Modified from an earlier answer of mine

Enjoy the war, for the peace is going to be terrible- popular German joke in the last year of the war

As the fortunes of war turned against Germany after the Battle of Stalingrad, German propaganda found an imperative need to readjust to this new reality. Prior to the military reversals of 1942, German propaganda had operated on the principle of presenting an "ersatz reality," wherein the state-dominated media maximized Germany's victories and ignored the salient reality that Germany's war was not a short one and her enemies persisted in fighting Germany. The scale of defeats like Stalingrad, the growing Allied bomber raids, and the surrender of German forces in North Africa pricked this media bubble and German propaganda organs responded accordingly.

This retooling of the Third Reich's propaganda apparatus in light of defeat pursued several seemingly counter-intuitive strategies. For one thing, despite the fact that the Third Reich was a personalist dictatorship par excellence, the figure of Hitler disappeared from German propaganda. In contrast to propaganda from the earlier years of victory, post-Stalingrad news of German military operations seldom invoked Hitler's name or connected him too heavily to military operations. This was part of a deliberate strategy on Goebbels's part as he recognized connecting Hitler too intimately to Germany's military fortunes made him, and by extension, the legitimacy of the entire regime, culpable when these operations did not bear fruit. Rather than present images of the Führer, Hitler was invoked in late war propaganda as an abstract figure that stood for all Germans. This could just be from invoking his title, or oblique historical analogies such as films that made apparent the connection between Hitler and historical personages like Frederick the Great. Hitler, whose visage was omnipresent in state propaganda between 1933-1941, became an abstraction. By the same token, German propaganda also emphasized the severity and violence of German military setbacks, but with a unique spin. Allied bombing, the Soviet massacres of Polish officers at Katyn, and other actions of the Allies became staples of German propaganda after the tide had turned as it showed that Germany's enemies were merciless. The idea behind this emphasis upon the Allies' purported barbarity was to bind the Germans together through a policy of "strength through terror." This dehumanization of the Allies' military underscored that no compromise was possible and this was a war in which there was to be no quarter given and none expected.

These new strategies often dovetailed with established propaganda discourses that had been present within the Third Reich since 1933. The regime's castigation of the so-called "November Criminals" of 1918 also found new currency in this environment. Interrogations of German troops captured after 20 July 1944 often reported back that one key motivation for fighting on was to prevent a repeat of Germany's humiliating defeat at the end of the First World War. One important component of the demonization of the Allied military was that German retribution was in the making. Since 1933, one of the central legitimizing planks of the NSDAP was that it had enabled German technology and genius to reach its full potential. The vaunted V-weapons tapped into this established narrative that German technical expertise brooked no rivals. But beyond rockets and other Wunderwaffen, National Socialism had always stressed the ability of the will to transcend any material obstacles. This propaganda's emphasis upon collective action in the face of numerical superiority fed into this notion that the will is superior to rational logic. Similarly, the destruction of German landmarks and the seemingly indiscriminate nature of Allied bombing heightened the sense that this was a cultural war and that the Germanic culture constantly trumpeted by the Third Reich was in existential danger.

One sinister aspect of the late war propaganda was its turn to a heightened antisemitism. Goebbels used the solidarity of Allied coalition of both the imperial Britain, hypercapitalist United States, and the Bolshevik USSR as evidence of grand global Jewish conspiracy against Germany. Victor Klemperer, a German Jew who by fortune escaped deportation and murder, would note in his diaries the increasingly shrill antisemitism in propaganda as Germany's fortunes waned. The widespread knowledge about the Holocaust amongst the German public imparted a weight to this propaganda that it might not have otherwise possessed. Although they might not have known the specifics of the Holocaust, most Germans were aware that something quite terrible had happened to the Jews in the East. Even though the antisemitism was troweled on so thick to strain credibility in this propaganda, it encouraged the expectation that the Allies would hold Germany collectively responsible for the mass murder of the Jews. This does not mean that the German public accepted the NSDAP and Propaganda Ministry's antisemitism wholesale, but in some cases interpreted antisemitism quite differently than the state. One popular rumor among German civilians in 1943/4 was that Hungary had not been the target of any Allied bombings was because the Hungarian government had spared its Jews. The SD recorded a number of complaints that because the Horthy government has ghettoized Jews in Budapest the Allies would not attack this human shield, and there was grumbling within the German populace that Hitler did not do the same for cities like Berlin or Hamburg. And some of this disgruntlement was not clandestine, but in direct petitions to Goebbels. There were a string of letters to the Propaganda Ministry after the mass operations to clear Hungary's Jews in 1944 demanding that they be used as human hostages against Allied bombing. But the general acceptance of some of the antisemitism produced by Goebbels's machine precluded any thought or possibility of a negotiated peace for much of the German public. News of the Morgenthau Plan, which would have deindustrialized Germany, the expansion of Allied bombing, and the scale of German reverses fostered the expectation of a Carthaginian peace.

The effectiveness of this late-war propaganda is open to interpretation. While it could not rekindle hope in final victory, it did strengthen the resolve of some Germans to see the war to its bitter conclusion. Yet, even as propaganda turned to negative integration (uniting around a threat), it could not arrest the gradual estrangement of much of the German public to the National Socialist state. Goebbels himself appreciated this sentiment and his famous February 1943 Sportpalast speech had veiled threats against the "Golden Pheasants" of the NSDAP who were thus far still enjoying a prewar lifestyle. This late-war propaganda often worked in conjunction with greater arbitrary state violence directed against Germans, especially after the 20 July plot. Extralegal state violence had been embedded in the DNA of the Third Reich since 1933, but outside of political enemies and German Jews, most Germans' interaction with arbitrary state violence was the threat of it until around Stalingrad, when the security services began a much more thorough crackdown against shirkers and potential fifth-columnists. The 20 July plot helped to further this turn towards extralegal violence and other forms of domestic terror.

In this hypothetical scenario, a western German would have been obviously aware that the war had been going poorly. There were simply too many salient reverses to ignore. The Allied bomber campaign against the Ruhr and the sound of flak would have been something impossible to ignore. Their own government would have also publicized some of the Allied victories as an example that Germany's back was against the wall. By the the winter of 1944, the Red Army had begun to occupy German territory in the East (both in the Reich and those annexed in 1939) and Goebbels's propaganda ministry published lurid atrocity tales. Moreover, the advance of Anglo-American arms across France had eliminated what had been Hitler's greatest strategic victory in 1940. The retreat of German troops as well as the fall of the German city of Aachen in October 1944 would have been a reality that would have been difficult to ignore.

The mid- and late-war propaganda drive for mass action and a collective response to Allied aggression worked in often counterintuitive ways. While it stiffened resolve to not have a repeat of November 1918, propaganda along with the deteriorating war effort engendered a kind of grim fatalism for the future. Both rhetoric and reality heightened the sense of social anomie and the breakdown of society that came as bombing and wartime pressures destroyed the German infrastructure and stretched the civilian domestic economy well past its breaking point. The final agonies of the last few months of the war, as well as the violence meted out to Germans that shirked in their duties, helped to cement the postwar myth that Germans were double victims of the war- who were both subject to extreme violence from their military enemies, but also brutalized by a hypocritical criminal regime.