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Saturday, July 16, 2022

The Treaty of Versailles and the Dawes Plan

In today's post, the continuing saga of the house-of-cards finances orchestrated by the US after World War I, as told in about 6 minutes by three videos. The groundwork for these shenanigans were established by Article 231 in the infamous Treaty of Versailles. 

Note that the last 30 seconds or so of the video is History Matters just thanking its patrons.

Despite the fact the Treaty of Versailles was not as harsh as the conditions imposed on Austria and Hungary, it did cause severe economic problems for Germany in the early 1920s. In May 1921, the Reparation Commission established by Article 231 set the amount Germans had to pay for starting World War I at 1 million dollars 132 BILLION gold marks.


After the Germans defaulted on the payment plan, France and Belgium occupied the Ruhr causing even deeper economic and civil chaos in Germany. The reparation plan was restructured and Germany shored up with a fresh set of US loans organized by one Charles Dawes, an American banker and director of the US Bureau of the Budget. Dawes also become vice-president under Calvin Coolidge the same year that his namesake plan went into effect.  

Sub-prime mortgage-backed securities have got nothing on the round-robin of revenue roulette of the Dawes Plan. Mainly because of New Deal banking reforms a decade later and the Federal Reserve, the economy only partly collapsed in 2008, unlike what happened in the years after the Dawes Plan was implemented...

Of course, this  is an oversimplification, but not by much.

A final note -- in 1953 and eight years after World War II ended, West Germany agreed to pay 50% of the remaining balance of World War I reparations. 

Germany made the final reparations payment on October 10, 2010.

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