Barkley, I don't see how Hitler's Germany gives evidence of anything 
related to the hypothesis that an increase in government spending, not 
financed by additional money, would have a good effect, including the 
reduction of unemployment. The German "economy" of the period is hardly 
the kind of economy about which Keynes and the Keynesians were writing.

In fact, there may be no way to test the hypothesis effectively even for 
a market economy. This was my point about Sims' view, which Kevin Hoover 
seemed to confirm.

It is not difficult to explain how a military dictatorship can reduce or 
eliminate unemployment.

Regarding the German "economy," here is how Mises described it, although 
he gave no time line.


"It is true that there are still profits in Germany. Some enterprises even
make much higher profits than in the last years of the Weimar regime. But
the significance of this fact is quite different from what the critics 
believe.
There is strict control of private spending. No German capitalist or
entrepreneur (shop manager) or any one else is free to spend more money
on his consumption than the government considers adequate to his rank and
position in the service of the nation. The surplus must be deposited 
with the
banks or invested in domestic bonds or in the stock of German corporations
wholly controlled by the government. Hoarding of money or banknotes is
strictly forbidden and punished as high treason. Even before the war there
were no imports of luxury goods from abroad, and their domestic production
has long since been discontinued. Nobody is free to buy more food and
clothing than the allotted ration. Rents are frozen; furniture and all other
goods are unattainable. Travel abroad is permitted only on government
errands...

German corporations are not free to distribute their profits to the
shareholders. The amount of the dividends is strictly limited according to a
highly complicated legal technique. It has been asserted that this does not
constitute a serious check, as the corporations are free to water the stock.
This is an error. They are free to increase their nominal stock only out of
profits made and declared and taxed as such in previous years but not
distributed to the shareholders.

As all private consumption is strictly limited and controlled by the
government, and as all unconsumed income must be invested, which means
virtually lent to the government, high profits are nothing but a subtle 
method
of taxation. The consumer has to pay high prices and business is nominally
profitable. But the greater the profits are, the more the government 
funds are
swelled. The government gets the money either as taxes or as loans. And
everybody must be aware that these loans will one day be repudiated. For
many years German business has not been in a position to replace its
equipment. At the end of the war the assets of corporations and private
firms will consist mainly of worn-out machinery and various doubtful claims
against the government. Warring Germany lives on its capital stock, i.e., on
the capital nominally and seemingly owned by its capitalists.

Mises, OMNIPOTENT GOVERNMENT, online at the mises.org website.

Pat Gunning