Preparing for Inflation - October 8, 1934
On October 8, 1934, I declared the complete disbandment of the Wave Corps, my private militia. For years, it had been the core power base of the DDRAP, but now that my authority had elevated to the national level—beyond the party—it had become a thorn in my side. The Wave Corps refused to know its place; they dreamed of supplanting the German Wehrmacht or at least claiming a pillar of national security. Even after their ranks were thinned by the Night of the Long Knives, their ambitions showed no sign of fading. So, I simply dissolved them outright.
"Thank you all for your service to the Wave Corps thus far, but now we need a legitimate military—not an illegal private army."
With the Wave Corps disbanded, some members promptly left the DDRAP. Yahn Krichz was the prime example.
"Brother... no, Führer. May I come in?"
"Of course. Come in, Yahn."
I welcomed Krichz warmly. But seeing his hardened expression, I sensed the moment had finally arrived. In his hand was a small white envelope.
"Führer, do you remember what I said in Munich? Right after you nearly got assassinated and things blew up for a bit."
"Führer? Yahn, why the formal title?"
"We're too far apart now, sir. It doesn't matter if you don't remember. I'm not cut out for these heights anyway—born a street rat, through and through."
Indeed. After the Black Night of Bavaria incident, Krichz had once told me as much. That when the time came, he'd step away. And now, on the day his creation—the Wave Corps—was dismantled, he came to me personally with his resignation. Technically, he was no longer its leader or commander; it had slipped from his grasp long ago. But he'd chosen this as his exit cue. Considering his mindset and caliber, holding on this long was impressive in itself.
"You know you're the one who did the most to make me Führer. If you want to go, I won't stop you."
"Thank you, Führer."
"I'll make sure your severance is generous. Thanks for all your hard work with the DDRAP. Take the family on a trip—America's a fine spot these days."
And with that, Krichz left the DDRAP.
Krichz's departure saddened me, but I didn't stop. I immediately summoned Hjalmar Schacht.
"You called for me, my Führer?"
"I hear you've been quite busy lately, Schacht. How's it going?"
"As you say—extremely busy."
Hjalmar Schacht sat across from me, sliding over specific documents as he gave a rundown.
"The first batch of bills matures from March to May 1936. With some economic growth by then, we should clear it without issue."
"And since you bring that up, the second batch is the problem, right?"
"Precisely, my Führer. The second issuance matures from May to July 1939, and the volume is substantial. Without building up state reserves in advance, repayment could prove difficult."
"The specifics and exit strategies are all in this report, I assume?"
"Yes. It's the product of brainstorming with the sharpest minds at the Reichsbank—should be solid."
I skimmed the report Schacht handed me, zeroing in on the exit strategies. Plan C caught my eye: inflation. The idea was to trigger inflation, devalue the currency, and pay off the bills that way. But it would make future issuances impossible—companies holding the bills would dump them and run. Hence, Plan C, not A. There was even a Plan D: pay bills with more bills. Repay the promised amount in fresh paper—a mad scheme that would tank bill value, so it was lower priority.
"You've lined up quite a few exit strategies. Plan D, even... But let's skip from Plan C onward. We must defend against inflation in Germany at all costs."
"What do you mean, Führer?"
"Right now, the Great Depression's aftermath has consumer goods prices dirt cheap. The economy's stagnant, inventories pile up unsold, factories go bankrupt left and right. A horrific deflationary storm has hit us."
But after deflation and recession comes massive inflation. Currency value, temporarily inflated by deflation, crashes in a heartbeat. And the higher the fall, the harder the landing. That's why we must fear deflation above all—it's not the end, but the beginning.
"We're issuing bills to pay workers, forcibly boosting consumer spending. Deflation's easing, the economy's stirring. You see it, Schacht—you're too smart not to. What comes next?"
"A boom... and a bubble, probably."
"Exactly. A boom and bubble. What does that mean? Inflation."
The boom and bubble spawn two ills: soaring real estate and consumer prices. A boom isn't always good—sustainable growth is. The post-New Deal boom leaned toward the unsustainable kind. A fleeting mirage, ready to vanish. Fail to stabilize prices, and it all crumbles; people's lives plummet back to ruin. We can't let that happen.
"Consumer prices will skyrocket soon. More spending power means sellers jack up prices. And when housing and food costs rise—what then?"
"Many will suffer, I suppose."
"Worse than that. Birth rates drop, suicides spike."
A future Germany hadn't faced yet. But in the far-off East, in a certain distant tomorrow... a nation botched both real estate and food prices, missing two key rabbits. Sure, 'conflict' as a side issue fanned the flames unnecessarily, but failing the essentials? The result speaks for itself. High food prices force workers to demand wage hikes to match. Social strife and competition intensify; a baseline emerges—"I need at least this to survive"—exacerbating youth issues. High real estate makes city life hell. Skyrocketing homes, higher startup costs, aversion to risk. When the people's goal shifts from 'happy lives' to 'just own a home,' the nation's vitality slowly dies. Real estate bubbles are poison—euphoric drugs that kill vigor.
And France was suffering it now. Birth rates at rock bottom, leading Europe's low-fertility pack; social conflict and fractured politics a 'grand tradition.' Germany can't follow suit. Absolutely not. We needed youth for the wars ahead.
I've become a proper Prussian Junker after all... Bitter, sure. My fight against inflation wasn't for happiness, but war readiness. But what could I do? I'd lived more years as Falkenrain than as a modern Korean now...
"The nation needs youth. So we must build a country where they thrive."
"Welfare measures?"
"No. To secure war-fighting capacity. We can't draft newborns, but kids born in '34 will be fine soldiers by '54, no?"
"My Führer... you're planning for war?"
"When the time comes, we'll need it, Schacht. That's why I'll do everything to stabilize consumer prices. Why I called you."
Time to prepare for inflation. First, eliminate factors inflating consumer prices. Lay the groundwork.
"How shall we proceed?"
"I'm creating a state-owned enterprise. Take charge, Schacht. Name: 'Third Reich Food Distribution Corporation'."
My chosen path: leverage a public corporation. State-owned, it's a private firm and government arm—a Frankenstein. Like Korea's KEPCO or Water Resources Corp., keeping electricity and water cheap in modern times. Public corps prioritize national policy over profit. Used right, they're a boon. Our ongoing New Deal already taps existing ones; the Mefo bill paper companies are quasi-public too.
"Schacht, smash the distribution networks across the Reich. The state will monopolize food and consumer goods distribution."
One more trait: public corps can monopolize. Unlike private firms... All I was doing was yanking the nascent food cartel by the roots.