After World War I, Europe had significant debt. Germany owed the Allies $33 billion in reparations as required by the Versailles Treaty. The Allies also owed us money from loans made to them during the war. As Germany drifted into a deep economic depression in the 1920s, in part because of the huge amount of money they had to pay in reparations, it became clear that Germany wasn’t going to be able to pay the...
After World War I, Europe had significant debt. Germany owed the Allies $33 billion in reparations as required by the Versailles Treaty. The Allies also owed us money from loans made to them during the war. As Germany drifted into a deep economic depression in the 1920s, in part because of the huge amount of money they had to pay in reparations, it became clear that Germany wasn’t going to be able to pay the full reparation amount. This, in turn, threatened the ability of the Allies to pay their debts to us. This is where Charles Dawes stepped in to try to resolve the issue. His actions made the United States a world banker.
The Dawes Plan allowed Germany to pay a lower figure than the $33 billion in reparations. The Allies accepted the reduced amount. The United States would then loan the money to Germany to pay the Allies. The Allies, who were in debt to us, would use that money to repay their debt to the United States. The United States, at a later date, would collect the money it loaned to Germany. Thus, the United States was acting like a world banker because of the money we loaned to Germany and how that money would be used to repay us.
Unfortunately, the Dawes Plan wasn’t successful. Germany never repaid their debt to us.
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