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Remembered Today:

Britiain Broke at War's End?


wiking85
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I am currently reading "The First World War: An Agrarian Interpretation" which states several times how broke the Entente, specifically Britain was. The author (a Brit) goes on to explain that the US entering the war made more funds available to the Entente, saving the them from a negotiated peace. How true is this? I know that the US made the equivalent to the modern amount of $2 Trillion ($9.6 Billion IIRC). But I seem to recall the British still having money to keep going and that they were borrowing mainly to get extra funds to loan their allies, as they could borrow at a lower rate from the US. Does anyone have a definitive answer?

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Does anyone have a definitive answer?

Don't know much about the UK, but do know that Jack Lang's threat to place a moratorium on the payment of interest on loans that had been raised in the UK to finance the AIF set off a chain reaction that exacerbated the effects of the Great Depression in Australia.

Brian

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All the countries involved in WW1 raised large amounts of money through the issue of government bonds, often bought by foreign investors some of whom caught a real cold (for example buying Russian government bonds mainly sold in France and Italy) I believe that Germany channeled her overseas bond sales through the Swiss banks. There were also major domestic sales of bonds (the US raised more money through bonds than taxes) Liberty Bonds, Freedom Bonds Victory Bonds etc. This resulted in a diversion of savings from investment in the production of consumer goods to war production which in turn had an inflationary effect as the increase in the total of wages and other payments for war production had no outlet in the purchase of consumer goods which had became scarcer. Policies of what today would be called qualitative easement (a weasel word if ever I heard one) and in effect was printing money increased inflationary pressures. In Germany hyperinflation resulted wiping out anyone's investment in bonds. In the Entente the Government finances were in a mess (sound familiar?) with large debts. There was a degree of recession in 1919 (in effect stagflation). Many people had to sell their war bonds short at a discount. Those who had enough cash to buy and hold until maturity made money (including Lloyd George)

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  • 3 months later...

Britain remained on the Gold Standard until the 1930s and had an artificial exchange rate as a result. The UK had enough money to mint and issue by registered mail (special delivery) millions of medals, including the British War Medal in silver. In the next 15 years the silver content of the circulating silver currency had to be debased, but didn't become cupro-nickel until after WW2. It was the latter war, coming so soon after WW1, that finally broke Britain.

Edited by per ardua per mare per terram
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As Professor Joad used to say, " It all depends on what you mean by broke". Britain in 1920, say, had enormous resources at her disposal. A sovereign nation is not broke because it has no cash. A printing press will soon solve that. What it needs is assets to back that cash. The Empire was intact, the map was still red with India still the jewel in the crown and Britain had a long way to go before she was broke.

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It was in the uS interest for there to be loans. Post-war Britain received German reparations which could then be used to pay back the Americans, who post Dawes Plan gave loans to German firms whose taxes helped to pay the reparations to Britain etc etc

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