202409291608 Status: #idea Tags: #history #economics #politics #world_war_1 # American debt repayments led to WWII In the wake of WWI, the French & British had significant debt obligations to the United States. In turn, Germany owed significant sums in reparations to the British and French. Moreover, Germany's private businesses took significant loans from American banks. ([[The Treaty of Versailles was simultaneously too lax and too strict towards Germany]]) As a result, a system of exchange took root where America loaned money to Germany, Germany used this money to repay its reparations and bolster its economy, and France/Britain used the money flowing in from Germany to repay its debts to America. Hence, the whole system hinged on the United States - it required American capital to keep going & only was required to keep going because of American debt obligations. When economic crises hit in the early 1930s (Great Depression), American capital flows to Germany & American imports of German goods were reduced due to increased American protectionism. However, the US government refused forgive French & British wartime debt. Thus, Britain and especially France refused to forgive Germany's reparations payments. With Germany required to make reparations payments without American capital and export markets, it was unable to pay. This led to the Nazis and the cancellation of all war debts & reparations. With Germany unable & unwilling to make reparations payments, France defaulted on its war debts to the United States, further shaking the global financial system that was already reeling from widespread deflation and unemployment. The economic instability and global financial collapse that resulted from these events paved the way for nationalist strongmen to successfully enter the scene. Had the US entered into an agreement with Britain & France, agreeing to forgive their war debts if they forgave or reduced Germany's reparations, WWII may never have happened. --- # References [[The Deluge_ The Great War, America and the Remaking of the Global Order, 1916-1931]]