Öffa bills (" ö" is a

Germanic umlaut The Germanic umlaut (sometimes called i-umlaut or i-mutation) is a type of linguistic umlaut (linguistics), umlaut in which a back vowel changes to the associated front vowel (fronting (phonology), fronting) or a front vowel becomes closer to ...

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 A Mefo bill (sometimes written as MEFO bill) was a six-month promissory note, drawn upon the dummy company MEFO, Metallurgische Forschungsgesellschaft (Metallurgical Research Corporation), devised by the Reichsbank, German Central Bank President, ...

which followed the same scheme.

History

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

chancellor Chancellor () is a title of various official positions in the governments of many countries. The original chancellors were the of Roman courts of justice—ushers, who sat at the (lattice work screens) of a basilica (court hall), which separa ...

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 scientis ...

after consultation with the then President of the

Reichsbank The ''Reichsbank'' (; ) was the central bank of the German Empire from 1876 until the end of Nazi Germany in 1945. Background The monetary institutions in Germany had been unsuited for its economic development for several decades before unifica ...

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'' (), 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 In finance, discounting is a 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", "Effi ...

by the

. This way, the

financed public building projects. In the wake of the

Great Depression The Great Depression was a severe global economic downturn from 1929 to 1939. The period was characterized by high rates of unemployment and poverty, drastic reductions in industrial production and international trade, and widespread bank and ...

, this hidden

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

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

Reichsmark The (; sign: ℛ︁ℳ︁; abbreviation: RM) was the currency of Germany from 1924 until the fall of Nazi Germany in 1945, and in the American, British and French occupied zones of Germany, until 20 June 1948. The Reichsmark was then replace ...

. 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 average price of goods and services in terms of money. This increase is measured using a price index, typically a consumer price index (CPI). When the general price level rises, each unit of curre ...

agreed to only a small volume.

Kurt von Schleicher Kurt Ferdinand Friedrich Hermann von Schleicher (; 7 April 1882 – 30 June 1934) was a German military officer and the penultimate Chancellor of Germany#First German Republic (Weimar Republic, 1919–1933), chancellor of Germany during the Weim ...

'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 1889 – 30 April 1945) was an Austrian-born German politician who was the dictator of Nazi Germany from 1933 until Death of Adolf Hitler, his suicide in 1945. Adolf Hitler's rise to power, He rose to power as the lea ...

wanted to extend the scheme to the

German re-armament German rearmament (''Aufrüstung'', ) was a policy and practice of rearmament carried out by Germany from 1918 to 1939 in violation of the Treaty of Versailles, which required German disarmament after World War I to prevent it from starting an ...

disagreed, and he was replaced on 16 March 1933 by

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

. Schacht instituted the

, a similar system to the Öffa bills.

References

{{Authority control Payment systems Economy of Nazi Germany

History

See also

References