World War Two - Where did all the money come from?

[Roscoe]

There must have been billions of dollars spent on World War Two.

America helped the UK, and from what I understand, almost sent them bankrupt.

The Germans must have spent as much. I saw a TV programme recently that showed the fortifications that the Nazis built on the Channel Islands, off the coast of France. It is a big construction. The Channel Islands were amongst the most heavily fortified parts of the Atlantic Wall, particularly Alderney which is the closest to France. On 20 October 1941 Hitler signed a directive, against the advice of Commander-in-Chief von Witzleben, to turn the Channel Islands into an "impregnable fortress". It must have cost them a few million deutschmarks, not to mention the fortifications they built on the French Coast, in particular at Calais.

So where did all the money come from?

[KarameaDave]

Money is just an abstraction you simply print more.
Inflation on the other hand...

[piroska]

So where did all the money come from?

1)Not spending on other stuff
2)Bonds.

[allblack]

3) no welfare state.

[CliveM]

Money is just an abstraction you simply print more.
Inflation on the other hand...

This is the correct answer.
Just think if we banned all electronic transfers overnight in NZ there is no way there would be enough physical cash to go around.

[zqwerty]

As long as everyone or anyone believes that the tokens we call money, ie coins and notes for instance are worth something, the money-go-round keeps on going round.

The workers do the work that's required and get paid in tokens which they can exchange for beer, food, etc, management supervises the distribution of the tokens and is quietly complicit in the big game, as they are generally more informed on the ways of the world and possibly more educated than the average worker. Also probably have more of 'an eye for the main chance'.

You can always print/manufacture more tokens but things start to head downhill when it becomes obvious that the amount of money in the system is greater than the actual value and inflation results as the businessmen put up their prices whenever they suspect that this is happening thus causing inflation, after a while businessmen constantly put up the prices at any opportunity, it becomes a habit, and after all, why not do as little as possible and get the highest price?

And this is why regulation is required by a third authoritative part with teeth, ie government; laugh or cry at this point.

[Nick G]

Primarily, it was financed through the issue of debt. The following two graphs show US debt and US deficit levels over time. The spike during WW2 can clearly be seen. Interestingly, US debt levels (as a % of GDP) are currently around the WW2 levels, which is unheard of during peacetime. This also highlights why there is growing concern around the US debt levels - they have less fiscal wiggle room than previously and it is highly questionable if they have used the borrwed money in overly productive ways.





Taking a step back from the details and elaboring on the comnent that money is just an abstraction: the amount of money you print doesn't change the potential output of your econony, which is set by factors such as technology levels, human capital, and physical capital (you can easily ruin an economy with poor monetary policy, however you can't work miracles and create things out of nothing). Given this and ignoring the concept of money, what can have changed during WW2?

1) People worked far more than before. If more people work longer hours, there is greater economic activity.
2) There was a dramatic shift in the types of activies which occured. This is really related to point one, as working more and having less free time is really just a shift in activity. However, it might also help to imagine people changing what they bought and did (and cutting back).
3) They borrowed from future generations. This can be thought of in many ways, however a simple one is to consider what all young people lost out on due to the war, and what could have been achieved with the resources that went into fighting the war.

Hopefully these three "intuitive" type explanations help answer your question.

[Lurking]

Isn't that, what was taken off the 6 million Jewish folk!. Not many future generations there!.

German Industrialists' were in on the act as well, believe they are still underground in Germany as well.

Read somewhere where the pope was involved with the final solution and helping quite a few Nazis out of Germany to South America.

lurking.

ps. and to think I have a good sprinkling of German in my tree!!!.

ljurks.

[B.M.]

From memory, civilised countries were expected to have Gold reserves to cover any cash in circulation, and coins contained an amount of precious metal (gold or silver) to cover their value.

In NZ our 10/- note would get you 2 American $’s and Australian money just wasn’t wanted.

What the hell happened?

As an aside, I Salute our forefathers who built roads the length and breadth of the country, Railway the same, Power Stations and Dams, Bridges, both road and rail, Houses that didn’t leak, I could go on, and all without High Vis Vests, Safety Boots, Hard Hat and on and on............................. and on.......

The luckiest country on earth wrecked by Drongo’s in Parliament and the Public Service.

[zqwerty]

Fiat currency means that all types of money were not covered by actual value about fifty years ago I think.

"Fiat money is a government-issued currency that is not backed by a commodity such as gold. Fiat money gives central banks greater control over the economy because they can control how much money is printed. Most modern paper currencies, such as the U.S. dollar, are fiat currencies."


https://en.wikipedia.org › wiki › Fiat_money
"Treatment in economics[edit]. In monetary economics, fiat money is an intrinsically valueless object or record that is accepted widely as a means of payment."

"The luckiest country on earth wrecked by Drongo’s in Parliament and the Public Service"

No, too many overpaid management staff cost cutting and "increasing productivity" and not enough well-paid skilled workers actually doing important jobs like routine maintenance.