In part one, I covered the societal ills of Weimar Germany. Now it is time to get into the economic woes that were a result of the Treaty of Versailles (ToV).
Unfairly being blamed for WW1 and being forced to pay reparations was the main cause of the economic struggle that caused decent folks to suffer. The middle class saw the worst of it while influential groups generally fared quite well, some even benefiting (source). There were also the matters of the 3 million German lives lost during the war, Germany losing 13% of her land (which included farmland and coal and iron-producing areas) and other terms of the ToV that hindered economic recovery.
So it comes as little surprise that Germany couldn’t pay this unjust bill. Because most of the war was fought in France, they were the main recipients of the reparations. Germany defaulting on the payments led to France occupying Germany. From Wikipedia:
By late 1922, the German defaults on payments had grown so regular that a crisis engulfed the Reparations Commission; the French and Belgian delegates urged occupying the Ruhr as a way of forcing Germany to pay more, while the British delegate urged a lowering of the payments.[5] As a consequence of a German default on timber deliveries in December 1922, the Reparations Commission declared Germany in default, which led to the Franco-Belgian occupation of the Ruhr in January 1923.
Yes, France invaded Germany, but it didn’t spark a world war. Things were peacefully (albeit not fairly) worked out. Makes you wonder why peaceful negotiations weren’t made when Hitler invaded Poland to reunify her former land and protect the German people that were being abused in Poland. But that’s a whole other can of worms which we’ll get to later.
The Reparations Commissions, or Inter-Allied Reparation Commission, was established by the ToV to determine the level of WW1 reparations which Germany should pay the money-grubbing Allies. Raymond Poincaré was the first chair for the commission, elected in 1920. According to an 1934 article from the Jewish Telegraph Agency (pictured below), Poincaré was a friend of Jews and “an ardent supporter of the Zionist ideal.” Interesting.
Instead of doing the right thing and not forcing a war-torn Germany to pay reparations, in 1924 the American government organized a ten-man international committee to examine the situation in Germany and consider the problem of reparations. At the head of this committee, they placed Charles G. Dawes, who would go on to become the 30th vice president. The following is the summery of the plan— for which Dawes won a Nobel Peace Prize —as provided by Wikipedia.
- Reparations payments began at one billion Reichsmarks the first year, increasing annually to two and a half billion after five years. No total sum was set.[9] The terms included a prosperity index, based on which Germany would have to pay more under favourable economic circumstances.[11]
- The sources for reparation payments included taxes on customs duties, alcohol, tobacco and sugar, and revenue from railroads and the budget.[10] As a guarantee for payments, the German National Railway was converted into a corporation under creditor-state supervision. An interest-bearing mortgage on German industry for 5 billion Reichsmarks also served as a guarantee.[12]
- The Reichsbank was reorganized under the supervision of the creditor states. It had seven representatives from the creditor states and seven Germans on its board [13] and was independent of the central government.[4]
- Germany was loaned 800 million Reichsmarks to be the base capital of the central bank and to ensure the Reichsmark’s stability.[12] About half of the sum was raised through Wall Street bond issues in the United States.[6]
- The Allied Reparations Commission was replaced by a Transfer Committee which was to take the value of the Reichsmark into consideration when making payment transfers.[12] Payments were not to be made if they endangered the gold that backed the Reichsmark. Repayment of commercial debts took priority over reparations payments in order to maintain Germany’s creditworthiness.[14]
- Foreign troops were to be withdrawn from the Ruhr.
Some notable takeaways are that no total sum was set for the amount to be paid; if Germany was prospering, the Allies could bleed more money out of them like an eternal cash cow. The railway sector was corporatized and put under an interest-bearing mortgage. Furthermore, the fat cats of Wall Street also got a piece of the pie through interest received from the bonds that they issued. If you’ll recall, Jews like Bernard Baruch made their fortunes from Wall Street. Here are some more Jews of Wallstreet of that era:
According to Carroll Quigley in Tragedy and Hope, the Dawes Plan was a project of J.P. Morgan:
The Dawes Plan, which was largely a J. P. Morgan production, was drawn up by an international committee of financial experts presided over by the American banker Charles G. Dawes. It was concerned only with Germany’s ability to pay, and decided that this would reach a rate of 2.5 billion marks a year after four years of reconstruction.
There has been much speculation as to the connection between J.P. Morgan Co. and the Rothschilds, however no mainstream source wants to admit to anything. Considering the global reach and power the Rothschilds had, it isn’t hard to believe that there was a connection.
In the book The Dawes Plan in the Making by Rufus Dawes, who served as an expert on the commissions to prepare the Dawes Plan and the Young Plan, I found this bit about our friend to the Jews:
Poincare in supporting generally the national interest has the support of all parties. The Treaty must be upheld, the rights of France enforced, Germany must be brought to realize the necessity of complying with the terms of the Treaty, continuing payments and ceasing their passive resistance. Who could oppose such a policy?
There is a reason that Poincaré was so insistent on Germany paying reparations. To learn why we can turn to the US Office of the Historian:
Meanwhile, a second wartime financial issue was causing tension among the former co-belligerents. While the United States had little interest in collecting reparations from Germany, it was determined to secure repayment of the more than $10 billion it had loaned to the Allies over the course of the war. Time and again, Washington rejected calls to cancel these debts in the name of the common wartime cause; it also resisted efforts to link reparations to inter-allied war debts. In 1922, London made this link explicit in the Balfour Note, which stated that it would seek reparations and wartime debt repayments from its European allies equal to its debt to the United States. That same year, Congress created the United States War Debt Commission to negotiate repayment plans, on concessionary terms, with the 17 countries that had borrowed money from the United States.
America being unwilling to forgive wartime debt was ultimately responsible for this pressure.
Now this plan did help. Overall economic production increased 50% in five years, unemployment fell sharply, and Germany’s 34% share of world trade was higher than it had been in 1913. But at what cost? Germany received substantial loans totaling 29 billion Reichsmarks. While it met most payments under the Dawes Plan, this was only possible due this large foreign debt. Despite its stronger economy, Germany struggled to achieve trade surpluses necessary for reparations. Thus, Germany became heavily reliant on foreign capital. For a temporary boon, Germany’s economy was controlled by foreign powers that were also former wartime enemies. This lack of sovereignty was an intolerable situation, but Germany was supposed to sit there and take it.
Germany was purposefully put in an endless cycle of debt. According to Quigley:
The only things wrong with the system were (a) that it would collapse as soon as the United States ceased to lend, and (b) in the meantime debts were merely being shifted from one account to another and no one was really getting any nearer to solvency. In the period 1924-1931, Germany paid 10.5 billion marks in reparations but borrowed abroad a total of 18.6 billion marks. Nothing was settled by all this, but the international bankers sat in heaven, under a rain of fees and commissions. (source)
The Dawes plan was replaced in 1929 by the Young Plan, which was also headed by an American, Owen Young. This plan was meant to solve the problems of the Dawes plan. The most obvious way to solve the problem, dropping reparation requirements, was not on the table. These are the changes made according to Wikipedia:
The transfer protection of the Dawes Plan was abolished, meaning that in future Germany was responsible for ensuring that the sum raised from tax revenue could be transferred in foreign currency or in kind to the Bank for International Settlements. The institution took over the functions of the Reparation Commission, which was abolished, as was the office of the general agent for reparations payments. The control that the creditor powers had secured in the Dawes Plan over the German National Railway and the Reichsbank were also dropped,[12] as was the prosperity index, which meant that Germany could be sure that it would not have to pay more if the economic situation was favourable.
Some of the more negative aspects of the Dawes plan were dropped, but Germany’s economy was still under the thumb of countries that were hostile towards her.
In 1933 when Hitler came into power he stopped complying with the ToV, which included not making reparation payments. That, combined with the fact that the NASDAP (National Socialist German Workers’ Party) put an end to the Weimar degeneracy talked about in part one, made many enemies out of many powerful people and governments. Their cash cow had been taken away and their party had been put to an end.
This animosity gave the UK every reason to find any excuse to enter into war with Germany. This will be talked about in the next installment. Stay tuned!
If you would like to get into the weeds about this topic I suggest checking out chapter IV in Tragedy and Hope and chapters 1 and 2 in Hitler’s Revolution, by Richard Tedor.