By 1944 Germany proper was also facing uncontrolled inflation, which Hans Kehrl, leading figure in the RWM (though Goering was at the helm), described in a memorandum in July. Banks no longer invested into government bonds, leaving that task for the Reichsbank. The volume of cash in circulation exploded. Kehrl noted that the bureaucratic suppression of inflation that was already being attempted could only be effective if combined with tax increases and the replacement of some cash payment with payment in bonds (comparable to the New Finance Plan of 1939). Yet Hitler, which had previously overseen a high level of peacetime taxation, a measure identical to a tax increase in 1939 and further efforts in 1942, now refused to raise taxes, ruling out such a possibility in 22 September 1944. In February 1945 he agreed to the RFM’s request for a tax increase… on the condition that it would happen after the war.
Refusal to raise taxes did not mean civilians were spared. Living standards plunged and a tax increase would have been the lesser evil. There was a “drive towards substance” (Drang zur Substanz): once it was clear that funds would evaporate in postwar inflation, capital that could have contributed to the war effort flowing towards shares, machine tools, new buildings and neutral states. In the industries, partial answers to the meaninglessness of monetary incentives were found in material rewards such as extra rations and greater coercive violence. But inflation was still one of the factors behind the war economy’s collapse in late 1944.