16 October 2013 (15:01 UTC-07 Tango)/11 Dhu’l-Hijja 1434/24 Mehr 1391/12 Ren-Xu (9th month) 4711
Germany suffered more than a decade of massive economic depression, but suddenly became an economic powerhouse almost overnight. How? They defaulted on the unfairly imposed debts!
Defaulting means you tell those you owe money to, sorry we no got it. So why does the government of the United States want to take on more debt by raising the debt limit (by the way Obama recently lied and told the citizens that raising the debt limit does not increase U.S. government debt!!!)?
After the First World War, France, Italy and United Kingdom imposed unfair reparations on Germany. They blamed Germany for the war even though it was actually started by the Austro-Hungarian empire. Germany was targeted because the war actually destroyed the Austro-Hungarian empire, and the winners wanted someone to pay for it.
This hog tied the new Weimar government of Germany, as they tried to make the outrageous payments. It was turned into a devastating economic depression by the irrational decision by France and United Kingdom to shut down Germany’s money making industries!!! That action resulted in massive unemployment and basically stopped tax revenues that the Weimar government relied on to make the reparations payments! I’ve read historical books that say this was intentional on the part of France and United Kingdom, because the real goal of reparations was to destroy the new country of Germany (the political entity known as Germany did not come into existence until 1871).
The reparations also resulted in a debt financed economic explosion in the United States known as The Roaring 20s. France and United Kingdom were borrowing money from U.S. against the promised reparations money from Germany.
But Germany was also borrowing money from the United States to be able to make their reparations payments! So like the U.S. government today, the German Weimar government was digging itself deeper by essentially raising its debt limit by borrowing money from the U.S. to pay France and United Kingdom.
The loans and other financial help from the U.S. made things look, on paper, better than they actually were in Germany. That’s the mirage of debt financing.
So from 1920 to 1932 Germany was economically devastated, thousands of people starved to death, how did Germany get out of it? They went bankrupt and defaulted!
In retaliation the United States began economic sanctions against Germany in 1933 (apparently they didn’t apply to Ford, GM and IBM), the same year that German dictator Hindenburg made Adolph Hitler the new Chancellor. Despite the U.S. sanctions Germany became an economic powerhouse virtually overnight.
To be sure Germany got itself into new debts, but new debts weren’t being used to make unfair reparations payments, they were used to create new jobs by re-starting major industries the French and British shut down. You understand? They brought the jobs home.
In 1933, the year after default, Gross National Income jumped from negative percentage to plus 6% of Gross National Product, and remained above 7% until the Second World War. Germany was still in debt but the jobs were now there to create the tax revenues to pay those government debt, instead of continually borrowing from Peter to pay Paul. In other words, the debts were being paid with real money, not fake debt money.
It was the Second World War that destroyed Germany’s booming economy, which is more proof that war destroys your economy.
The lesson? The war weary United States will not save its long term economy by raising its debt limit and continuing its War on Terror!