"Germany's national debt in November 1918?" Topic

Hi all,

It has always seemed odd to me that historians have emphasised the scale of the £6.60 GBP billion reparations that Germany was required to pay after WW1, when Britain came out of WW1 with a national debt that had ballooned to £7.40 GBP billion.

Is it because the Germans had funded their own war effort with massive government borrowing, and that these existing debts had to be paid off *simultaneously* with their reparations?

If so, what was the scale of the existing national debt that the Weimar government inherited from the Kaiser and his warlords in November 1918? Anyone have any idea?

Thanks in advance for any tips,
Redcoat

I'm no expert on economics but from what I can gather from 'The Coming of the Third Reich' by Richard J. Evans, the German government had been borrowing money to pay for the war right from the start, planning to recoup its losses by annexing rich industrial areas to the west and east and imposing large financial reparations on its enemies. I don't have any figures for the national debt at the end of the war but it must have been substantial. There was also the need for massive expenditure to adjust to a peacetime economy and the Weimar governments didn't want to fund this by increasing taxation because they feared that they would be accused by opponents on the nationalist right of imposing taxes to pay reparations.

Many thanks for that, SJD!

Trawling Google Books, I find a reference (Eyck, A History of the Weimar Republic, p. 70) to Germany's national debt in 1918 (largely the war loans you mention) having been 144 billion marks.

That figure is superficially similar to the reparations bill of 132 billion marks that the Germans were handed in 1921.

I wonder whether the sums were comparable or whether the 1921 figure looks misleadingly big because of inflation – i.e., was the 1921 mark worth much, much less than the 1918/19 mark?

Interesting…

Any thoughts?
Redcoat

According to Evans's figures, before the war there were just over four paper marks to the dollar and by the end of the war a dollar was worth almost twice that. Things quickly got worse and there were 47 marks to the dollar by the end of 1919 and, despite some efforts to halt the slide, by November 1921 a dollar was worth 263 marks. Inflation then really got going and the figures become truly astronomical. By December 1923 there are 4,200,000,000,000 marks to the dollar (a figure so high as to surely be meaningless?).

Germany's reparations had to be tendered in gold and since it could no longer meet the international market price it fell behind on its payments. It had also fallen behind on its deliveries of coal to France (which was also part of the reparations programme) which led to French and Belgian troops occupying the Ruhr.

However, as I said, I am no economist and I don't really know whether the cause of Germany's economic collapse was the size of its national debt after the war or the reparations imposed on it by the allies (my guess is that it was a bit of both).

At age 15 while looking around inside an old building/warehouse my family had purchased, I found a German 200,000,000 mark note from the mid 20's. I assumed I was rich! It was worthless I later found out. For a couple of days though…..

@skipper John

I hope you kept it. I would have that framed on my wall.

I knew a guy who lived through the hyper-inflation of the 20's. He told me that everyone where he worked was paid daily before lunch. People would run out and try to buy lunch before the money inflated further.

From Sept 2010:

link

And in 2018? We never know but it did all lead to WW2 because of them big banker types.

Something to remember is that the UK and France still held their colonial posessions, who's trade goods helped satbalize their ecconomies. Germany lost her empire and was also devestated ecconomically at home.
"The war left a curious issue, in that the UK and France borrowed huge amounts from the US but could not pay them back, as they were owed huge amounts by Germany, which was broke."
Article here:
link

While Keynes 'The economic consequences of the peace' doesn't progress your discussion here, it's essential back ground .. in case you haven't read it. Available free as a part of the Gutenberg project:

gutenberg.org/ebooks/15776

I first read it when studying as an economics undergrad .. I still think that it's beautifully argued and has lots of data to support the case.

Kind regards
Robin

According to Adam Tooze who recently wrote "Wages of Destruction" Germany borrowed money from the U.S. to pay England and France. England and France then gave this money to the U.S. for all the supplies and support they received. In Turn the U.S lent the money back to Germany. (Ring around the Rosie.)

Germany still was in debt to the U.S. but stopped paying England and France in the late 30's when Hitler came to power.

A more instructive thing would be to look at Germany's GNP compared to the amount of the Reparations, and then remember that most nations have less than 100% of their GDP (a more accurate measure of the country's economy) in debt. The US just recently exceeded 100%, and Japan is pushing 200% of their GDP in debt.

The reparations were quite literally impossible for Germany to repay, so for the first few years the Germans just printed more and more money to pay the reparations. Poof, instant massive inflation. December 1919, there were 6.7 paper Marks per dollar. By the first half of 1921, there were 90 paper Marks per dollar, and May 1921 Britain and France declared that German Marks were no longer valid for paying the Reparations. Instead they must be paid in gold or foreign currency, to the tune of 2 billion goldmarks PLUS 26% of the value of Germany's exports, annually! A total of 132 billion goldmarks in reparations, which at 2790 goldmarks per kg of gold meant over 47 thousand tonnes of gold. And that's roughly a sixth of all the gold ever mined.

On a lesser scale, but equally bizarre, a British company was still paying a German one for building a variant of the Maxim gun under licence during WW1.

I have various multi-trillion Zim notes framed in my bar… I'm still hoping it'll come back.

Keep in mind that certain key industrial areas of Germany were occupied and commercially exploited by France for a number of years as war reparations.

B

One of the most short sighted treaties ever…unless the allies really were trying to go to war again

Keep in mind that the German government deliberately caused much of the inflation just to avoid paying the debt.

Also, considering the damage and intentional ruin of much of northern France and Belgium mines, factories and such that the Germans occupied and used for four years, it is difficult to understand why they felt punished.

Dan

Keynes set the tone of the debate on reparations, and his arguments are still being held up as proof of Allied stupidity. But it would appear that in recent decades more and more historians appear to be throwing their weight behind the argument that the reparations demanded by the Allies were reasonable.

It is striking to learn, for example, from the wiki article that:

The Treaty of Versailles and the 1921 London Schedule of Payments required Germany to pay 132 billion gold marks (US$33 billion) in reparations to cover civilian damage caused during the war. This figure was divided into three categories of bonds: A, B, and C. Of these, Germany was only required to pay towards 'A' and 'B' bonds totalling 50 billion marks (US$12.5 billion). The remaining 'C' bonds, which Germany did not have to pay, were designed to deceive the Anglo-French public into believing Germany was being heavily fined and punished for the war.

It is also instructive to learn that, by 1925, Germany was producing twice as much steel as Britain. That doesn't seem to be the mark of an economy on the brink of collapse.

There seems to be mileage in the point, made above, that the German government intentionally went out of its way to avoid paying them.

The wiki article is very interesting…
link

Hyperinflation != economic collapse.

The factories were still producing, and the employers were actively increasing wages in an attempt to keep up with the cost of inflation, to the tune of paying employees twice a day (once at lunchtime so they could buy lunch, and again at the end of the day to buy dinner!)