00:00Have you ever looked at your stock portfolio and thought that it could use a little bit
00:04more fascism?
00:06Probably not a good move these days, what with the benefit of hindsight and all that.
00:12But for a brief moment in history, betting it all on old Adolf was a very profitable
00:17gamble, as long as you figured out a way to keep your riches after it all came crashing
00:23down.
00:24Now, to be clear, in the early 1930s, very few people were left that were still invested
00:31in Germany's stock market.
00:33After all, Germany had lost the First World War and then had to endure massive reparations
00:40payments to the Entente, a hyperinflation crisis and a banking crisis.
00:46The summer of 1932 marked the absolute bottom of the Great Depression for Germany.
00:52Germany.
00:52Anyone holding stocks had been effectively obliterated.
00:57Worse yet, the country seemed on the verge of civil war, with Nazi brownshirts and communist
01:03paramilitaries clashing in the streets and the German Reichstag paralysed between the radical
01:09left and far right parties.
01:11Not exactly what you'd call a bullish signal.
01:14By this point, only the ultra-wealthy industrialists and a few Americans you might be familiar with
01:21still held out.
01:23And they were all definitely not rooting for the communists.
01:27When Hitler took power in January 1933, the German stock market was elated and it began
01:34a dramatic upswing over the next five years, doubling in value.
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03:02It is worth noting that the gains were concentrated in firms connected to the Nazi Party.
03:09Depending on how you count, no less than one in seven public companies were in bed with
03:14Adolf by 1933, and perhaps as many as a full half.
03:19Certainly, many industrialists and aristocrats underestimated how out of control the Nazis would get.
03:27This includes Franz von Papen, the man who quite deliberately bestowed Hitler with absolute power
03:34under the childish delusion that he could then be controlled.
03:39Within mere months, Hitler had stamped out all opposing political parties and had issued
03:45his first decrees against the Jews.
03:48Bad news if you're a good person, but great news for the stock market.
03:53With political instability finally solved, German stocks did have a good reason to go up.
04:00And the Nazis would soon give them plenty more.
04:03The man all Nazi investors had to thank for their years of outperformance was Hjalmar Schacht,
04:10a conservative banker personally appointed by Hitler to lead the Reichsbank.
04:16While never a member of the Nazi Party himself, Schacht nevertheless was instrumental in most of
04:22its pre-war economic shenanigans.
04:25He oversaw the vast public works of the Nazi state, including the construction of the Autobahns,
04:32which directly reduced unemployment and brought Germany out of the Great Depression.
04:39Simultaneously, Schacht brought foreign trade and currency exchange under the state's control,
04:46specifically to assist Hitler's plans for rearmament.
04:51Yet perhaps Schacht's most brilliant contribution was the financial wizardry he concocted to hide
04:57the fact that Nazi rearmament was even taking place.
05:02The infamous MIFO bills allowed Schacht's Reichsbank to lend billions of Reichsmarks for rearmament
05:10under everyone's nose.
05:12As much as 50% of all weapons purchases.
05:16To be clear, this was all leveraged debt that had to one day be paid back.
05:21Essentially, a Ponzi scheme, so it was in no way sustainable.
05:25But overnight, German industry went from depression-level stagnation to a state-backed demand boom.
05:32So everyone was happy.
05:34And as if that wasn't enough, Hitler gave German companies a further boost by banning all trade
05:41unions and instituting wage freezes.
05:43So, at the same time that demand was surging, labour expenses remained fixed, resulting in
05:50a spectacular boom of corporate profits.
05:53Of course, it was all built on a house of cards that would inevitably crumble if the Nazi economy
06:00did not go to war.
06:01But the stock market didn't know that, so it kept pumping.
06:06The summer of 1937 was the peak of this pre-war stock market euphoria.
06:12When everything seemed to go right for the Nazi economy.
06:18Someone who had bought in 1932 would be up over 150% in 5 years.
06:24It was also still relatively easy to cash out and move your money elsewhere, provided you
06:31paid the Reich's modest 25% exit fee.
06:35Unless, of course, you happened to be Jewish.
06:38In which case, you would have lost your German citizenship in 1935 and would be lucky to escape
06:45with a fraction of your wealth.
06:48Things started to turn sour in 1938 after Hitler annexed Austria and threatened to invade Czechoslovakia.
06:56Potential war against France and Britain kept investors on edge as everyone feared that
07:03Hitler might drag Germany into a war.
07:08While nobody went to war to save Czechoslovakia, the Nazi stock market remained flat for another
07:15full year.
07:16When Hitler invaded Poland, everyone held their breath as Britain and France finally declared
07:22war on Germany.
07:24Yet Poland was crushed by the Germans in less than a month with help from Hitler's favourite
07:30frenemy, Joseph Stalin.
07:32When it became clear that Britain and France would just hide behind the Maginot Line twiddling
07:39their thumbs, the Nazi stock market exploded upwards faster than a hand at a Nuremberg rally.
07:46The conquests of Denmark, Norway, Belgium and the Netherlands pushed the Nazi stock market
07:53to new highs.
07:55And by the time France fell after six short weeks of half-hearted fighting, the Nazi investor
08:02could happily look at their portfolio having tripled in value from the depression lows.
08:07Nazi stocks had beaten not just the S and P, but half of Europe.
08:12Now, towards the end of 1940, it was still plausible for you to sell your Nazi stocks and move your
08:20gains to a conveniently neutral country like Switzerland.
08:24Yet cashing out was becoming increasingly difficult.
08:28The Nazis were closing all the loopholes to keep investors locked into the Nazi financial
08:33system and the war effort.
08:35The Nazis were never fans of freedom, especially for capital markets.
08:40So, even though stocks were rising, people's ability to enjoy those gains was shrinking.
08:47If one didn't have strong connections in the Nazi party, the winter of 1940 and early 1941
08:55was probably the last real opportunity to liquidate your gains and run off to greener pastures.
09:02But Nazi investors were not immune to the fear of missing out, so most kept their money in
09:09the market.
09:10At first, their greed paid off.
09:13When Hitler invaded the Soviet Union in June 1941, he dealt terrible blows to the Russians,
09:20destroying armies with millions of soldiers in the first months of the war.
09:25Like the Blitzkrieg in the West, the Nazi stock market reacted by shooting up euphorically.
09:32Yet, before long, the Berlin Stock Exchange realised something that it took most Nazis,
09:39and the rest of the world, at least another year to grasp.
09:43The war with the Soviet Union had fundamentally failed.
09:47It would not be the quick plundering that all of Hitler's previous conquests had been.
09:53The Nazi stock market peaked in the autumn of 1941, nearly at the peak of Germany's
10:00territorial expansion into the Soviet Union.
10:04While the Wehrmacht's patrols were in sight of Moscow's spires, the Nazi stock market foresaw
10:11that the momentum had shifted.
10:13The Soviet Union did not crumble, and now the Nazis were at war with Britain, the Soviets,
10:19and in short order, the US.
10:22By this point, your hypothetical Nazi portfolio was looking less like a store of wealth,
10:28and more like a hostage note.
10:30From 1942 onwards, investors could only sell their stocks to the Reif, and not for cash,
10:37but for government bonds. So in practice, almost everyone was trapped.
10:43Nazi propaganda minister Joseph Goebbels was working overtime to convince the Germans
10:48that this was fine. But the defeat at Stalingrad shattered any such illusions.
10:54For any investor paying attention, the question was no longer about beating the market,
10:59but about getting out with more than the clothes on your back.
11:04After Stalingrad, the Berlin Stock Exchange froze its prices, and in August 1944,
11:11the market was closed indefinitely.
11:14By the time the Soviets were knocking on the gates of Berlin, Nazi Germany had no financial system
11:20to speak of, and Reichsmarks were abandoned as a currency in favour of cigarettes and Hershey's bars.
11:27Whatever fortune you might have built riding the Nazi wave was now trapped in a country occupied
11:33by four different armies. If your stocks were in companies in the Soviet zone, they now belonged to
11:40the proletariat and were worth exactly zero. But if you were lucky enough to be in West Germany,
11:47you had some chance of recovering assets, provided you weren't a convicted Nazi war criminal.
11:53Actually, you'd be surprised at how many Nazis were let off the hook at the end of the war,
11:59but that's a story for another time. When the West German Stock Exchange finally reopened in 1948,
12:07stocks of surviving companies opened trading at prices about 90% lower than the high of 1941.
12:14The only consolation for you would be that if you'd continue to hold West German stocks,
12:20you'd make back all your money and a ton more, thanks to the so-called Wirtschaftswunder.
12:26West German stocks would boom from the 1950s onwards, in no small part thanks to aid from the US.
12:35The companies that once built the Nazi war machine quietly rebranded, and their shareholders did very
12:41well. A fact they'd prefer you not dwell too much on. What you should dwell on is liking and subscribing
12:50to our humble little channel. It's free, unlike leaving the Third Reich. If you enjoyed this brief
12:57tour through history's least moral market, consider supporting us on Patreon. Also consider checking out
13:04our first ever merch, the Stars and Stripes Pinset, linked in the description. Let us know in the
13:10comments what other topics you'd like us to cover, and stay tuned for the next dubiously profitable
13:17episode of SideQuest. Why did Hitler never ride cabs? He was more of an Ubermensch.
