Germany went bankrupt twice in 20th century

[socafighter]

Germany went bankrupt twice in 20th century




© Photo: SXC.hu
 

You think national bankruptcy is something that happens only to weak economies in developing countries? Think again. One of the Europe’s economic strongholds, Germany, went bankrupt twice in the 20th century: once in 1923 after losing World War I and again after the end of World War II in 1945.

The first time it was the crushing reparations payments imposed by the Treaty of Versailles that reduced the once almighty empire to a state of complete, and hopeless financial ruin. The German people were expected to reimburse the costs of the war for all participants.

When the German mark had begun to plummet, it caused the worst runaway inflation in modern times. At its peak, a wheelbarrow full of 100 billion-mark banknotes could not even buy a loaf of bread. The national treasury was empty. People were living in shacks and starving.
Nothing like it had ever happened in Europe before - the total destruction of the national currency, wiping out people's savings, their businesses, and the entire economy. Making matters worse, at the end of the decade the global depression hit. The radical devaluation of the German mark is cited as the textbook example of what can go wrong when government is given the unfettered power to print money. Hjalmar Schacht, who was the then head of the German central bank, complained:

“The Treaty of Versailles is a model of ingenious measures for the economic destruction of Germany. . . . The Reich could not find any way of holding its head above the water other than by the inflationary expedient of printing bank notes,”Hjalmar Schacht said.
Nevertheless, Germany managed to overcome this unprecedented crisis astonishingly fast. Hitler’s government issued debt-free and interest-free money from 1935 and on, accounting for its startling rise from the depression to a world power in five years. Germany financed its entire government and war operation from 1935 to 1945 without gold and without debt. Economist Henry C. K. Liu writes of Germany's remarkable transformation:

“The Nazis came to power in Germany in 1933 at a time when its economy was in total collapse, with ruinous war-reparation obligations and zero prospects for foreign investment or credit. Yet through an independent monetary policy of sovereign credit and a full-employment public-works program, the Third Reich was able to turn a bankrupt Germany, stripped of overseas colonies it could exploit, into the strongest economy in Europe within four years, even before armament spending began”

However, the end of World War II produced another bankruptcy in 1945, as most of Germany’s industrial capacity and factories were destroyed by the Allies. But the country learned its lessons well; today Germany is undoubtedly one of the strongest economies in the world.

Anna Mikhailova

[Tiresais]

Her analysis of Nazi Germany is too simplistic - they ran the finances into the ground again, and were near-bankrupt on the eve of the Anschluss of Austria (maybe before this). The cost of re-armament was cripping the German finances, and they have huge trade and government deficits. She needs to be more critical.

[asylumseeker]

Link?

[Tiresais]

Link?

Not sure if there's a concensus as it's a hobby area rather than a specialism. Overy (1987) would disagree with me - he argued that it took Britan, America and Russia combined to cripple the Germany economy. I (as a layman) and a number of other authors point out that the  politically-motivated privatisations of the period were either driven by these concerns, contributed to the problem, or both. Moreover, there's the question of the validity and longevity of a system so reliant on forced labour and whether you consider such a system 'financially stable'.

[asylumseeker]

Link?

Not sure if there's a concensus as it's a hobby area rather than a specialism. Overy (1987) would disagree with me - he argued that it took Britan, America and Russia combined to cripple the Germany economy. I (as a layman) and a number of other authors point out that the  politically-motivated privatisations of the period were either driven by these concerns, contributed to the problem, or both. Moreover, there's the question of the validity and longevity of a system so reliant on forced labour and whether you consider such a system 'financially stable'.

Not you ... socafighter. There's an article attributed to someone, but from where etc. Will review nonetheless.

[Tiresais]

Link?

Not sure if there's a concensus as it's a hobby area rather than a specialism. Overy (1987) would disagree with me - he argued that it took Britan, America and Russia combined to cripple the Germany economy. I (as a layman) and a number of other authors point out that the  politically-motivated privatisations of the period were either driven by these concerns, contributed to the problem, or both. Moreover, there's the question of the validity and longevity of a system so reliant on forced labour and whether you consider such a system 'financially stable'.

Not you ... socafighter. There's an article attributed to someone, but from where etc. Will review nonetheless.

Appears to be "Voice of Russia"

http://voiceofrussia.com/radio_broadcast/no_program/269147153/

[ribbit]

tiresais, yuh serious?

fact is nazi germany handled the priority which was unemployment. all dem deficits yuh mention there are for the 1%. de man on de street have to work.

as for trade deficit, yuh leave out de context - around the globe at that time was a high tariff regime.

[Tiresais]

tiresais, yuh serious?

fact is nazi germany handled the priority which was unemployment. all dem deficits yuh mention there are for the 1%. de man on de street have to work.

as for trade deficit, yuh leave out de context - around the globe at that time was a high tariff regime.

You understand that someone's deficit is someone else's surplus right? The deficit was caused by rearmament and importing large quantities of the materials needed for that. Look you clearly haven't read any of the links I posted, possibly 'cause you don't have academic access and that's cool, but solving unemployment doesn't make the forced labour any less important. He solved unemployment through unsustainably running the government finances into debt - it's like saying you're solving your family's hunger problem by running up hundreds of thousands of pounds in debt - sure you solved it for now, but you're absolutely screwed very quickly later on - you're just kicking the can down the road.

[ribbit]

tiresais, yuh serious?

fact is nazi germany handled the priority which was unemployment. all dem deficits yuh mention there are for the 1%. de man on de street have to work.

as for trade deficit, yuh leave out de context - around the globe at that time was a high tariff regime.

You understand that someone's deficit is someone else's surplus right? The deficit was caused by rearmament and importing large quantities of the materials needed for that. Look you clearly haven't read any of the links I posted, possibly 'cause you don't have academic access and that's cool, but solving unemployment doesn't make the forced labour any less important. He solved unemployment through unsustainably running the government finances into debt - it's like saying you're solving your family's hunger problem by running up hundreds of thousands of pounds in debt - sure you solved it for now, but you're absolutely screwed very quickly later on - you're just kicking the can down the road.

while germany was tooling up, the rest of the world wasn't importing any german goods - that was the effect of the high tariffs. so of course germany would run a trade deficit.

for the remarks the author made re nazi germany, it's clear the turnaround happened pre-war ("The Nazis came to power in Germany in 1933 at a time when its economy was in total collapse, ...  into the strongest economy in Europe within four years."). the article you have on forced labour is during the war - it doesn't really apply to this article. yuh playing fast and loose with the timelines.

[Tiresais]

tiresais, yuh serious?

fact is nazi germany handled the priority which was unemployment. all dem deficits yuh mention there are for the 1%. de man on de street have to work.

as for trade deficit, yuh leave out de context - around the globe at that time was a high tariff regime.

You understand that someone's deficit is someone else's surplus right? The deficit was caused by rearmament and importing large quantities of the materials needed for that. Look you clearly haven't read any of the links I posted, possibly 'cause you don't have academic access and that's cool, but solving unemployment doesn't make the forced labour any less important. He solved unemployment through unsustainably running the government finances into debt - it's like saying you're solving your family's hunger problem by running up hundreds of thousands of pounds in debt - sure you solved it for now, but you're absolutely screwed very quickly later on - you're just kicking the can down the road.

while germany was tooling up, the rest of the world wasn't importing any german goods - that was the effect of the high tariffs. so of course germany would run a trade deficit.

for the remarks the author made re nazi germany, it's clear the turnaround happened pre-war ("The Nazis came to power in Germany in 1933 at a time when its economy was in total collapse, ...  into the strongest economy in Europe within four years."). the article you have on forced labour is during the war - it doesn't really apply to this article. yuh playing fast and loose with the timelines.

Tariffs were not specifically targeting Germany during this period - other Western countries were doing fine - the problem is that Germany was spending something like 30% of its GDP (not even the budget, but GDP) on rearmament by 1939 (17.2 in 1938), as compared to 22% in Britain (8% in '38). It had unsustainable spending in a number of sectors, most prominantly Military and in the works programmes to keep people employed - this wasn't a successful economy, this was unemployment kept artificially low by huge unsustainable government spending, who then set about privatising (sometimes forcibly) some domestic companies in order to keep the lights on. The other major problem was Hitler's preoccupation with Autarky, which given Germany's lack of raw resources meant discouraging trade outside of Fascist spheres of influence and signing bilateral trade agreements with specific countries.

In order to save money, he also banned/outlawed trade unions and strikes, so Germans who were working had to accept the poor pay on offer. Not exactly a system to emulate.

[ribbit]

tiresais, yuh serious?

fact is nazi germany handled the priority which was unemployment. all dem deficits yuh mention there are for the 1%. de man on de street have to work.

as for trade deficit, yuh leave out de context - around the globe at that time was a high tariff regime.

You understand that someone's deficit is someone else's surplus right? The deficit was caused by rearmament and importing large quantities of the materials needed for that. Look you clearly haven't read any of the links I posted, possibly 'cause you don't have academic access and that's cool, but solving unemployment doesn't make the forced labour any less important. He solved unemployment through unsustainably running the government finances into debt - it's like saying you're solving your family's hunger problem by running up hundreds of thousands of pounds in debt - sure you solved it for now, but you're absolutely screwed very quickly later on - you're just kicking the can down the road.

while germany was tooling up, the rest of the world wasn't importing any german goods - that was the effect of the high tariffs. so of course germany would run a trade deficit.

for the remarks the author made re nazi germany, it's clear the turnaround happened pre-war ("The Nazis came to power in Germany in 1933 at a time when its economy was in total collapse, ...  into the strongest economy in Europe within four years."). the article you have on forced labour is during the war - it doesn't really apply to this article. yuh playing fast and loose with the timelines.

Tariffs were not specifically targeting Germany during this period - other Western countries were doing fine - the problem is that Germany was spending something like 30% of its GDP (not even the budget, but GDP) on rearmament by 1939 (17.2 in 1938), as compared to 22% in Britain (8% in '38). It had unsustainable spending in a number of sectors, most prominantly Military and in the works programmes to keep people employed - this wasn't a successful economy, this was unemployment kept artificially low by huge unsustainable government spending, who then set about privatising (sometimes forcibly) some domestic companies in order to keep the lights on. The other major problem was Hitler's preoccupation with Autarky, which given Germany's lack of raw resources meant discouraging trade outside of Fascist spheres of influence and signing bilateral trade agreements with specific countries.

In order to save money, he also banned/outlawed trade unions and strikes, so Germans who were working had to accept the poor pay on offer. Not exactly a system to emulate.

again, your comments apply to the wartime period rather than the timeline specified by the article (1933-1937) which is pre-war.

concerning your comments about "unsustainable" spending during a war - sound like you recommend a country remain solvent but risk defeat. doesn't make sense in relation to the context. world war ii was an existential war. even usa and uk turned into command economies. defeat was not an option.

[Tiresais]

tiresais, yuh serious?

fact is nazi germany handled the priority which was unemployment. all dem deficits yuh mention there are for the 1%. de man on de street have to work.

as for trade deficit, yuh leave out de context - around the globe at that time was a high tariff regime.

You understand that someone's deficit is someone else's surplus right? The deficit was caused by rearmament and importing large quantities of the materials needed for that. Look you clearly haven't read any of the links I posted, possibly 'cause you don't have academic access and that's cool, but solving unemployment doesn't make the forced labour any less important. He solved unemployment through unsustainably running the government finances into debt - it's like saying you're solving your family's hunger problem by running up hundreds of thousands of pounds in debt - sure you solved it for now, but you're absolutely screwed very quickly later on - you're just kicking the can down the road.

while germany was tooling up, the rest of the world wasn't importing any german goods - that was the effect of the high tariffs. so of course germany would run a trade deficit.

for the remarks the author made re nazi germany, it's clear the turnaround happened pre-war ("The Nazis came to power in Germany in 1933 at a time when its economy was in total collapse, ...  into the strongest economy in Europe within four years."). the article you have on forced labour is during the war - it doesn't really apply to this article. yuh playing fast and loose with the timelines.

Tariffs were not specifically targeting Germany during this period - other Western countries were doing fine - the problem is that Germany was spending something like 30% of its GDP (not even the budget, but GDP) on rearmament by 1939 (17.2 in 1938), as compared to 22% in Britain (8% in '38). It had unsustainable spending in a number of sectors, most prominantly Military and in the works programmes to keep people employed - this wasn't a successful economy, this was unemployment kept artificially low by huge unsustainable government spending, who then set about privatising (sometimes forcibly) some domestic companies in order to keep the lights on. The other major problem was Hitler's preoccupation with Autarky, which given Germany's lack of raw resources meant discouraging trade outside of Fascist spheres of influence and signing bilateral trade agreements with specific countries.

In order to save money, he also banned/outlawed trade unions and strikes, so Germans who were working had to accept the poor pay on offer. Not exactly a system to emulate.

again, your comments apply to the wartime period rather than the timeline specified by the article (1933-1937) which is pre-war.

concerning your comments about "unsustainable" spending during a war - sound like you recommend a country remain solvent but risk defeat. doesn't make sense in relation to the context. world war ii was an existential war. even usa and uk turned into command economies. defeat was not an option.

I agree it was a total war, not said otherwise. 1938 is not during the war - Germany invaded Poland September 1st 1939. My point is not that they remain solvent, but that Germany's economy was fragile and certainly not the success story put out. Low unemployment was the manifestation of war armament and massive infrastructure expenditure which was occuring at an unsustainable rate. Without a war, they would have gone bankrupt. They were on the way to economic ruin before WWII, which was not the case in the UK. The USA was still suffering from the Great Depression, and they (arguable) benefited from the massive government expenditure and industrial capacity required during the war, and then benefited from destroyed European capital making their manufactures almost uncontested on the world market.

[asylumseeker]

(The preceding point raised by ribbit alludes to an element pertinent to the budget discussion that escaped you regarding the FSB discussion). Now it's evident why it did.