Interwar US (1919-1925)
US
1919-1925
In 1913, the US had a third of the world’s industry. In 1919 it had half, plus two thirds of the global gold reserves and was the largest creditor.
Versailles
Members
The English wanted mild terms on the Germans to help its own economy and prevent Russia and France from becoming too influent.
The French wanted plenty of territory and vastly reduce the German military and industry.
Results
The US argues for the creation of the League of Nations, light terms on Germany (no revanchism), self determination and others among Wilson's 14 points.
In the end territory is given to France (Alsace-Lorraine), Denmark and Poland (Silesia), plus the Rhineland is demilitarized.
The US and Britain agree to defend France in case of another war.
Germany is only allowed to keep a military for internal affairs, and all members of the LON were supposed to do the same eventually.
Saarland falls under French control but was supposed to have a referendum after 25 years.
Germany was to pay reparations equivalent to the English GDP (132 billion gold-marks), and relied on American investments to pay it.
The US uses this to keep dollars in circulation and keep its value low, thus maintaining its exports.
Wilson's 14 points are largely a failure as the US population had no interest in European affairs, and Congress doesn't ratify the Treaty of Versailles.
Thus, the US won't defend France in case of war.
The Soviets get closer to Germany to expand their influence.
Germany
Even then, most of it is directed towards the internal market, and Britain still holds much more influence. Also, they still lack a powerful military,
During the war, the CB bought bonds from the population and used them as lastro for the mark, but this vastly increased the amount of existing currency.
Prices were frozen, leading to scarcity and black markets. When the prices were unfrozen, prices skyrocketed.
Plenty of coal mines are lost with the Treaty of Versailles, leading to an energy crisis.
The Treaty of Rapallo (1922) ends mutual debts between Germany and the USSR, and also secretly begin joint military exercises and the creation of chemical weapons.
In 1920, the Beer Hall Putsch makes Hitler famous and pressures the government to spend more on policing.
This makes them announce inability to pay their debts, leading to a Franco-Belgium occupation of the Frankfurt.
Briand (France) is forced to resign after a the first Ruhr deal and Rathenau (Germany) is killed by the far-right
The price of the mark increased more than 1000x between 1921 and 1922 due to an expansionist monetary policy.
The inflation once again makes Germany unable to pay, and once again the Ruhr is occupied, leading to coal shortages and a collapse of the worthless currency.
The French also suffered in the Ruhr, as their troops became increasingly expensive
The solution comes from Hjamar Schach, who creates the concept of Retenmark associated to public mortgage and inflation, making things more predictable and stable for the market. In 1924, the Reichsmark is created and the economy stabilizes.
The Dawes Plan sets a new timeline for reparations, reorganizes the BC under allied supervision, and US loans to Germany with mortgage on railroads and railways.
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The Locarno Treaties (1925) leads to mutual defense accords between Britain, Germany and France.
In the same year, France removes its troops from the Ruhr and in 26 Germany enters the LoN.
The Young Plan (1929) once again readjusts German once again to inflation, making them even more unpayable.
In 1932, Hoover accepts a halt to German reparations.
The Nazi party denounces the Young Plan and Versailles, but claims that a plebiscite supporting Young was fraudulent until elected in 1933.
Gold standard
The old gold standard collapses amidst protectionism in WW1, and the new one takes unitl 1925 to start becoming popular.
After the war, syndicalism becomes stronger (thanks also to the USSR), England becomes weaker and recessive policies are no longer as popular.
There were no major crisis between 1870 and 1914, creating an exceptional environment for the gold standard.
The dollar is still in smaller demand than the pound, but becomes a much safer option.
Plenty of countries press for the repayment of loans, increasing the chances of a new crisis.
Everything makes the return to a fixed exchange rate extremely difficult.
Countries have too much currency and too little gold, but need imports and easy credit for reconstruction.
The Brussels Conference (1920) tried to deflate prices and Genoa (1922) tries to organize interest rates between countries, with no US participation.
The solution was to try to link the values of all currencies, but this required absurd coordination.
The US doesn't participate in Genoa because its economy was doing well.