Aside from completely ignoring reparation payments outlined in the Treaty of Versailles, the main method Germany used to rearm their military was through extreme deficit spending and hiding the paper trail using bogus promissory notes issued through a dummy company, known as MEFO bills.

Hjalmar Schacht, the Reichsminister of Economics for Nazi Germany, formed a fake Limited Liability Company called Metallurgische Forschungsgesellschaft (Metallurgical Research Corporation), where we get the shortened name MEFO, to issue bills to industrial manufacturers as promissory notes beginning in 1934, essentially an IOU that was guaranteed for 5 years. These bills were convertible into Reichsmarks on demand from the Central Bank and issued as payment to the armaments manufacturers such as Mauser, Krupp, Henschel, and Porsche. By 1939, over $12 Billion Reichmarks worth of MEFO bills had been issued in order to fund rearmament while hiding the paper trail from Britain and France.

Were these bills actually backed up by anything? Hell no. When MEFO bills eventually became due, the German Banks had to buy government bonds in order to issue payment in Reichmarks, and the government in turn scrapped money from various insurance companies and other personal bank accounts to cover it.

By 1939, when the MEFO bills issued in 1934 were to be due, the German state would have no way to honor all payments and the economy would implode again....That is unless Germany goes on a total conquering spree, plunder everything of value from their defeated neighbors, and pump it all back into the economy, that would work, and work it did until their defeat in the war and total destruction of almost all their economic assets.

For further reading, I'd definitely say check out War and Economy in the Third Reich by R.J. Overly