World War I Reparations

World War I reparations were the payments and transfers of property and equipment that Germany was forced to make under the Treaty of Versailles (1919) following its defeat during World War I. Article 231 of the Treaty (the 'war guilt' clause) declared Germany and its allies responsible for all 'loss and damage' suffered by the Allies during the war and provided the basis for reparations.

In January 1921, the total sum due was decided by an Inter-Allied Reparations Commission and was set at 269 billion gold marks (the equivalent of around 100,000 tonnes of pure gold). This 100,000 tonnes of gold is equivalent to more than 50% of all the gold ever mined in history (est. 165000 tonnes) which was clearly not within the means of the Germans to pay. Consequently their only way of paying back the debt was in foreign currency, but attempts to purchase foreign currency with devalued paper Marks led to the hyperinflation.

Historical conversions between currencies are based on the nominal gold standards of each currency: one gold mark ≡ 1⁄2790 kg pure gold; one pound sterling ≡ 113 grains pure gold; one U.S. dollar ≡ 25 8⁄10 grains gold at 9⁄10 fineness (= 23.22 grains pure gold). ($834 billion in 2012), a sum that many economists at the time deemed to be excessive. The yearly amount paid was reduced in 1924 and in 1929 the total sum to be paid was reduced by over 50%.

Payments ceased when Adolf Hitler's National Socialist German Workers' Party took power in 1933, with about one-eighth of the initial reparations paid. With the reparation payments abolished, Germany was still required to pay the sums owed on bonds that were issued between 1924 and 1930 and sold foreign investors. The final payments were made on 4 October 2010 the twentieth anniversary of German reunification.

Read more about World War I Reparations:  Evolution of Reparations, As Viewed Within Germany, Impact On The German Economy, Reasons For The Size of The Reparations Demands, Current Status

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