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The German government needed to spend a large amount of money to fund the Depression-era reconstruction of its heavy industry based economy and, ultimately, its re-armament industry. However, it faced two problems. First, rearmament was illegal under the terms of the Treaty of Versailles, and secondly there was a legal interest-rate limit of 4.5%.
The Nazi government tried to limit the number of its trade partners, and, when possible, only trade with countries within the German sphere of influence. A number of bilateral trade agreements were signed between Germany and other European Countries (mostly countries located in Southern and South-Eastern Europe) during the 1930s.
After World War II ended, the main four Allied powers – Great Britain, The United States, France, and the Soviet Union – jointly occupied Germany, with the Allied occupation officially ending in the 1950s. During this time, Germany was held accountable for the Allied occupation's expenses, amounting to over several billion dollars. [21]
The debt problem was exacerbated by printing money without any economic resources to back it. [1] John Maynard Keynes characterised the inflationary policies of various wartime governments in his 1919 book The Economic Consequences of the Peace as follows: The inflationism of the currency systems of Europe has proceeded to extraordinary lengths.
Since the debt ceiling system was instituted in 1917, Congress has never not raised the debt ceiling. Congress has voted 78 times to raise or suspend the debt limit since 1960.
[4]: 353 Ultimately, losses of U.S. investors into German debt amounted to 13 to 16 percent of U.S. 1931 GDP, and the German debt problem would only be settled in 1953 with the London Agreement on German External Debts. At its low point in 1932, German economic output had declined 39 percent from its level in 1929.
The Dawes Plan temporarily resolved the issue of the reparations that Germany owed to the Allies of World War I.Enacted in 1924, it ended the crisis in European diplomacy that occurred after French and Belgian troops occupied the Ruhr in response to Germany's failure to meet its reparations obligations.
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