[atq2119]

I'm not so sure about the "hidden debt" story. I have a feeling that that's a story popularized by people who want to believe that everything done under the Nazi regime was bad.

The truth is that the rise of authoritarian extremism tends to be facilitated by economic uncertainty (yes, racism and xenophobia tends to play a big role as well, but immigration is always easier to stomach when jobs are plenty etc.). Staving off anti-democratic forces should take precedence over almost everything else, and it certainly should take precedence over economic orthodoxy. If that means learning from a Nazi supporter (who wasn't a Nazi himself), then so be it.

So rather than hand-waving about "hidden debt", it would be important to explain the actual transmission mechanisms through which Schacht's policies would eventually have caused problems if the war hadn't happened.

It's unclear whether you would truly be able to do so. As the article explains, Schacht used some clever techniques both domestically (shifting investment from private to public sectors, basically) and externally (the aski accounts) that would seem to put a limit on the effects that the debt could have.

Those policies are against the tastes of the economic orthodoxy, and a lot of the "wisdom" of economic orthodoxy is stated with the hidden assumption that such policies aren't used. So any blanket statement about the dangers of debt made by this orthodoxy are quite suspect and probably do not apply. At the very least, you need to look at the details to consider whether they apply.

[danmaz74]

If you use a lot of borrowed money, you need that money to be invested in a way that will generate wealth that you can use to pay interests on the debt you created.

The nazis used most of that money to build their army. If they hadn't used that army, it would have been wasted money, which in no way could have repaid the debt.

Democratic governments can - and should - borrow to invest if they see an opportunity for future growth. But you can't create those opportunities out of thin air.

[atq2119]

What you're saying applies to private households and companies. It doesn't necessarily apply to a government that issues its own currency.

Just look at the debt ratio of Japan. For that matter, look at the modern day US which also uses a lot of debt to build up its army.

The point is, blanket statements such as yours have been shown again and again to be false, at least in that generality. I can only reiterate that you have to look more closely at the details to judge each situation.

[danmaz74]

As it happens, I read quite a bit about Schacht and Nazi Germany. They spent around 15% of GDP in the army in the years before the war. And they created an enormous external debt for that, because they needed lots of raw materials they didn't have internally (oil, rubber and many others).

In the USA, military spending is just a little above 3%.

Japan's economy stopped growing years ago. Their debt is mostly internal. They pay for what they import.

If you need resources from foreign countries and can't pay for them, printing your own currency can only help for some time.

[Spooky23]

The US certainly hides debt well. The reserve status of the currency keeps money out of circulation, keeping inflation at bay, and we “borrowed” trillions of dollars by overcollecting payroll taxes in exchange for future social security payments.

Hopefully things play out well.

[hutzlibu]

"If that means learning from a Nazi supporter (who wasn't a Nazi himself), then so be it."

I certainly do not have a problem with learning from Nazis when they did things right. I just mostly learn from them how not to do it. Regarding this example see the other reply. They invested mainly in military - which only can pay off with a succesful war.

Another important example of "how not to do it, I took from "Mein Kampf" where Hitler states how he became Antisemitic. Basically he says his instinct and feelings were allways disgusted with antisemitism, but his rational thinking convinced him more and more to the point where he made the conscious decision of being a mortal enemy to the jews. (and after that he said his intuition which he could rely on usually ... went away for a few years)

So my takeaway is, to trust more my instincts and feelings which I take for deeper thinking, and not the simple, rational thinking which is too shallow for complex things.