How did Nazi Germany finance itself during WW2?

Nazi Germany was a command economy run via expropriation. Nothing was "paid for" in the rational sense of a physical currency but instead was basically looted from occupied countries. That included labor.

The Nazi economy had a very serious inflation problem going into 1939 and in fact 1938 as well. (Just read up on your Albert Speer...both his testimony before the Nuremberg Tribunal and his biography.) Everything was rationed in Nazi Germany once the Polish Campaign began. Anything could be requisitioned by the State at will...which normally meant your kid.

All POW's were to be put to work either producing armaments, building the Atlantic Wall, manning anti-aircraft towers or sent to France to defend against an Anglo-American invasion.

I believe the theory behind the "death camps" was Jews to the East "to fight the communists" and "undermenschen" to the West to the support The Reich.

Obviously this did not prove popular with the Undermenschen so they either fought for their "SSR", fought with the Nazi's to defeat Stalin's Russia or fought "for the Revolution" against the entrenched "establishment." Either way your odds of survival were pretty slim. There were Jews who fought ferociously for Nazi Germany as many had had their property expropriated by Stalin's Russia. The "future Nazi mayor of Moscow" was to be a Jew actually.

The whole process was very inefficient and basically unworkable. There was an emphasis on engineering but little in the way of mass production or interchangeable parts. The losses on the Eastern Front simply couldn't be made up by any sources of labor or forced production. As German positions in the East were over run the Nazi economy simply ceased functioning.

When the collapse finally came in 1945 the only thing of value were US dollars.

The Russians loved watches actually...can't really explain that one.

I think the true answer is: money is a fiction, useful for bookkeeping, but ultimately meaningless. What truly matters is control of resources, infrastructure and labor. Using money is the "civilized" method of gaining that control, but if you're prepared to resort to uncivilized methods (forced labor, seizing privat property, outright conquest), you can pretty much ignore it.

See http://bits.blogs.nytimes.com/2014/01/27/bitcoin-and-the-fictions-of-money/ and http://www.thisamericanlife.org/radio-archives/episode/423/the-invention-of-money

Not sure if it's already mentioned here, but not many people know that Nazi Germany was on the verge of bankruptcy in the years 1936-1938. Uncontrolled investments in weaponry, social plans plus the build up of an extensive police- and army apparatus where too much for the state, which just was coming out of the deepest recession in German history until then. After 1938 this changed of course, as occupying other countries, hence robbing their gold reserves and access to massive private (mainly Jewish) capital, meant a big boost for for them. And let's also not forget that Germany was financially supported by very rich Americans of German and Irish (Henry Ford!) descend. Although this proved to be a drop on a boiling plate. German economy only SEEMED strong, but in fact was still very weak in the 30's. That's why I don't agree with the answer chosen as the correct one as it's not a correct answer.

Some US Bank and large US Companies funded the Germans in World War 2. One of these banks,The Union Bank run by Prescott Bush owned by George Herbert Walker was seized by the U.S in 1942 for trading with the Germans. Under The trading with the enemy act. Mr Julius Silverstein and Mr. Gingold sued the Bush family and the United States in 2001 for profiting from the Auschwits concentration camps. One of the reason the United States didn't get involved in World War 2 was because of US companys profits. One company was Ford Motor Company.

Nazis got there money by kicking out the privately owned central bank. (Just like the privately owned Federal Reserve Bank of USA, aka Central Bank). After that Hitler printed their own money which was interest free. within a few years Germany was the richest nation in the world while the rest of the nation were in a depression from the privately owned central banks greed.

Germany conquered and occupied a number of countries, and stripped them of their gold reserves (except in those instances where the countries were able to ship the gold abroad).

They sometimes paid in either marks, or more often, local currency, since they effectively controlled those countries' banking systems.

And in a pinch, they could requisition the supplies and labor that needed, basically at the point of a gun.

And Germany was one of the first countries to "exit" the Depression. That was a major result of the rearmament program, which had a "pump priming" effect on the economy.

According to a recent study commissioned by the German Finance Ministry, looting of German Jewish wealth amounted to 120 billion reich marks and financed about 1/3 of the expenditure of the German armed forces during WWII.

http://www.telegraph.co.uk/news/worldnews/europe/germany/8119805/Confiscated-Jewish-wealth-helped-fund-the-German-war-effort.html

The recent book Hitler's Beneficiaries: Plunder, Racial War, and the Nazi Welfare State by Götz Aly offers a new and very important look at this question. It is the subject of an ongoing academic debate but many of the factual findings seem to be indisputable, if I understand correctly (haven't read it but read very detailed reviews).

Very brief summary:
The Nazis borrowed prodigious sums to finance the re-armament of Germany, the Autobahns and the social benefits the Germans received. "Fortunately", at the very moment the chips were due to fall and they would have had to face insolvency, they started the war and turned it into a great expopriation scheme. That the Nazis looted all Europe and made it pay and work for the war machine is quite well-known;

Ali goes into great detail showing the mechanics of the process and showing that the German was effort was to a large degree a financial pyramid, where the conquered countries and the murdered Jews were looted to pay off the deficits the Nazis had kept accruing.

He posits that the common German people were quite aware of this, grosso modo, and claims that this partly explains the tenacity with which the Germans fought to the bitter end (a claim that may not immediately follow from his economic data, as other factors, e.g. ideology, are involved).

One detail for example: they herded hundreds of thousands of Russians to work as labourers, industrial workers and domestic help in Germany; they were ostensibly paid (very low) salaries - but these salaries were stashed into a fund which nobody ever saw.

Another example: the Germans paid for goods in the countries they conquered (at least in the East) with "occupation marks" - an artificial currency whose exchange rate they loaded heavily in their own favour.