Ok, this is a huge question about which there have been virtually whole libraries full of books been written. In the following I'll try to give a somewhat simplified and condensed run-down of the "Jewish Conspirarcy" trope.

To completely understand this one, we actually need to start with modernity itself. The Enlightenment and the onslaught of modernity following its earlier thinkers but especially the French Revolution had a profound impact on the thinking of the 19th century. With God being out of the game as the factor upon which the course of history and the legitimacy of power could be rested, discursive pressure formed to find new explanations for why the world was the way it was, why the people in it were different from each other, and what gave political power and order its legitimacy.

To solve this conundrum, various people formulated different answers. One you might be familiar with was Marxism, in the sense that Marx posed that the underlying force of history was class conflict and the legitimacy of power ultimately derived from the ownership of the means of production (simplified version here). But another and for this question very pertinent answer was also found in Social Darwinism. Social Darwinism wants to apply the concepts of survival of the fittest and natural selection to society and politics. In the age of the rise of nationalism, which saw nations resp. the according races as the actors in the historical process (like Marx viewed classes), the theory of Social Darwinism was combined with the theory of races as the historical actors and created what in essence became the völkisch ideology.

Now where do the Jews fit into and what does this have to do with some sort of alleged conspiracy, you might be asking. Well, in the tradition of völkisch thought as formulated by thinkers such as Gobineau and Houston Steward Chamberlain races as the main historical actors were seen as acting through the nation, the latter being basically their tool or outlet to compete in Social Darwinist competition between them. The Jews thought of as a race had no nation - seen as their own race, which dates back to them being imperial subject and older stereotypes of them as "the other" - but were a "race" that acted internationally rather than nationally. In order to be able to compete within the racial conflict them having no nation were seen as acting in a conspiratorial manner. Chamberlain e.g. made them out to be the controlling parasites behind political action and order that was seen as anti-national such as the Catholic Church or the Habsburg Empire. The anti-Semitism that formed here in the later stages of the 19th century is in effect a ideology of conspiracy, alleging a Jewish conspiracy in order to weaken their racial competitors.

The clearest example of such a way of thinking can be found in the Protocols of the Elders of Zion, a political treatise produced by the Tsarist Secret Police at some point in 1904/05 that alleges to be the minutes of a meeting of the leaders of the Jewish world conspiracy where they discuss their plans to get rid of all the world's nations and take over the world. Despite these protocols being debunked as a forgery really quick, they had a huge impact on many anti-Semitic and völkisch thinkers in Europe, not at least for some in the Habsburg empire such as Jörg Lanz von Liebenfels and others which were most likely read by the young Hitler.

The whole trope of the Jewish conspiracy as formulated by völkisch thought took on a whole new importance with the end of WWI, the Bolshevik revolution, and the subsequent attempts at revolution in Germany and elsewhere.

The defeat of the Central powers were seen by many of its soldiers and ardent supporters not as a military defeat but as a "stab in the back". The way the war ended in Germany with revolts of soldiers and the deposition of the monarchy by Social Democrats was the foundation for this myth that in essence revolved around Germany not being defeated by the Entente but by the enemies within. The trope of the enemy within being Jews and leftists had been brewing for a long time (see the Jew count of the German army in 1916/17) but really came to the forefront with the defeat. What follwed compounded this further. The violence of revolution and counter-revolution as well as the treaty of Versaille lead to many völkisch inclined thinkers and political actors believing that Germany's defeat and the subsequent peace terms could only be explained by a concerted act of the jewish conspiracy leading to internal enemies stabbing Germany in the back, threatening the very German way of life through Bolshevism and preparing the Jewish-Bolshevik takeover of Germany by making it defenseless through the Versaille treaty.

Democracy seen as faulty and antithetical to the German racial character and communism as an essential anti-national movement were both shunned by these völkisch ideologues and explained through a concerted effort by a conspiracy of the anti-national "race", the Jews. This was the very core idea of völkisch thought and of Nazi Weltanschauung. In the end, for Hitler and many of his followers it was the only way to explain the state of the world because it hinged on this Social Darwinist, ultra-nationalist view of history being a history of races competing for power and supremacy.

Sources:

• Chrisoph Dieckmann: Jüdischer Bolschewismus 1917 bis 1921. In: Fritz Bauer Jahrbuch 2012.

• Robert Gerwarth: The Central European Counter-Revolutionary: Paramilitary Violence in Germany, Austria, and Hungary after the Great War.

• Andre Gerrits: Anti-Semitism and Anti-Communism in Easter Europe.

• Peter Pulzer: The rise of political anti-Semitism in Germany and Austria.

It seems that /u/commiespaceinvader has answered your question (quite well as always). Your explanatory text also seems to require some information.

You are correct in asserting that the persecution of the Jews was not just scapegoating. There were a myriad of reasons why each perpetrator of the Holocaust acted. For some it was scapegoating, others it was enrichment through stolen property, while others did have ideological hatred of the Jews.

You are also right in saying that the Holocaust (meaning the extermination of the Jews) was to remain a secret. As Himmler stated in a speech to SS officers on October 6, 1943, "It should be discussed among us, and yet, nevertheless, we will never speak about it in public." However, the plan to eliminate the Jews from German life was fairly public. It could be clearly seen during the 1930s that Jews were being removed from the public sphere (not geographically at that point). They had been removed from the civil service, lost citizenship rights, etc. It was the END of the Jews in extermination that was "hidden" so to speak. Germans across Europe took part in the deportations of the Jews. Germans could see trains of Jews travelling past them. However, the camps themselves were hidden. This allowed Germans to accept that the Jews were being relocated to the East, which was a euphemism used by the Nazis for the Final Solution. However, on the other hand, the Wehrmacht and Einsatzgruppen were heavily involved in open air shootings of hundreds of thousands of Jews in the occupied territories of the Soviet Union. It is hard to claim that this was "secret".

Regarding the work potential of the Jews, this is a very complicated issue with quite a bit of research. /u/commiespaceinvader has given a detailed post here regarding the net gain/loss to the Nazis of the Holocaust.

Another question: Here's something i never understood, how did they know who was a jew? If i was a jew i wouldn't say it out loud if i'm trying not to get killed...

Out of curiosity, why did Hitler find it okay to spare some Jews and deem them as descendants of the Aryan race (ie his Austrian doctor, and I know there was one or maybe a few more) but at the same time go along with the extermination of so many of them?

The answer listed by commiespaceinvader is fire. Can some historians tell me the validity of these other reasons I have heard as to why the Nazi's Jewish Conspiracy theory was bought into by so many people.

I have heard that international Jewish banking families have for the past few centuries played a roll in European politics since their banking has been so successful. Particularly the Rothschilds who financed the Napoleonic wars and made money off the British when they found out the outcome of Waterloo before the crown and raised the rates on their bonds.

Prior to World War I the idea of zionism was gaining popularity among the Jewish populations of the world, basically saying Jews, like a lot of other peoples at this time, should have their own nation in their historic homeland. Many Christians at the time bought into this too because they believed having Jews return to Judea was a necessity before the second coming of Christ.

So back to the war. On one side you have Germany, Austria-Hungary, and the Ottoman Empire and the other you have Russia, UK, and France. After a few years of fighting the war is in basically a gridlock with little changing of the front lines. During this time the scales are fairly balanced or else one side would have beat the other. Then the Soviet Revolution happens and overnight the scale of power is shifted. They are now out of the war leaving the UK and France to deal with Germany's Western Front while the Germans begin to ship soldiers from the East to help in the effort. Now UK and France are freaking the fuck out especially since battalions of French soldiers are mutinying refusing to make any advancements into no mans land and only holding defensive positions.

This is where things get sketch to the Nazis because at this point it seems like they should have won the war, especially since no foreign soldiers were on German soil. So apparently the British Government told the elite British Jews to convince the Americans to join the war on their side and in return when the war was over they would partition a defeated ottoman empire and give the Jews a homeland of Israel.

Another reason is that the Soviet REvolution had many Jewish ring leaders. The Germans viewed this as a Jewish Minority taking over a country from the Slavic peoples and running it (part of the reason they thought little of the Slavs). So after the war when there were attempted revolutions in Bavaria many of the conspirators were Jews as well. This was enough to attribute communism to an international Jewish Conspiracy.

I am at work but I would love to know the extent that these are either true or believed by the nazis.