The Germans had a problem with lack of foreign reserves in the 30's because they maintained an artificially highly valued RM. They maintained the RM at such high value for political reasons, however, there is no rational economic reason for keeping the RM artificially valued.Sea Skimmer wrote:The German government spent every cent it had already. As early as 1934 the Nazi government was down to only a few weeks foreign exchange reserves, and had to seize all private gold and currency stocks. German citizens could not even leave the country with more then 100 reichsmarks worth of currency because the Germans did not physically have the foreign exchange to allow them to do so. This was actually a major problem when the SS tried to simply force Jews to leave German, before concentration camps or death camps were politically acceptable. You want a giant pile of German oil, then you've got to cancel something else that was imported of equal value. That's pretty much going to have to be either food, hardly an option, or rare strategic minerals like molybdenum which was used for making armor plate and weapons.Iosef Cross wrote: I admit I don't have data about the costs of storing oil in the 1930's. So I don't have anywhere to go if you want a detailed financial study of the feasibility of storing 1 billion barrels of oil in preparation to WW2.
Just let the RM fluctuate and you have all the the foreign exchange reserves that you need.
As I said before, imports were rationed because the country maintained the RM artificially high. As result, the price level of Germany was higher than the price level of the rest of the world, with meant that entrepreneurs could profit from buying in the rest of the world and selling to Germany. Since the Germans need foreign exchange to buy goods from the rest of the world, the demand for foreign exchange is higher than supply, with creates a tendency for the depreciation of the RM. Since it was a political move to keep the RM at fixed rate, because Germany needed a "strong currency", the supply of foreign exchange had to be rationed.Imports were already tightly rationed, and this plus the very tight credit supply even for German currency created by the massive arms programs made everything worse because it precluded an expansion of exports that would have earned more money. As it was the Germans very much DID try to build reserves, and expand synthetic oil production. They failed dismally because it was too expensive to stockpile anything, and the synthetic oil plants were hugely expensive, and produced far more expensive fuel while taking years to build.
But that's the standard outcome of market intervention: If the price is keep artificially low (of foreign currency compared to the RM), demand is greater than supply.
The RM became had the tendency for devaluate because Germany was the first major economy to get out of the great depression, while the economies of the other major powers suffered from deflation, while Germany's supply of money increased. As result, prices in Germany rose relative to the rest of the world, with created the tendency for devaluation of the RM, or a disequilibrium between the supply and demand for foreign exchange.
1- Today is would be much more difficult to store several years of oil consumption than in Germany of the 30's. Since for Germany in the 30's, oil was a secondary energy source, today the US for example, consumes much more oil than Germany for the size of their economy. Germany consumed 7 million tons of oil per year, second to Simon, the US today consumes nearly 1 billion tons of oil per year. However, the US consumes today less than 1.1 billion tons of coal, while Germany consumed 300 million tons of coal and lignite in the 30's. So for Germany in the 30's, coal was 40 times relatively more important than oil, if compared to modern US.Today we have a far more evolved oil industry to deal with the problem, and the Germans never had enough coal anyway, some had to be imported before the war began.And also the fact that since oil consumption was a very small part of German resource consumption, to store several years of oil equivalent consumption wouldn't be much, considering that the Germans consumed dozens of times as much coal as they consumed of oil in those days, oil was not like today in the US, were several years of oil consumption is an absurd quantity, in 1938 Germany produced over 300 million tons of black and brown coal, 50 times their oil consumption.
2- Germany was a net exporter of coal, their net export was 45 million tons before the war. They exported coal to France, for example, with produced only 1/5 of the coal that Germany produced. However, Germany's newly conquered European empire consumed slightly more coal than they produced, but it was a small difference, second to Wages of Destruction, page 414, they consumed 3% more coal than they produced.
However, if Germany wanted to go to war, it would be a long term war, since Germany would be at war with the US, if they managed to defeat France and UK in the short term (with they did). And you cannot defeat the US from Europe in a few months. Hence, they needed to stock rare resources, like oil and minerals, with they didn't have in their territory.Once the war started the coal shortage just kept getting worse because of insufficient food for miners, German and slaves alike. If the Nazis could have afforded more oil, they would have spent the money on more tanks and bombers to try to win wars more quickly anyway. The German empire was fucked in a long term war and they knew it, which is why Hitler wanted to just seize most of Europe and eliminate any credible threat prior to the as yet unknown atomic bomb.
Historically, the Germans planned to conquer the USSR and get their oil, to fight a long term war. The original plan was to conquer most of Europe, including the vast natural resources of the European part of the USSR, and fortify agaisnt the western allies, to reach a stalemate. They never planned to invade the US and didn't have serious plans to invade UK.
Depends on the quantity of resources that you store. The price of a barrel of oil in the 30's was around 1 dollar per barrel. That's 2.5 RM per barrel, Germany's GDP in 1939 was 115 billion RM (source: Harrison, The Economics of WW2), though since the RM was overvalued, if they devalued the RM to their equilibrium value, it would be around 3 RM per barrel.So were a fuckload of other strategic resource stocks. That's what you get when you mobilize in peacetime to wage massive wars of conquest. If the Nazis had somehow been willing to adapt a defensive posture in Europe then building up large stocks would have been possible. You can't expand an economy, which stockpiling resources is part of, and mobilize for war at the same time. It just will not work.
So, if Germany stocks 10 years of their annual oil consumption (about 500 million barrels), it would be 1.5 billion RM, or less than 1.5% of their GDP of 1 year. If they planned to go to war, they would stock such oil reserves for about 4-5 years, mobilizing 0.3-0.4% of their annual GDP to purchase oil.
Germany's military expenditures in 1938 were 18% of their GDP. Accumulation of oil would correspond to a very small fraction of Germany's military expenditures. The problem is that we don't have data on the costs of storing oil during the 30's.
Also, Germany developed a synthetic oil industry, with was ridiculously inefficient, since the price of synthetic oil was nearly several times higher, still, they managed to synthesize nearly 50 million barrels in 1943. Considering the price of synthetic oil, it would be cheaper to accumulate strategic oil stocks. A 500 million barrel oil stock would be more oil than the German armed forces consumed during WW2.
Actually, I said that assuming that Germany HAD their 1944 levels of military production in 1940 and 1941, they would stand a good change of winning the war. It quite a common argument.But you want the Germans to spend money on oil. This cannot happen without weakening the military forces.With greater supply of equipment and ammo, it would help to make the German forces stronger. To have stronger forces is always good.
However, I said after that if Germany wanted to get 1944 levels of war production in 1940, they would have to start mobilizing their industry for total war in 1935-36, so that their workers gained 4-5 years of experience and the entire industry learned to produce munitions to maximum efficiency by 1940. I didn't consider the political or foreign exchange rate problems associated with mobilizing for total war in 1935-36. But they are substantial.
They historically quadrupled their heavy ammo production between 1941 and 1944, from 27 million rounds to 108 million rounds in 1944. Source: The Review of Economic Studies, Vol. 13, No. 1 (1945-1946), pp. 33-52.Sure, that's also totally out of reason. Don't you think of the fucking Nazis of all people could have had FOUR TIMES as much ammo they would have done so?
Did you miss how the Germans totally collapsed in WW1 because the German population basically starved to death because all the government did was make guns and ammo? The Nazis were intent to avoid that, and this is one place they did well. You want to start starving the German population in 1933... okay, they'll collapse by 1940 and end up speaking French.[/quote]
Also, note that in WW1 the Germans would have probably won as well if they had 1918 levels of production in 1915, with had tripled by 1918.
Military expenditures in Germany, both in WW1 and WW2, were still to low to make the private consumption to reach below subsistence levels. In WW2, by 1944, consumption was ~70% of 1938 level (as I pointed out before in this same tread). And Germany's 1938 level of consumption was around 10 times the minimum subsistence level.
The problem would be that a 1936 mobilization for total war in 1940 would imply in a peacetime reduction of per capita consumption, with is politically impossible. I never claimed that total mobilization in 1936 was the ideal strategic plan.
You are wrong in your remarks. The major factor in the increase in war production between 1941 and 1944 was not looting of occupied territories (actually, the contribution of the occupied territories was much lower than their pre war industrial production levels), nor was the expansion of factory capacity, with did occur between 1938 and 1943, but was much smaller than the increase in total war production.Increased production late in the war was the result of years upon years of steady increases in factory capacity, backed up by looting and starving occupied countries for labor and resources. You seem to think this can just happen earlier if the Nazis wish it. It cannot. The Nazis only took power in 1933 and by 1934 they already had enormous economic problems which ultimately forced them into war before they were ready. You want mass Nazi mobilization to an even more intensive degree, the most likely result is utter bankruptcy and war in 1936. Indeed the Germans only hung on until 1939 in large part because they stole all the Czech's gold after they seized everything in Germany.
The major factor in the increase of war production between 1941 and 1944 was the natural process of industrial learning and adaptation from producing consumer goods to producing weapons and ammunition. The stock of industrial capital didn't increase significantly and neither the size of the industrial labor force, second to Wages of Destruction, page 442, Germany's industrial capital stock increased from 63 billion RM in 1941 to 68 billion in 1944. The size of the labor force employed in industry was constant at around 10-11 million, with the flux of recruits being compensated by the flux of foreign labor. While the labor force involved in production for the armed forces increased from 5.5 million in 1940 to 6.6 million in 1943. However, armament production increased 200% between mid 1941 and mid 1944.
Clearly, the main driver in the increase of war production was not the increase in the size of industrial labor force, nor the increase in capital stock, but it was the increase in total factor productivity, with is expected. For example, the average number of hours worked to make a single Me-109 frame decreased greatly, second to Wages of Destruction, page 583, from January 1940 to April 1944, the number of hours needed to make an me 109 airframe decreased from 5,500 hours to 2,000 hours.
This process of learning can begin earlier by mobilizing the industry before the start of the war. However, as I already said, it won't be politically possible, since it would imply in a reduction of consumption. However, the foreign exchange problem is not directly caused by war mobilization, but by political measures involving the maintenance of out of equilibrium exchange rates.
However, the expansion of military expenditures and the simultaneous expansion of domestic consumption would involve the more intensive utilization of existing factors of production and the existence of increasing deficits in the commercial balance (since domestic absorption would exceed domestic production), with would imply in tendency for deficits in the balance of payments. The correction of these deficits would involve the devaluation of the national currency, with would reduce national purchasing power in the international markets, would would imply in a reduction of national consumption. This wasn't politically possible.
