Worthless Currency?

On November 11, 1918, the Armistice of Compiègne between the Allies and the German Empire was signed. The Great War was effectively over. By 1920, peace would be concluded with the defeated Central Powers (the German Empire, Austria-Hungary, the Ottoman Empire, and the Kingdom of Bulgaria) in five separate treaties at Versailles, Saint-Germain-en-Laye, Neuilly-sur-Seine, Trianon, and Sèvres. According to the treaties, war guilt served as a prerequisite to compel the Central Powers to pay reparations. However, all Central Power states (Austria-Hungary dissolved into the Kingdom of Hungary and the First Austrian Republic in 1918), besides the German state (the Weimar Republic), soon had their reparations cancelled due to poor economic circumstances. Germany did not get off so easily. In 1921, the Germans received a very hefty bill from the Allies, in three parts. First, they were expected to pay for damage directly linked to the war; this bill amounted to 20 % of Germany’s GDP. They were also held liable for war debts incurred by France and Britain to the USA, which then amounted to around 80 % of gross domestic product (GDP). Special reparations, amounting to 150 % of the GDP, were piled on top, in an apparent attempt to keep Germany too heavily taxed to even consider waging war. This massive last straw was not expected to be paid; diplomatic channels got word to the German government that it was meant to placate public anger in the badly damaged Allied states. Meanwhile, there were other real penalties, including the confiscation of colonies, bank deposits, and undertakings. Prior to Versailles, national debt amounted to around 50 % of German GDP. Adding in the war reparations, debt ballooned to about 300 % of GDP.