Oct 2019 19:04

and there is no indication in any of the literature that British or any Allied war production was diminished in any amount by the merchant losses inflicted by the U-boats. So the U-boats accomplished ... nothing, other than to waste German resources and send 60,000 Germans to their death at the bottom of the sea.
Wrong again.

https://dergipark.org.tr/en/download/ar ... ile/741220

The U-Boats sunk 17% of the merchant fleet. Given that most of these success happened in 1939-1943, they actually influenced the war economy. Yes, they didn't stop it. But they influenced it.
“And while I am talking to you, mothers and fathers, I give you one more assurance. I have said this before, but I shall say it again, and again and again. Your boys are not going to be sent into any foreign wars." - FDR, October 1940

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Re: German armaments spending in WW2 by sector

Post by HistoryGeek2019 » 29 Oct 2019 22:00

Peter89 wrote:
29 Oct 2019 21:27
Do you actually read your quoted sources or do you cherrypick the parts that support your statements? To bomb a nation like Britain into submission is impossible regardless the quality / quantity of medium bombers.
There's no need to speak in such an insulting manner, especially when you are agreeing with me. We are having a civil conversation. Please keep it that way.
The U-Boats sunk at least the following troopships:
- Aconia
- Arandora Star
- Nova Scotia
- Léopoldville
- Shuntien
- Ceramic
- Yoma
- Abosso
- Calabria
- Almeda Star
- Oropesa
Nearly all of these were civilian passenger ships carrying civilians, cargo or Axis prisoners of war when they were sunk. The only ones carrying a meaningful amount of troops were Leopoldville (which was commanded by the Belgians and sunk in the Channel in December 1944 when the war was already lost for Germany), Yoma (a true troop ship sunk in the Mediterranean in 1941, but since it was sailing in convoy, most of its soldiers were rescued) and Ceramic (an unescorted passenger ship that had a mix of civilians and military personnel on board). I was referring to the commonly repeated claim that the U-boats failed to sink a single Allied troop ship crossing the Atlantic, which remains true, and your additional evidence indicates that the Germans sank only one ship carrying a meaningful amount of enemy soldiers while the outcome of the war was still in question, of which a majority were rescued.
The U-Boats sunk 17% of the merchant fleet. Given that most of these success happened in 1939-1943, they actually influenced the war economy. Yes, they didn't stop it. But they influenced it.
Your source doesn't claim that these sinkings influenced Allied arms production in any way. That claim remains solely your inference.

But your source does state that " 784 of the total 940 submarines participating in the Atlantic operation of the German Navy were sunk by Allied forces. In other words, they have lost 84.6 percent of the total number in which this is a very large figure." I haven't seen any evidence suggesting that this disastrous loss of life and material in any way improved Germany's strategic position during the war.

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Re: German armaments spending in WW2 by sector

Post by Peter89 » 29 Oct 2019 22:53

HistoryGeek2019 wrote:
29 Oct 2019 22:00
Peter89 wrote:
29 Oct 2019 21:27
Do you actually read your quoted sources or do you cherrypick the parts that support your statements? To bomb a nation like Britain into submission is impossible regardless the quality / quantity of medium bombers.
There's no need to speak in such an insulting manner, especially when you are agreeing with me. We are having a civil conversation. Please keep it that way.
The U-Boats sunk at least the following troopships:
- Aconia
- Arandora Star
- Nova Scotia
- Léopoldville
- Shuntien
- Ceramic
- Yoma
- Abosso
- Calabria
- Almeda Star
- Oropesa
Nearly all of these were civilian passenger ships carrying civilians, cargo or Axis prisoners of war when they were sunk. The only ones carrying a meaningful amount of troops were Leopoldville (which was commanded by the Belgians and sunk in the Channel in December 1944 when the war was already lost for Germany), Yoma (a true troop ship sunk in the Mediterranean in 1941, but since it was sailing in convoy, most of its soldiers were rescued) and Ceramic (an unescorted passenger ship that had a mix of civilians and military personnel on board). I was referring to the commonly repeated claim that the U-boats failed to sink a single Allied troop ship crossing the Atlantic, which remains true, and your additional evidence indicates that the Germans sank only one ship carrying a meaningful amount of enemy soldiers while the outcome of the war was still in question, of which a majority were rescued.
The U-Boats sunk 17% of the merchant fleet. Given that most of these success happened in 1939-1943, they actually influenced the war economy. Yes, they didn't stop it. But they influenced it.
Your source doesn't claim that these sinkings influenced Allied arms production in any way. That claim remains solely your inference.

But your source does state that " 784 of the total 940 submarines participating in the Atlantic operation of the German Navy were sunk by Allied forces. In other words, they have lost 84.6 percent of the total number in which this is a very large figure." I haven't seen any evidence suggesting that this disastrous loss of life and material in any way improved Germany's strategic position during the war.
I am sorry if I offended you, it wasn't my purpose. I have no intention to be mean with you, and you are right: we are having a civil conversation. :milwink:

From your source (Strategy for defeat: the Luftwaffe) I concluded that the policy to force a surrender by terror bombings was not possible if a nation had a real chance to wage a war even with the faint hope of success. So Britain could not be "bombed down to surrender" in any case.

Re the troop ships sunk: you stated repeatedly that the U-Boats didn't sink a single troopship. I tried to correct your statement, because - at least for me - it seemed you diminish the results of the KM. Yes, the KM did not sink ENOUGH troopships to change the course of war, but hey, troopships weren't their primary targets. Also, the troopships that carried the allied soldiers to mainland Europe operated under full air- and sea controll after 1943.

Re the influence of the Atlantikschlacht on the economy of the Wallies: it is very hard for me (as a native speaker of a minor language) to cite sources regarding every general details. YES, the Wallies won, and their war efforts were not halted.
But if losing ~17% of your fleet is not a problem at all, then what are we talking about? The U-Boat war could only prolong the war, it couldn't turn it. Btw it is true for any arms in the Wehrmacht.
“And while I am talking to you, mothers and fathers, I give you one more assurance. I have said this before, but I shall say it again, and again and again. Your boys are not going to be sent into any foreign wars." - FDR, October 1940

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Re: German armaments spending in WW2 by sector

Post by glenn239 » 30 Oct 2019 15:45

HistoryGeek2019 wrote:
29 Oct 2019 19:04
Even if Germany successfully avoided war with the Soviet Union, its best strategy against Britain would have been to go strictly defensive, try to find ways to smuggle imports through the British blockade, and hope the British eventually lose interest in the war. A strictly defensive strategy after the fall of France would have also helped to appease the United States, and counter the perception in the American public that Germany was an all-conquering behemoth out for world domination.
I flipped this to the front because it underscores the key strategic insight why Hitler was going to lose WW2, but Germany might not have. I don't think a 'strictly defensive' war against Britain was required by Germany to keep the US neutral. But the idea that US neutrality was the ultimate pre-requisite, and that nothing was more important to Germany than that? This was completely lost on the Nazis. They were violent, arrogant, overconfident.
So you're proposing that Germany try to keep peace with the Soviet Union, and focus everything on trying to knock Britain out of the war? The problem is that Germany had even less chance of knocking out Britain than it did the Soviet Union.
Britain wins the war if it expands to include allies for Britain. Germany wins if it doesn't. Defeating Britain might certainly be hard, but could not possibly be harder than defeating Britain and the Soviet Union.
There was no way to get across the English Channel, so a land invasion was out of the question.
I've gotten in massive trouble on the internet with Sealion and I remain completely and utterly undeterred in the cold calculation that it should have been attempted. When the Union decided the Confederacy needed to be defeated, did they give up when their first 10 attacks failed? No, they repeated over and over and over and over and over until the offensive succeeded and the Army of Northern Virginia collapsed. Sealion? You said it yourself. Germany was supreme on land against Britain, so provided the USSR was neutral, it could afford numerous Sealion debacles and still hold dominance on land. Sealion was not the invasion of the USSR, and a sharp German defeat would bolster arguments for US neutrality. And, if it succeeded....
The Luftewaffe was comprised primarily of weak medium bombers that were easy fodder for Britain's fighters, so trying to bomb Britain into submission was also out of the question.
While I agree that daylight bombing was out of the question in the long term due to British fighters, night time bombing was viable. And, as the Allied strategic air offensive showed, the key was not bomb load (medium vs. heavy) it was bomb accuracy. Halving CEP was exponentially more important than doubling bomb load. (A 1,000m CEP is four times bigger than a 500m CEP) The Luftwaffe had excellent medium bombers and excellent basing in France. They had years to evolve their tactics and equipment. Where it made its mistake was going with city terror raids rather than evolving better night attack methods. The one thing medium bombers couldn't do was city terror raids.
The only route left is to try to defeat Britain at sea. The German surface fleet was puny in comparison to the Royal Navy, so that just leaves the flimsy U-boats to try "blockade" the blockaders.
So let's say the Germans conquer Gibraltar and Portugal and effect a union of the Axis fleets on the Iberian peninsula, where it is able to cut Atlantic SLOC or move to France for war in the Channel. Let's say the LW is doing increasingly effective night bombardments of the UK, the U-boat campaign is stepping up off French shores, the Africa Korps is considerably stronger and pushing on Egypt, and Sealion 1941 is massing on the French coast. The Soviet Union is attacking Turkey, Finland, Iran and moving strong forces into the Persian Gulf region. I don't see where this situation would be a panacea for Britain?
If the answer is "just make more U-boats", the British and Americans can (and did) counter that by making more destroyers, escorts and maritime patrol aircraft. British and American dockyard capacity far exceeded anything the Germans could churn out. German U-boat losses were horrendous throughout the war, and they never came close to sinking the amount of tonnage that Dönitz estimated would be necessary to knock Britain out.
German U-boats went from a 23.5 to 1 hit vs loss rate in 1940 to a 1:2 rate in 1945. That's a decrease of about 50 times less effective. This was due to failure to anticipate, and be competitive in, the ASW vs. U-boat techology war. The Type XXI was no perfect solution, but it was three years late. The problem tactically was Germany's failure to invest in U-boat technology in 1940-1942. The problem strategically was making sure that the U-boat war did not bring the US into the war. (the U-boats couldn't outpace Anglo-American construction, but they sure as heck could outpace Britain construction alone).

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Re: German armaments spending in WW2 by sector

Post by HistoryGeek2019 » 30 Oct 2019 18:02

glenn239 wrote:
30 Oct 2019 15:45

Britain wins the war if it expands to include allies for Britain. Germany wins if it doesn't.
Britain has the entire 500 million strong Empire backing it. Once FDR gets re-elected, it also has lend-lease aid from the United States. That is enough for Britain to wage an air and sea war against Germany indefinitely. Britain has the advantage that it controls the seas and can freely trade and receive all the resources it needs, whereas Germany is blockaded and has to rely on Eastern European imports for survival. Britain was outproducing Germany in every category except for small arms prior to Barbarossa, so I don't see how Germany can win in this scenario. Standards of living were much higher in Britain than Germany during the war, and Britain was devoting a smaller portion of its GDP to the war than Germany. The strain of war will eat away at Germany much faster than Britain.
I've gotten in massive trouble on the internet with Sealion and I remain completely and utterly undeterred in the cold calculation that it should have been attempted. When the Union decided the Confederacy needed to be defeated, did they give up when their first 10 attacks failed? No, they repeated over and over and over and over and over until the offensive succeeded and the Army of Northern Virginia collapsed. Sealion? You said it yourself. Germany was supreme on land against Britain, so provided the USSR was neutral, it could afford numerous Sealion debacles and still hold dominance on land. Sealion was not the invasion of the USSR, and a sharp German defeat would bolster arguments for US neutrality. And, if it succeeded....
How much damage can Germany inflict with each attempted Channel crossing vs. how much damage will Germany suffer? Maybe 10-20 thousand troops will get across with each attempt, with a tiny amount of tanks and artillery. They will quickly run out of supplies and surrender each time. How many casualties can they inflict when the British strategy is defensively focused (manning the GHQ Line)? Optimistically, the Germans inflict 1-3 thousand casualties with each wave before they surrender. That's a war of attrition that Germany is losing. Germany would also suffer devastating losses at sea with each attempt. Their "river barge" fleet would get wiped out on each attempt. Germany didn't have naval construction capabilities anywhere close to what Britain had. Britain could easily rebuild the few destroyers and cruisers lost in each crossing attempt faster than Germany could rebuild its entire landing fleet.
While I agree that daylight bombing was out of the question in the long term due to British fighters, night time bombing was viable. And, as the Allied strategic air offensive showed, the key was not bomb load (medium vs. heavy) it was bomb accuracy. Halving CEP was exponentially more important than doubling bomb load. (A 1,000m CEP is four times bigger than a 500m CEP) The Luftwaffe had excellent medium bombers and excellent basing in France. They had years to evolve their tactics and equipment. Where it made its mistake was going with city terror raids rather than evolving better night attack methods. The one thing medium bombers couldn't do was city terror raids.
The British were ahead of Germany in the technology of radar and radar jamming once they figured out how to counter Knickebein and Gerat during the Blitz. From that point on, the Germans could never undertake precision bombing at night. And the British quickly figured out how to engage in night-fighting during the Blitz and were inflicting significant casualties by the end. Britain was also outproducing Germany in aircraft, so trying to bomb Britain is a war-losing strategy for Germany.
So let's say the Germans conquer Gibraltar and Portugal and effect a union of the Axis fleets on the Iberian peninsula, where it is able to cut Atlantic SLOC or move to France for war in the Channel. Let's say the LW is doing increasingly effective night bombardments of the UK, the U-boat campaign is stepping up off French shores, the Africa Korps is considerably stronger and pushing on Egypt, and Sealion 1941 is massing on the French coast. The Soviet Union is attacking Turkey, Finland, Iran and moving strong forces into the Persian Gulf region. I don't see where this situation would be a panacea for Britain?
Taking Gibraltar and Portugal won't allow Germany to cut off British sea lanes in the Atlantic. The Royal Navy still dwarfed the KM and Italian navy, and would simply take over the Azores and Canaries. The Axis didn't have the logistics to support a stronger Africa Korps - the British had naval superiority in the Mediterranean, and nothing the Axis could do would change that. The Soviet Union would not have made any more attacks after settling with Finland because Stalin didn't want to go to war with Britain and the United States. He wanted Germany to hand over Bulgaria and bases in the Balkans so that the USSR wasn't confined by the Turkish Straits. Otherwise, Stalin would have slowly improved his position as Britain and Germany bled each other dry.

German U-boats went from a 23.5 to 1 hit vs loss rate in 1940 to a 1:2 rate in 1945. That's a decrease of about 50 times less effective. This was due to failure to anticipate, and be competitive in, the ASW vs. U-boat techology war. The Type XXI was no perfect solution, but it was three years late. The problem tactically was Germany's failure to invest in U-boat technology in 1940-1942. The problem strategically was making sure that the U-boat war did not bring the US into the war. (the U-boats couldn't outpace Anglo-American construction, but they sure as heck could outpace Britain construction alone).
Britain far outproduced Germany in naval construction throughout the war and was better at naval technology than the Germans. With American lend-lease aid, Britain was never at any risk. U-boats were simply an outdated technology, and Dönitz was living in the past. Even modern submarines can be detected by surface ships. The British would have countered anything the Germans threw at them at sea.

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