MEFO
Encyclopedia
MEFO Company was the more common name for Metallurgische Forschungsgesellschaft, m.b.H. (MEFO), a dummy company
set up by the Nazi
German government during 1934 to finance the German re-armament effort before World War II
.
. It was one of the key components of the Nazi
Germany
re-armament program, and was invented by Hjalmar Schacht
, who then was head of the Ministry of Economics, and Plenipotentiary for the War Economy.
After assuming power in 1933, during 1935 the Nazis realised that re-arming Germany would require funds that were not likely to be generated from taxes or public loans. In addition, the need to keep the rearmament effort secret led to the creation of this dummy company.
This system continued to be used until April 1938, when almost 12 billion Reichsmark of bills were outstanding. At that time the first of these bills, which were guaranteed for five years, would come due in 1939 when the holders would likely present them to the Reichsbank for payment.
This method of financing enabled the Nazi
government to obtain large loans from the Reichsbank
which was prohibited under then existing statutes. Direct lending to the Government by the Reichsbank had been limited by statute to 100 million Reichsmark.
The large nature of these outstandings led eventually to a confrontation between the Reichsbank and the German Finance Ministry in 1939, leading to the resignation of Hjalmar Schacht, the author of the whole strategy on 20 January 1939.
Dummy company
A dummy corporation or dummy company is an entity created to serve as a front or cover for one or more companies. It can have the appearance of being real but lacks the capacity to function independently. The goal of a dummy corporation can be to conceal true ownership and/or avoid taxes...
set up by the Nazi
Nazism
Nazism, the common short form name of National Socialism was the ideology and practice of the Nazi Party and of Nazi Germany...
German government during 1934 to finance the German re-armament effort before World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
.
Origins
This dummy company had a nominal capital of one million ReichsmarkGerman reichsmark
The Reichsmark was the currency in Germany from 1924 until June 20, 1948. The Reichsmark was subdivided into 100 Reichspfennig.-History:...
. It was one of the key components of the Nazi
Nazism
Nazism, the common short form name of National Socialism was the ideology and practice of the Nazi Party and of Nazi Germany...
Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
re-armament program, and was invented by Hjalmar Schacht
Hjalmar Schacht
Dr. Hjalmar Horace Greeley Schacht was a German economist, banker, liberal politician, and co-founder of the German Democratic Party. He served as the Currency Commissioner and President of the Reichsbank under the Weimar Republic...
, who then was head of the Ministry of Economics, and Plenipotentiary for the War Economy.
After assuming power in 1933, during 1935 the Nazis realised that re-arming Germany would require funds that were not likely to be generated from taxes or public loans. In addition, the need to keep the rearmament effort secret led to the creation of this dummy company.
Transactions
The transactions that led to the re-armament financing were conducted as follows:- Armaments manufacturers were contracted to produce arms
- Mefo billsMefo billsA Mefo bill , named after the company Metallurgische Forschungsgesellschaft, was a promissory note used for a system of deferred payment to finance the German rearmament, devised by the German Minister of Finance, Hjalmar Schacht, in 1934...
of exchange were drawn by these contractors, and accepted by MEFO Company - The bills were received by all German banks for possible re-discounting with the Reichsbank.
- The bills were guaranteed by the Reich for five years after issue.
This system continued to be used until April 1938, when almost 12 billion Reichsmark of bills were outstanding. At that time the first of these bills, which were guaranteed for five years, would come due in 1939 when the holders would likely present them to the Reichsbank for payment.
This method of financing enabled the Nazi
Nazism
Nazism, the common short form name of National Socialism was the ideology and practice of the Nazi Party and of Nazi Germany...
government to obtain large loans from the Reichsbank
Reichsbank
The Reichsbank was the central bank of Germany from 1876 until 1945. It was founded on 1 January 1876 . The Reichsbank was a privately owned central bank of Prussia, under close control by the Reich government. Its first president was Hermann von Dechend...
which was prohibited under then existing statutes. Direct lending to the Government by the Reichsbank had been limited by statute to 100 million Reichsmark.
The large nature of these outstandings led eventually to a confrontation between the Reichsbank and the German Finance Ministry in 1939, leading to the resignation of Hjalmar Schacht, the author of the whole strategy on 20 January 1939.
Quotes
- Our armaments are also financed partly with the credits of our political opponents. - Hjalmar SchachtHjalmar SchachtDr. Hjalmar Horace Greeley Schacht was a German economist, banker, liberal politician, and co-founder of the German Democratic Party. He served as the Currency Commissioner and President of the Reichsbank under the Weimar Republic...
in a memorandum to Adolf HitlerAdolf HitlerAdolf Hitler was an Austrian-born German politician and the leader of the National Socialist German Workers Party , commonly referred to as the Nazi Party). He was Chancellor of Germany from 1933 to 1945, and head of state from 1934 to 1945...
dated 3 May 1935.