During the Second World War, Germany established fixed exchange rates between the Reichsmark and the currencies of the occupied and allied countries, often set so as to give German soldiers and civilian contractors economic benefits. With the unification of Germany and Austria in 1938, the Reichsmark replaced the Schilling in Austria. Payment was about to come due, giving Hitler the option of shifting the German economy to export goods to pay the bills or going to war and paying the debts off by looting profits extracted from conquered states. This company essentially created a large amount of Reichsmarks off the books, inflating the currency in secret. The MEFO bills amounts were considered a state secret and were an important element in the impression that Hitlerian economics was a success. It issued bills without backing by its own resources but which were guaranteed redeemable at 1:1 for Reichsmarks for five years by the government. MEFO was a dummy company that was formed with relatively small amounts of capital that was used to finance German rearmament off the books. The Reichsbank rediscounted the bills of these companies, creating a monetary expansion without formally renouncing the link to gold. dollar worth 4.20 ℛℳ.ĭummy company currency expansion Ī number of companies were created with inadequate capital for their operations and authorized to issue bonds exchangeable at a 1:1 rate for Reichsmarks and sold at a discount. The Reichsmark was put on the gold standard at the rate previously used by the Goldmark, with the U.S. To stabilize the economy and to smooth the transition, the Papiermark was not directly replaced by the Reichsmark, but by the Rentenmark, an interim currency backed by the Deutsche Rentenbank, owning industrial and agricultural real estate assets. The exchange rate between the old Papiermark and the Reichsmark was 1 ℛℳ = 10 12 ℳ (one trillion in American English and French, one billion in German and other European languages and British English of the time see long and short scale). This was necessary due to the 1920s German inflation which had reached its peak in 1923. The Reichsmark was introduced in 1924 as a permanent replacement for the Papiermark. ( November 2016) ( Learn how and when to remove this template message) Unsourced material may be challenged and removed. Please help improve this section by adding citations to reliable sources.