Great Inflation Essays - Reparations, Inflation, Weimar Culture

Great Inflation annon In late-1922 the German government were forced to ask the Allies for a moratorium on reparations payments; this was refused, and she then defaulted on shipments of both coal and timber to France. By January of the following year, French and Belgian troops had entered and occupied the Ruhr. The German people, perhaps for the first time since 1914, united behind their government, and passive resistance to the occupying troops was ordered. A government-funded strike began as thousands of workers marched out of their factories and steel works. The German economy, already under massive pressure, gave way. The huge cost of funding the strike in the Ruhr and the costs of imports to meet basic consumer needs were met by the familiar expedient of the printing pre sses. Note circulation increased rapidly, and by November 1923 had reached almost 92 trillion marks. With less than three per cent of government expenditure being met from income and with the cost of one dollar at four billion marks, Germany was in the th roes of economic and social chaos. Starvation became a reality for millions of people, despite a bumper cereal harvest, as shops reverted to the barter system. Farmers refused to accept the effectively worthless, banknotes in exchange for grain, and food quickly began to run short in the cities. Prices rose one trillion-fold from their pre-war level. More importantly, for the long-term political future of Germany, the middle and working classes saw their savings wiped out. These were, in essence, the pe ople who were later to become the hard-core of the Nazi vote. Economists will argue that runaway hyperinflation has two sources. Firstly, it arises through a fall in the foreign exchange value of a currency, when an adverse balance of payments reduces foreign investors demand for the currency. A falling exchange rat e increases the cost of imports and, therefore, the cost of living. Wages rise as workers try to maintain their standard of living, especially if previous institutional arrangements have linked wages to living costs. Firms paying higher wages raise the pr ice of the goods they sell, prices rise still further, the foreign exchange value of the currency falls still more, and the cycle continues. Secondly, it arises through a large budget deficit which no one believes will narrow in the future. Faced with the prospect of budget deficits for many years to come, the usual sources of credit available to the government decline to make further loans; the government can no longer borrow to cover the deficit between revenue and expenditure. The only alternative is t o print more and more banknotes. As government workers and suppliers present their bills to the Treasury, it pays them off with newly-printed pieces of paper. This puts more banknotes into the hands of the public and they then spend them. In Germany, as we have seen, the problem was that there were trillions of marks worth of paper currency in circulation. Prices could rise one thousand times between a worker being paid and his reaching the shops. A common analogy used is that if one could afford a bottl e of wine today, one should keep the empty bottle which would be worth more tomorrow than the full bottle was today. Eventually, the power to boost government spending by printing money goes. When the government can no longer gain, even in the short-term, a budgetary balance through inflation, the situation becomes so intense that stabilisation through a currency board, a new finance minister or a link to the gold standard is implemented, and reform can be successful. It was at this point that some sanity was injected into the German economy by the election of Gustav Stresemann. He called a halt to resistance in the Ru hr, and set out to stabilise the mark. Luther, Stresemanns Finance Minister, introduced the rentenmark the value of which was based on Germanys staple, rye, rather than gold. In fact the rentenmark represented a mortgage on Germanys land and industry, which could never be redeemed. It did not matter. The point was that the currency was stabilised and became exchangeable at a rate of one billion old marks to one new mark, and at the pre-war parity of 4.2 marks to the dollar. The new currency was quickl y accepted by the population, and food and consumer goods began to appear in the shops. The government could now attempt to regain budgetary control in a climate of low inflation. The Dawes Plan was brokered, and a sum of some 39 billion dollars

French Indian War - French Indian War Aftermath

French Indian War - French Indian War Aftermath Previous: 1760-1763 - The Closing Campaigns | French Indian War/Seven Years War: Overview The Treaty of Paris Having abandoned Prussia, clearing the way to make a separate peace with France and Spain, the British entered into peace talks in 1762. After winning stunning victories around the globe, they vigorously debated which captured territories to keep as part of the negotiating process. This debate essentially distilled to an argument for keeping either Canada or islands in the West Indies. While the former was infinitely larger and provided security for Britains existing North American colonies, the latter produced sugar and other valuable trade commodities. Left with little to trade except Minorca, the French foreign minister, the Duc de Choiseul, found an unexpected ally in the head of the British government, Lord Bute. Believing that some territory had to be returned in order to restore a degree of balance of power, he did not press to complete the British victory at the negotiating table. By November 1762, Britain and France, with Spain also participating, completed work on a peace agreement dubbed the Treaty of Paris. As part of the agreement, the French ceded all of Canada to Britain and relinquished all claims to territory east of the Mississippi River except New Orleans. In addition, British subjects were guaranteed navigation rights over the length of the river. French fishing rights on the Grand Banks were confirmed and they were allowed to retain the two small islands of St. Pierre and Miquelon as commercial bases. To the south, the British maintained possession of St. Vincent, Dominica, Tobago, and Grenada, but returned Guadeloupe and Martinique to France. In Africa, Gorà ©e was restored to France, but Senegal was kept by the British. On the Indian Subcontinent, France was permitted to re-establish bases that had been founded before 1749, but for trading purposes only. In exchange, the British regained their trading posts in Sumatra. Also, the British agreed to allow former French subjects to continue practicing Roman Catholicism. A late entry into the war, Spain fared badly on the battlefield and in negotiations. Forced to cede their gains in Portugal, they were locked out of the Grand Banks fisheries. In addition, they were forced trade all of Florida to Britain for the return of Havana and the Philippines. This gave Britain control of the North American coast from Newfoundland to New Orleans. The Spanish were also required to acquiesce to a British commercial presence in Belize. As compensation for entering the war, France transferred Louisiana to Spain under the 1762 Treaty of Fontainebleau. The Treaty of Hubertusburg Hard pressed in the wars final years, Frederick the Great and Prussia saw fortune shine on them when Russia exited the war following Empress Elizabeths death in early 1762. Able to concentrate his few remaining resources against Austria, he won battles at Burkersdorf and Freiburg. Cut off from British financial resources, Frederick accepted Austrian entreaties to begin peace talks in November 1762. These talks ultimately produced the Treaty of Hubertusburg which was signed on February 15, 1763. The terms of the treaty were an effective return to status quo ante bellum. As a result, Prussia retained the wealthy province of Silesia which it had gained by the1748 Treaty of Aix-la-Chapelle and which had been a flashpoint for the current conflict. Though battered by the war, the result led to a newfound respect for Prussia and an acceptance of the nation as one of the great powers of Europe. The Road to Revolution Debate over the Treaty of Paris began in Parliament on December 9, 1762. Though not required for approval, Bute felt it a prudent political move as the treatys terms had unleashed a great deal of public outcry. The opposition to the treaty was led by his predecessors William Pitt and the Duke of Newcastle who felt that the terms were far too lenient and who criticized the governments abandonment of Prussia. Despite the vocal protest, the treaty passed the House of Commons by a vote of 319-64. As a result, the final document was officially signed on February 10, 1763. While triumphant, the war had badly stressed Britains finances plunging the nation into debt. In an effort to alleviate these financial burdens, the government in London began exploring various options for raising revenues and underwriting the cost of colonial defense. Among those pursued were a variety of proclamations and taxes for the North American colonies. Though a wave of goodwill for Britain existed in the colonies in the wake of the victory, it was quickly extinguished that fall with the Proclamation of 1763 which forbade American colonists from settling west of the Appalachian Mountains. This was intended to stabilize relations with the Native American population, most of which had sided with France in the recent conflict, as well as reduce the cost of colonial defense. In America, the proclamation was met with outrage as many colonists had either purchased land west of the mountains or had received land grants for services rendered during the war. This initial anger was escalated by a series of new taxes including the Sugar Act (1764), Currency Act (1765), Stamp Act (1765), Townshend Acts (1767), and Tea Act (1773). Lacking a voice in Parliament, the colonists claimed taxation without representation, and protests and boycotts swept through the colonies. This widespread anger, coupled with a rise in liberalism and republicanism, placed the American colonies on the road to the American Revolution. Previous: 1760-1763 - The Closing Campaigns | French Indian War/Seven Years War: Overview