Tooze argues in Wages Of Destruction that the "Speer miracle" and remobilization of the German economy are vastly overstated, that contrary to belief, the Nazi economy was fully mobilized. However, even at it's maximum potential the Nazi state simply could not industrialize on the scale of the USA or USSR.

Additionally, the initial re-armament was only made possible through massive, incredible distortion of the economy. Not only did the Nazis devote an unsustainable about of gdp on military, but they also used 'funny money' internally (MEFO bills) and all of their hard currency reserves externally. Once those were gone, the only additional hard currency they could get was by confiscating the wealth of Jews and looting their conquests, neither of which is obviously a sustainable income source.

He argues that they almost had no other choice but to go to war before the bills came due. Without the ability to pay for resources or to cover their debt, the only option was to seize them.

This led, almost inevitably to a negative feedback loop. Their rapacious behavior, not to mention their 'ideological quirks' so to say, meant that their conquests would never be secure,subject to resistance and sabotage.

For example, Tooze claims that when the Reich finally managed to send some engineers to take a look at exploiting the Caucasian oilfields, they were all assassinated in their beds. Despite the massive territory the fascists controlled on paper, it's said that in the East in particular, their control was limited to the roads and the ground soldiers were standing on at any particular moment.

The ever-increasing drain on manpower meant that more and more laborers and craftsmen, of higher and higher importance became liable for the draft and had to be replaced with slave labor, with obvious implications for domestic security, not to mention productivity and quality.

As if all that wasn't enough, despite the popular image of a Hyper-efficent scientific fascist state, the internal decision-making looked more like something out of "game of thrones" than a sterile technocratic state. Hitler played favorites and set factions against each other. Each military branch competed with the others for resources. Himmler and Goering tried to build personal armies at the expense of the other branches. Industrial concerns were set against each other, producing competing designs for the same role out of the same pool of labor and resources. Hitler would favor one, then the other, and then the next day discard them both in favor of whatever weapon he decided was the "war-winner" that day. Production drives switched from ammo, to artillery, to submarines, to tanks of ever-increasing impracticality, to wonder-weapons ranging from the merely ineffective to downright counterproductive. Hitler and his favorites would personally interfere with designs, insisting on adding more armor and ever-larger guns to designs that already strained under their own weight, or insisting that a heavy bomber have dive capability, or that a jet-fighter be used as a bomber for 'revenge attacks'.

Designs were rushed into production with inadequate testing, forcing men at the front to be "beta testers"- Kursk was delayed so that the brand-new panther could be rushed to the front, allowing the Soviets to set up a defensive line unprecedented in modern warfare, and when they finally showed up, two caught on fire simply from being unloaded from the train, and only a handful were still running after a week of battle.

Each tank off the production line was practically a bespoke variant as bugs had to be worked out day by day, in comparison to the USSR and US who limited production to proven, standardized designs. This is where the myth of nazi super-science comes from- they pushed experimental projects into the front line regardless of practicality, reliability or effectiveness. The nazis would look at some impractical paper design or test project and say "yeah, that's what we need, build that tomorrow, take all these workers building these lame Stugs or pz4s or boring old rifles" whereas the allies would say "hey, that's cool, let us know when you've ironed out the bugs and its ready for production".

Sources-

Adam Tooze, "wages of destruction"

Richard Overy "Russia's war"

Steve Zaloga "soviet tanks and combat vehicles of world war two"

It has to do with the collapse of Imperial Germany during the First World War.

A "War Economy" is not a "make the economy more efficient" button. All that war production comes at a cost, which is reduced production and availability of consumer goods, be it food, clothing, luxuries (things like tobacco, tea, candies, etc.), or fuel. Steel need to make cars and appliances is instead used on tanks, nitrogen needed for fertilizers is instead used for explosives, wool used for coats is instead used to make uniforms.

The Homefront is willing to endure a degree of hardships in support of the war effort, but if the Government demands too much and the people have too little, then the people will start to re-think their support of the war, rethink if the war is worth the sacrifices they are making.

During WWI, the German Homefront suffered terribly. Imperial Germany was not self sufficient in food even before the war, and the British blockade cut off both food imports and fertilizer. Combined with the drafting of fit men for military service rather than agriculture, the food situation in Imperial Germany was dire. This is exemplified by the "Turnip Winter" of 1916-1917, where the most common food available was turnips originally intended as animal feed. By 1918, after 4 years of hardship, the German people had had enough. Sparked by sailors who mutinied after they learned that their admirals planned to send them on a suicide mission, the German people revolted. The Kaiser and his military clique were overthrown, and Social Democrats were put in power with a mandate to make peace. One year before that, war-induced hardships in Imperial Russia caused the people to revolt and overthrow the Tzar.

Hitler was keenly aware of this, and the fact that the Nazi party did not have unconditional support at home. Hitler did the utmost to ensure life was as comfortable for the populace as possible, keeping then well fed, well clothed, and with plenty of goods available. This came at the cost of not having a "Full War Economy" as well as sentencing people in occupied territories to death by starvation.

Once the "tide had turned" in 43, Hitler realized that coddling the German people to keep their support wasn't sustainable, and wasn't needed anymore. The menace of million of Soviet soldiers bent on revenge would be effective in keeping the people rallied behind the war effort.

hadn't the Nazis had a war economy since the 1930's though?

what was that guns or butter thing?