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Post by oldpop2000 on May 18, 2019 18:10:06 GMT -6
In December of 1919, one of most important economist of our century wrote a book titled "The Economic Consequences of Peace". This economist was John Maynard Keynes. Keynes was famous for his Keynesian Economics which was, more or less, still abided by to this day. The book was Keynes way of illustrating his objections to the Terms of Peace including the reparations. It was published around the world and basically caused the British, including Lloyd George to back away from severe reparations against Germany. With the US out of the game due to its dislike of the size of the reparations and the whole treaty along with the British now backing away from severe reparations, it only left the French. I am beginning to read this today and hope to have some great information about the real story of the reparations and their effects.
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Post by oaktree on May 20, 2019 4:07:20 GMT -6
My take, from quite limited reading, is that France wanted the large reparations for two reasons. One, to help rebuild all the damage inflicted by the war on French soil. Two, as a way to keep Germany poor and prostrate as a military power for as long a period as possible.
The economic and social damage to France from the war is also something that had a lot of consequences between the wars as well.
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Post by oldpop2000 on May 20, 2019 9:26:26 GMT -6
My take, from quite limited reading, is that France wanted the large reparations for two reasons. One, to help rebuild all the damage inflicted by the war on French soil. Two, as a way to keep Germany poor and prostrate as a military power for as long a period as possible. The economic and social damage to France from the war is also something that had a lot of consequences between the wars as well. The French problems were essentially twofold. She had borrowed considerable amounts of money from the US and England. This war debt was hanging over her and because of it, she would not move from her position on the reparations. The Germans were trying to get a moderation from France on the reparations issue, and she would not change her attitude. This was also complicated by the fact that during the war, all the countries had left the gold standard and started to print money. This led to inflation and higher prices. Now after the war, there were only two ways to fix this. One way was to go back on the pre-war gold standard and eliminate some of the money in the system letting prices and unemployment rise. This would eventually, with two to three years, solve the problem. This was how the US and Great Britain solved the issue. France and Germany took the other route of devaluation. They went back on the gold standard but changed the equivalency of the money to gold, say from 1 is .5 ounces of gold, to 1 franc is now .15 ounces of gold. This only accentuated the problem, causing hyperinflation in Germany and similar problems in France. Both France and Germany mishandled the post-war economic planning and paid the price. As to the damage issue, there was only a very narrow strip of French territory actually heavily damaged in the war, so that was really a non-starter. The economic and hence social damage was extensive due to this mishandling of their finances. There was also the rise of the communists and socialist which compounded the issue. The US was resistant to renegotiating the debt, for England she went down to 80 cents on the dollar but France wanted more and the US would not budge. It is a complex story to say the least and I am now reading Keynes book of 1919 and another which tells the story of the four national bankers that essentially caused the problems. I believe that the US still believed that it was not a part of the European community and had not actually been involved at the beginning of the war. She only entered to protect England and France. Wilson did not believe that, but Congress would not budge on the issue and the US eventually went back to isolationism. After WW2, we will see a different attitude from the US and it was successful. This does not mean that if we had gone down the "path not taken" that things would have been different. We did not control German economic planning nor did we control French planning so it might have been better but not by much.
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Post by dorn on May 21, 2019 2:29:17 GMT -6
My search for a key or keys brings me to Germany itself. Without going to detail, the Germany of WW1 and WW2 came about with the unification in 1871. It was ruled by the Kaiser and early in its history, Otto Von Bismarck. Service to the Kaiser was considered the "cornerstone of Wilhelmine Germany" as one author states it. The men around the Kaiser truly believed that the coming war would be short, and that Germany would win. She felt that she could and would get reparations from the defeated nations and that was that. You are completely right. I remember reading years ago about Bismarck politics. He knows a lot of things and even realized that taking French soil after victory in Prussian-French war is in long term impulse for French against Germany. He even knows that colonial imperialismus for Germany is not good as there is nothing to gain and create a money drain. He changed his views later, but all this was something that did not help Germany. And he certainly knows international politics as he was the one to forge them. He knows that the peace need to be preserved even if Germany was getting stronger. As he realize that in case of war, Germany could be overhelmed from west and east. However it was changed by Wilhelm II and without caution approache used by Bismarck it was more a matter of time when both blocks will clash. For economic perspective Germany has no chance as it could be easily blockade by UK and Russia and financial and military potential cannot compete France and and mainly British Empire.
note: You are right, with game released, this excellent discussion has been a little distracted
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Post by oldpop2000 on May 21, 2019 8:15:11 GMT -6
My search for a key or keys brings me to Germany itself. Without going to detail, the Germany of WW1 and WW2 came about with the unification in 1871. It was ruled by the Kaiser and early in its history, Otto Von Bismarck. Service to the Kaiser was considered the "cornerstone of Wilhelmine Germany" as one author states it. The men around the Kaiser truly believed that the coming war would be short, and that Germany would win. She felt that she could and would get reparations from the defeated nations and that was that. You are completely right. I remember reading years ago about Bismarck politics. He knows a lot of things and even realized that taking French soil after victory in Prussian-French war is in long term impulse for French against Germany. He even knows that colonial imperialismus for Germany is not good as there is nothing to gain and create a money drain. He changed his views later, but all this was something that did not help Germany. And he certainly knows international politics as he was the one to forge them. He knows that the peace need to be preserved even if Germany was getting stronger. As he realize that in case of war, Germany could be overhelmed from west and east. However it was changed by Wilhelm II and without caution approache used by Bismarck it was more a matter of time when both blocks will clash. For economic perspective Germany has no chance as it could be easily blockade by UK and Russia and financial and military potential cannot compete France and and mainly British Empire.
note: You are right, with game released, this excellent discussion has been a little distracted It happens, I will be posting some information about the Gold Standard and its effects post-WW1. Enjoy the game, I got it the other day. I will continue to read and investigate reparations and the gold standard especially as it relates to the relationship between France and Germany. This will be a research based on a timeline. It appears now, that when the new Reichsbank leader took over after the old one died, he did not get the strong support needed to implement his ideas on solving the German hyperinflation. This was the problem for the Social Democrats who ran the government. He needed a strong central government who would back him and get the country out of debt and eliminate or reduce the reparation. A government like the Nazi's. The new leaders name was Hjalmar Schacht. But Schacht did not agree with the German rearmament because it disrupted the German economy. Its an interesting story. Enjoy the game and come back here if you would like.
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Post by oldpop2000 on May 21, 2019 21:06:14 GMT -6
As most of us always do when trying to examine why an event occurred, we look for one reason or person. In this case, there is not one reason or person. So, the question remains: Could Germany be stopped before WW2.
Well, yes, if the nations involved had made some different decisions, then possibly there would not have been a reason for the rise of Hitler. Here is my list:
1. All countries had to remove their financial system from the gold standard. The gold standards only real purpose when it was begun in 1872, was the give the people of the nation confidence in paper money. By the late 19th century this had been accomplished. The standard did fix the growth of money supply and hence restricted inflation but it did hamper economic growth. You have to have a supply of gold to increase the supply of money, the last major gold discovery was in the late 19th century in South Africa. Countries should have used the principles of monitoring the money supply and adjusting the interest rates that the national bank charged the other banks in the country. This is the system that we still use. Had they done this, the hyperinflation of the war years and post war years most likely would never have occurred. It was this poor financial management by the Germans, French and to a certain extent, the British that caused the economic problems.
2. Reparations. This issue of forcing Germany to pay for the damages incurred by the French and other nations was failure of economic policy. The French spent 4 Billion dollars rebuilding the occupied areas of France and they wanted the Germans to pay for this. The German's were not able to pay and would not pay, until the reparations were reduced. Then the French occupied the Ruhr, which was a complete failure and they were force to leave the area.
3. Territorial losses exacted by the Allies. This was a very sore issue with the German's. It was used by the Nazi's as an excuse to invade Poland, and this started the war.
These are the three main issues that had they been changed probably would not have led to the rise of Hitler and the Nazi's. I would say the French bear a great responsibility for this, but so do the English and to an extent the US. The latter for returning to isolationism and not compromising on the war debt that was owed by the other nations.
Anyway it is possible that had any one of the three been done differently, the Second World War might not have occurred. We might have still been involved with Japan, but if Great Britain and France, along with the Dutch had been free and able to support our efforts in the Far East, I seriously doubt the Japanese would have attempted to take over the China and rest of the far east. She would have also had the Soviet Union on her back. Hard to know.
Interesting subject.
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Post by oldpop2000 on May 22, 2019 19:09:20 GMT -6
Some closing thoughts. I wish I understood more about finances and banking, I am learning, but I am not there yet. But the '20's were a decade of ups and downs in Western Europe. The German's finally came out of there hyperinflationary period but still owed the reparations. The French began to recover, and their budgets were finally brought under control but there still had war debt not only to the US but to the British. The British budget was brought under control but there was unemployment issues and of course their War Debt which was owed by France to them and the debt they owed to us. The British were more on the side of the Germans than the French and this caused very bad feeling amongst the national bank leaders.
The US had some up's and downs, but mostly ups but there was the problem of margins with stocks. Banks loaning money to people to buy stocks on margin hoping that the stock would go up, and if it didn’t, they had more money to pay to the bank. If they did not have it, they had a problem and so did the bank. The Federal Reserve tended to stay out of this problem, they felt they enough to handle and it was the job of the individual Federal Reserve Banks around the nation to deal with it. All of these issues including the other issues that I have spoken of, lead eventually to the rise of Hitler. The US economy tanked in 1929 due to the banking crisis. The Western Europeans were still living on borrowed time with the gold standard, and eventually the German economy went down.
It is a very complex story and the answer is what I said in my previous post. Could Germany have been stopped before WW2. The answer is still, yes, but with many changes to the economic system and to the issues of lands taken away from Germany.
It's hard to pin down one of the factors I have mentioned, as the one factor that could have changed everything. If I were a betting man, it would be the gold standard. That archaic financial tool should have been eliminated and maybe the other issues could have been resolved.
There is a statement in one of my books on economics that says there is a “ persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences.” I think this statement speaks to the problems of the 1920’s leading to Hitler and World War 2.
Hazlitt, Henry. Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics (pp. 15-16). The Crown Publishing Group. Kindle Edition.
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Post by dorn on May 23, 2019 1:13:38 GMT -6
There were League of nations in 20s and 30s. If it worked it could be quite good security.
I know that one of our previous presidents, Mr. Beneš, who was minister of foreign affairs almost whole interwar time was very active as he thought that this is something needed for security small nations in Europe. He was completely right that this would be solution. However main issue was that after WW1 UK, France wanted to go back to pre-war politics which was completely against League of nations
However principles of League of nations was against politics of colonial Empire who wants to decide alone and on top of that USA never enter this organization and Soviet Union was not accepted for long time. This allow old European powers do what they wanted and Legue of Nations was practically ineffective.
You nicely summary all the reason which were primary for situation before WW2 which ultimately started.
Stil question if war could be stopped remains? When was the last time that war could be stop?
September 1939 - war started March 1939 - Slovakia state and annexation of rest of Czechoslovakia - Was this time that could stop war if Western powers push? Probably not as Germany was strong enough and they cannot prevent annexation. However situation would be probably a little better as Germany get more from time up to September than Allies. Could be stop annexation of Czechoslovakia? I do not think so? Could be stop Germany takover of Poland? I do not think so. Could be stop Germany attack at France? It is difficult to asses however Germany would still use time that suits them so probably not.
September 1938 - Germany takeover of Sudetenland? Could be Germany stopped if Western powers push? I think so, Germany land army was in similar strenght as Czechoslovakia army, Germany would defeat Czechoslovakia if the can use all army but not if they need to defend against France.
So who has the power to stop Hitler? Daladier and Chamberlain. Now we can look on both why they act as they did and if there was possiblity to act differently.
Chamberlain - he thought Hitler could be appeased - he did not want to fight - he did politics as colonial powers did for centuries so do some agreement as Germany was involved in China
- he saw Germany as potential friend in Europe that can help to stop communismus
Could he act differently? Yes, if he can see Hitler as long time threat but very few people could see that. Otherwise it was impossible he can act differently.
Daladier - France had treaty with Czechoslovakia - France had difficult internal politic scene - France had very weak government unwilling - France was not willing to secure actively European peace - France was very dependent on British opinions as thought that British French relations are ones which secure them most Could Daladier act differently? No, he cannot. There would be needed strong person who would do what they think is the best, but it was not Daladier and there was nobody in France.
So I think that UK with their politics was nothing to secure European peace but France could do it to be continental power and protector of peace in continental Europe. However because of all the reasons you mentioned Franche could not do it. And the reasons are - we get back to your research.
But I think the key participant in European peace was France as USA was not in Europe and UK was always more interested by her security by balancing power in continental Europe and Soviet Union was excluded about decision in Europe.
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Post by oldpop2000 on May 23, 2019 9:08:47 GMT -6
If I were to try to put a date on the last possible time when that war could have been stopped, it has to be in 1927. It was in this year that the US stock market speculative bubble can be traced to its beginnings. Up to this time there had been ups and downs in the market and we were now in conventional bull market with stock prices reflecting the growth of profits properly. Profits in industry rose about 75% from 1922 to 1927 and accordingly, stock prices rose with them. There were old industries who prices did not go up, like coal, railroads and textiles. On the other hand, there were new industries like automobile and trucks, consumer appliances and radio.
In the middle of 1927, speculation began around the US. Everyone including the average person, went to their new banks which had sprung up, borrowed money and bought stocks on margin. In other words, if the stock was $10 per share, and you borrowed enough money to buy 100 shares, you would have to pay the broker, $1000.00. However, if you bought the stock on margin, then you might only pay $200.00 counting on the stock price to go up. If it did, then you would sell the stock, pay off the debt to the broker or bank, and pocket the rest. If the stock price went down, you might get a margin call because the asset is no longer worth what it was when you bought it, so you had to give the banker or broker, more money.
Now, if a new bank had 10 million dollars in assets, it might keep $1 million dollars for depositors and loan out the other 9 million for builders etc. or stock purchases. If the people using the loans for stock purchases, had many margin calls, they might go bankrupt, and the bank would not get its money hence, it would go bankrupt. This is essentially how the stock market crash and bank failures proceeded in 1929.
In mid-year 1027, profits in companies began to drop but the stock market leaped as one author puts it. It rose about 30%. In early 1928 that Dow was at 200 and this is when the market exploded. It went from 200 to 380 almost doubling in value. This was the beginning of the bubble. One author calls it a mania. Few stocks were going up but the fascination of the US nation with the stock market rose. The price/earnings ratios rose appreciably. Stock prices no longer represented the earnings of the company. This was a serious problem and it was recognized. The New York Daily Mirror stated that "the prevailing bull market is just America's bet that we won't stop expanding..." This was not correct, because the US markets had already stopped expanding. The Federal Reserve and its banks recognized the issue and so did Washington. They all knew that the market was in a bubble.
The problems for the Feds and the government was how to deflate the bubble without doing damage to the economy. The mistake was recognized as the easing of credit or interest rates in 1926 or thereabouts. They increased the interest rates to 5% from 3.5 but it did not good. The other issue then was that money from Europe was beginning to flow into the stock market which now meant that if the market crashed, this would greatly affect the Europe with its economies teetering on the brink since the end of WW1. If the interest rates were increased more, more gold would flow from Europe to buy stocks and this would hurt the European economies who were already short of gold and if they devalued their currency, inflation would skyrocket.
To make a long story short, all bubbles come to an end, the end can be gradual or it can be catastrophic. This one was catastrophic. The most dangerous part of this was the fact that for years, US bankers had been pushing loans onto Germany but the bubble was causing a recession. The German bankers were trying to get away from depending on foreign bankers. When the bubble burst, the loans dried up and high interest rates. This was 1929 and the German's were supposed to be beginning to pay off the reparations, which they could not do. All the bans in Europe now had major interest rate problems, more debt to handle and eventually Germany was locked out of our loans.
As I hope you can see, by this brief narrative, the tipping point for WW2 which was caused by the gold standard and difficulties it caused for the European nations was the Stock Market bubble bursting, ruining banks around the US and plunging the US into a deep recession which went even farther into a depression. Many average people lost their life savings, local banks failed losing depositors money and the Fed just did not take the appropriate action until it was too late. This crash, hit the European economies hard including Germany. This led to economic problems in Germany which led to the failure of the Weimar Republic and the rise of Adolf Hitler.
So, the answer is mid-1927 to the first quarter of 1928. That is the date, if you want to put one on it, where action by the US government and Federal Reserve might have forced the bubble to burst gently. But don't believe the US was at fault for the war, it was the European economies that failed in their duties to manage their budgets and get off of the gold standard. Had they done that, the stock market bubble which crashed would not have affected them that much. They did not, so the result was WW2. As I have said numerous times, events like WW2 have a myriad of causes, so you can't just look for one, there were many in this march to WW2.
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