2010-09-30

A country paying off its debt

This coming Sunday (October 3rd, 2010) Germany will pay the last of its debt / war reparations from World War I. On June 28th 1919, the Treaty of Versailles was signed to end the war between the German Empire and the Allied Powers. Articles 231-238 of the Treaty involved payment reparations to certain countries. In 1919, this amount totaled approximately $31.4 Billion. Compared with today's dollar value, that amount can equate anywhere from $1900 Billion ($1.9 Trillion) to $5000 Billion ($5 Trillion).

To say the least, this impossible amount of debt had an impact on the German economy. One solution was for the government to print its way out of debt. In a few short years German banknotes had lost so much value, that they were used as wallpaper. This Hyperinflation combined with the effects from the American Depression sent the German economy in a downward spiral.

The German Workers' Party that had formed at the end of World War I changed its name to the National Socialist German Workers' Party (Nationalsozialistische Deutsche Arbeiterpartei) in 1920. The conditions of war torn Germany and its failing economy set the stage for this Nazi party's rise to power.

Anyone reading this should be able to recognize parallels with our current governments economic actions, and what road this may be leading us down.
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