Öffa bills ("ö" is a

Germanic umlaut The Germanic umlaut (sometimes called i-umlaut or i-mutation) is a type of linguistic umlaut in which a back vowel changes to the associated front vowel ( fronting) or a front vowel becomes closer to (raising) when the following syllable conta ...

that can be transcribed "oe") or job-creation bills were

promissory note A promissory note, sometimes referred to as a note payable, is a legal instrument (more particularly, a financing instrument and a debt instrument), in which one party (the ''maker'' or ''issuer'') promises in writing to pay a determinate sum of ...

s created in 1932 by the German government. They were aimed at additional fund-raising for public building initiatives and later for job creation schemes. The Öffa bills were the blueprint for the

Mefo bills MEFO was the more common abbreviation for (german: MEtallurgische FOrschungsgesellschaft m.b.H., en, Society for Metallurgical Research LLC), a dummy company set up by the Nazi German government to finance the German re-armament effort in the y ...

which followed the same scheme.

History

In 1932, Öffa bills were created by the second cabinet under

chancellor Chancellor ( la, cancellarius) is a title of various official positions in the governments of many nations. The original chancellors were the of Roman courts of justice—ushers, who sat at the or lattice work screens of a basilica or law cou ...

Heinrich Brüning Heinrich Aloysius Maria Elisabeth Brüning (; 26 November 1885 – 30 March 1970) was a German Centre Party politician and academic, who served as the chancellor of Germany during the Weimar Republic from 1930 to 1932. A political scienti ...

after consultation with the then President of the

Reichsbank The ''Reichsbank'' (; 'Bank of the Reich, Bank of the Realm') was the central bank of the German Reich from 1876 until 1945. History until 1933 The Reichsbank was founded on 1 January 1876, shortly after the establishment of the German Empi ...

Hans Luther Hans Luther () (10 March 1879 – 11 May 1962) was a German politician and Chancellor of Germany for 482 days in 1925 to 1926. As Minister of Finance he helped stabilize the Mark during the hyperinflation of 1923. From 1930 to 1933, Luther was h ...

. The bills were issued by the ''Deutsche Gesellschaft für öffentliche Arbeiten AG'' ( en, German Society for Public Works plc), founded 1 August 1930, and rediscounted by the

. With the capital thus raised, the ''Deutsche Gesellschaft für öffentliche Arbeiten AG'' financed public building initiatives. It was a shell company without sufficient shareholders' equity. Nevertheless, the bills were

discounted Discounting is a financial mechanism in which a debtor obtains the right to delay payments to a creditor, for a defined period of time, in exchange for a charge or fee.See "Time Value", "Discount", "Discount Yield", "Compound Interest", "Efficient ...

by the

. This way, the

financed public building projects. In the wake of the

Great Depression The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...

, this hidden

money creation Money creation, or money issuance, is the process by which the money supply of a country, or of an economic or monetary region,Such as the Eurozone or ECCAS is increased. In most modern economies, money creation is controlled by the central bank ...

stimulated the German economy. The German ''Deutsche Gesellschaft für öffentliche Arbeiten AG'' brought into circulation Öffa bills worth 1.26 billion

Reichsmark The (; sign: ℛℳ; abbreviation: RM) was the currency of Germany from 1924 until 20 June 1948 in West Germany, where it was replaced with the , and until 23 June 1948 in East Germany, where it was replaced by the East German mark. The Reich ...

. In general, the duration of a bill was three months but it could be prolonged to five years. Economically, this meant an expansion of the money supply. As this would tend towards increasing

inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reductio ...

agreed to only a small volume.

Kurt von Schleicher Kurt Ferdinand Friedrich Hermann von Schleicher (; 7 April 1882 – 30 June 1934) was a German general and the last chancellor of Germany (before Adolf Hitler) during the Weimar Republic. A rival for power with Hitler, Schleicher was murdered by ...

's second cabinet decided to expand the Öffa bill scheme. Öffa bills could now be issued by other (mostly public) financial institutions such as the ''Deutsche Verkehrskreditbank AG'' which had issued Öffa bills worth 1 billion

. After becoming Chancellor in January 1933,

Adolf Hitler Adolf Hitler (; 20 April 188930 April 1945) was an Austrian-born German politician who was dictator of Nazi Germany, Germany from 1933 until Death of Adolf Hitler, his death in 1945. Adolf Hitler's rise to power, He rose to power as the le ...

wanted to extend the scheme to the

German re-armament German rearmament (''Aufrüstung'', ) was a policy and practice of rearmament carried out in Germany during the interwar period (1918–1939), in violation of the Treaty of Versailles which required German disarmament after WWI to prevent Germa ...

disagreed, and he was replaced on 16 March 1933 by

Hjalmar Schacht Hjalmar Schacht (born Horace Greeley Hjalmar Schacht; 22 January 1877 – 3 June 1970, ) was a German economist, banker, centre-right politician, and co-founder in 1918 of the German Democratic Party. He served as the Currency Commissioner a ...

. Schacht instituted the

, a similar system to the Öffa bills.

References

{{reflist Payment systems Economy of Nazi Germany

History

See also

References