I picked up recently a new book written by Tobias Straumann....1931:Debt, Crisis and the Rise of Adolph Hitler. Straumann is a Swiss historian who has a fair summary of economics for the 1920s and 1930s for Germany. It's a book that I would strongly recommend (around 260 pages). I will say....he keeps the book at a good pace and avoids the 'dry' topics that you might encounter.
So, he gets over to the reparations situation dwelling from the peace treaty, and it's a story which I've rarely seen the complete details laid out.
There are three 'funds' which are set-up in the peace treaty of WW I.
The first fund was a pay-back situation for damages done to England and France, which was settled on the amount of 12-billion gold Marks.
The second fund was a pay-back situation, which covered all resources and material provided by the US to France and England.....which was to avoid going through the hands of France or England. Germany (by the agreement) had to pay back the US for this 'cost'. Amount? 38-billion gold Marks.
Throughout my educational period of life, I was always given the impression that the US gave the UK and France a 'hand-out' without anything coming back. That's simply not the case.
The third fund? Well, this is where things get interesting....this was a sort of unidentified fund, which I would call....'they-got-to-pay-and-suffer'....amounting to the sum of 82-billion gold Marks. As Straumann writes the piece....this is more like a publicity effort....assigning a huge amount to make the general public (the voters) happy, but just about everyone figured that just about every part of this sum would be cut here and there.....with the end-result likely to be zero.
So the sum of this reparation effort? 132-billion gold Marks.
Trying to sum this up in reality? Germany's GNP for 1913 was a total of roughly 50-billion gold Marks.
So if they'd just stuck with just the first and second fund....combined.....it's the loss of their total GNP of 1913. It's a fair sum of loss.
If you'd gone to 99-percent of countries....it would have been a fairly devastating situation in the end. But as they sprinkled the third fund over this....you are saying roughly 2.5 times the GNP of 1913.
So when this finally gets into the public news....it's just not taken well by the German public. In their minds, it's an impossible sum of money. If you'd gone out and said the third fund was going to be easily forgiven or forgotten....that might have helped, but that didn't occur.
This reparations ending.....then led to a curious period where Germans (realizing the impact) simply weren't willing to pay income or sales taxes.....to the 'bucket' which was going to funnel reparations out of the country.
As Straumann lays it out....Germany does make good on the first payment deal, but as 1922 progresses....public sentiment and non-tax payment has reached a level where the entire economy is falling apart.
The peace treaty effort....paved the way for public sentiment, and later support for t Hitler. It was pretty simple to envision.
By the end of 1922....there's just not any cash in the bucket of the German government, and so begins the 'trigger' of France marching troops into the NW region....to 'control' the coal/steel region (the second payment for reparations was not going to occur).
The massive hyperinflation period of Germany? It opens up in 1923 because of these steps.
One always gets the general lecture that the German hyperinflation period followed the end of WW I, but this is actually four years later.
The meaning of all of this?
To sum it up....there are an enormous number of consequences that are attached to the end of WW I....which simply open door after door to political downfall in Germany....with an abundance of serious economic consequences.
I strongly recommend a read of Straumann's book and think it lays out an economic story that we rarely get a full telling of the entire story.
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