When talking about the cause of the outbreak of World War II, perhaps everyone will subconsciously think that it is the product of the Great Depression. Some people may think that it is mainly a Jewish problem, so the economic crisis in Europe and the world caused it, which intensified the contradictions and led to the rise of the NC Party. But things are far from that simple. About a hundred years earlier, the Great Depression caused by the stock market crash in the United States in 1929 was very serious, but it did not reach the point of being out of control. Countries were already in a very depressed state, so the Great Depression exacerbated the global economic crisis, but it was not the fuse.
It was probably the economic crisis in Germany in 1931 that plunged the entire world into panic and recession, and led to the Nazi Party taking power in Germany. The problems of World War I continued to ferment: debts and reparations, which led to the failure of international coordination, triggered a series of wrong policies by the German government, and triggered a financial crisis, which shook the unsteady parliamentary democracy and destroyed the firm confidence of many people, giving Hezbollah the opportunity to take power.
*
Around 1930, the United States also entered the second year of the Great Depression, but European government officials, including economists, were very optimistic. Although there was no rebound, it had already reached the point. But at this time, an Austrian economist did stand up and said that 1929 was just the beginning of a decade of economic depression. And he inferred that it was due to problems in the German banking system, which was the source of the European economic crisis. This economist was called Sommere.
Let's look at how he reasons and argues his point.
As mentioned at the beginning, the end of World War I would lead to issues of debt and reparations. As a defeated country in World War I, Germany paid about 132 billion marks to the Allied Powers to eliminate the civilian losses. Looking at the "London Payment Schedule" in 1921, the total amount was 226 billion marks. The principal was not paid off until recent decades, that is, in 1983, and the remaining interest was not paid until around 2011.
Probably since the defeat, Germany's dependent loan expenditures have remained generous, mainly from foreign loans. It did not cut back on food and clothing due to war reparations, nor did it reduce the welfare of the people. It also started a series of employment projects and built public housing. Through loans, it built a large number of factories, improved machinery and equipment, and reformed new management systems. This industrial production efficiency reduced manufacturing costs and made Germany one of the few prosperous countries in Europe, probably in the 1920s.
Let's go back to the doubts raised by economist Somar. He thought that the German banking industry would soon collapse. Why? In his opinion, this prosperity was rather abnormal: inflation made people unwilling to save. Germany resumed exports, and workers' wages increased, and they were more willing to spend. Therefore, the loans Germany issued to various companies came from foreign countries, not domestic savings. Foreign countries were also happy to lend to Germany. German banks paid companies an interest rate of 10%, plus profits, resulting in corporate loan interest rates exceeding the average profit rate. Secondly, the total amount of short-term loans of German banks was close to 27 billion marks of private foreign debt, half of which was short-term.
This also reflects a problem, that is, overdraft, early consumption, and alternating repayment of old and new debts. By the end of 1929, the foreign debt was as high as 310 billion marks, including reparations, accounting for 86% of the entire GDP. It can be seen here that the economy is actually very fragile. As long as there is a little fluctuation in debt and reparations, it will cause a thunderbolt. This also verifies the problem that Somare saw.
*
After Germany was defeated in World War I, it had to pay reparations. How was the money paid? It was divided into three parts, of which two installments of 50 billion were to be paid as soon as possible, and another 82 billion was set up by the victorious countries for public opinion, which angered the people. In this case, no matter who was in power, they dared not actively pay the reparations, because this move would lead to losing the support of the people, which was equivalent to losing the support of voters, and also to avoid cutting welfare and taxation. As a result, Germany began to issue banknotes indiscriminately, leading to hyperinflation. In two years (1921-1923), the original 2,000 marks to 1 US dollar became 10,000 marks. When the mark became useless and the economy began to collapse, the Dawes Plan began.
Let's first look at what the main parts of the Dawes Plan are: reparations are obligatory, and the total amount of payment should maintain economic operation. There is a special agency that monitors various areas of Germany to ensure that the limit can be paid. The mark must become a stable currency and its value is linked to gold. It cannot be issued without corresponding gold reserves. In this case, in order to keep Germany with enough gold, loans must be provided. With so much money owed, everyone knows that no one will lend a hand. At this time, the plan set up a "transfer protection clause", which means that it can be extended. The domestic debt was temporarily suspended due to hyperinflation, coupled with a complete industrial system, etc., so that Wall Street investors smelled a high-quality borrower: a "Dawes International Loan" was issued, and the subscription exceeded the expected 10 times.
Britain and France supported the Dawes Plan because they were under great financial pressure after World War I and hoped to reduce their financial burden by bundling the German reparations and the US loan issue. Britain and France each had their own calculations: Germany was Britain's largest trading partner and Britain hoped that Germany's economy would recover. France was worried that Germany would threaten its security again and that if a war broke out again, France would be too weak to fight Germany and hoped to get Britain and the US on its side by paying reparations.
Therefore, the German Foreign Minister at the time, Stresemann, believed that the more money they owed, the safer they were. The original alternation of old and new debts could maintain operations, but because the Dawes Plan was a temporary plan lasting five years, the Allies must have a permanent plan to resolve the reparations, which was the Young Plan, and the "transfer protection clause" was modified. As we all know before, Germany can postpone the reparations, but there is an "absolute annuity" in the Young Plan. What does it mean? It is the minimum monthly repayment amount we are now exposed to. No matter how the economy develops, a fixed amount of reparations must be paid. Although it is not much, only more than 600 million marks, but because Germany's economy is very fragile, it is a fatal blow. A person who does not take the war terms reparations seriously, but becomes a deadbeat because of the monthly new debts, hahahaha, it makes me laugh to death.
Why is this so? Because Germany's economy continued to develop and prosper under the support of the Dawes Plan, and its military gradually recovered. Although it gave its ocean-going merchant fleet to the Allies in 1918, it rebuilt a fourth fleet after the war. This made Britain afraid and stood on the side of France, not wanting Germany to be too comfortable. Together with the United States, it acquiesced to the Young Plan. After this plan came out, the alternation of new and old debts could no longer be played, hahahaha.
*
So what should be done? At this time, the government and business community needed a plan to protect the economy and get rid of the reparations. At this time, financial expert Brüning came up with a plan that he thought was brilliant. He was also appointed Prime Minister in 1930.
Bu pointed out that Germany was stuck in the Young Plan from top to bottom, so it should use the money in the most effective direction, and at the same time, it could continue to strive for foreign loans, increase taxes and cut taxes, etc., which would sacrifice the people to protect the finances and enterprises. Of course, he also wanted to arouse sympathy from Britain and France through this move, so that they would not regard Germany as hostile.
As mentioned at the beginning, such actions are likely to lose public support politically, because the votes are in the hands of the people, but other political parties will not take the blame together. Farce began to happen. The demands for tax increases and cuts did not receive the support of the parliament. Bu had no choice but to dismiss the parliament and force the annual budget to pass, turning fiscal austerity into law. Such digging holes caused the political world to split and the economic crisis to intensify sharply. A series of actions led to an increase in the unemployment rate of the German people. Most of the unemployed people hoped to receive government relief, but Bu made austerity policies a priority. The continued impoverishment led to the emergence of anti-political factions, and he also believed that he could defeat the extreme right forces within a year.
At this time, the NC Party made a big fuss about the impoverished people in Germany to attack Bu. As early as the peak of hyperinflation in 1923, Bu had launched the "Beer Hall Putsch" but failed. However, with the later Young Plan and Bu's austerity policy, Bu had more supporters and the support of a media tycoon. As for other reasons behind the support, I will not write about them for now. The propaganda efforts were greatly increased, allowing Bu to gain more and more support and supporters, making the NC Party quickly become the second largest party. Bu was also in a hot situation and launched the "German-Austrian Customs Union Plan", adopting a unified tariff externally, which could appease the Japanese right and the NC internally.
The right wing and the NC thought that Bush had run out of money and wanted to drive him out of office. The plan he promoted also angered France, because France believed that Germany deceived the Allies by fraud in exchange for sympathy and defaulted on its debts. By June 1931, Germany's economy was in collapse, and Britain and France were also suspicious of Bush and did not extend any assistance. Germany only had the United States to help it. On June 20 of that year, the United States announced the Hoover Plan, which was roughly that Germany would suspend its reparations to Britain and France, and Britain and France would suspend its loans to the United States. France openly opposed this plan. It was not until July 6 that France approved the plan, but at this time, the originally fragile German economy collapsed. German depositors turning their deposits into cash or foreign exchange meant that it would sweep across Europe. On July 13, German banks stopped withdrawals, and on July 14, the gold standard was abolished and foreign exchange controls were implemented. The collapse of German credit triggered a series of European economic crises. It even spread to the Atlantic. In the fall of 1931, American banks also began to fail, leading to an economic recession.
In 1932, Bush fell, and in January 1933, Hitler came to power and pushed himself onto the chariot of conquering the world. Hahahaha.
Looking back at this period of history, we can see the profound impact of the post-World War I European political order and the influence of the United States on Germany and the global economy. As a creditor, the United States was unwilling to continue to aid Europe, and the Versailles system made Germany bear heavy reparations, exacerbating Germany's economic difficulties. The German government's economic policies caused the people to suffer from the double blow of inflation and deflation, exacerbating dissatisfaction with the status quo. This process created conditions for the rise of the NC.
Hahahaha, just treat it as a story! It takes a lot of brainpower