We’ve Bailed-Out Before

In keeping with my program’s marquee expression “history repeats itself because we weren’t listening the first time,” I write to you today about the issue of bailing out foreign governments. At a time when the American economy is hampered by a Federal deficit topping $15 trillion, it seems like the folks in Washington are completely committed to driving us over the financial cliff. Yesterday, even while our own economy is reeling, the International Monetary Fund (IMF), which the President and his Congressional allies gave an additional $100 billion in 2009, provided another $37 billion bailout to Greece.

This new round of bailouts to Greece includes an American taxpayer contribution of nearly $8 billion, which is on top of the already over $13 billion America has handed Greece thus far in this crisis. What our government is effectively doing is throwing good money after bad. It seems so very similar to the Dawes Plan of 1924, which was designed to bailout post- World War I Germany. The Treaty of Versailles, which ended World War I in 1918, forced Germany to pay reparations to France for its role in starting that Great War. The reason for this treaty provision was that France was in tremendous debt to Great Britain, due to war financing provided by the Britons to aide the French in pushing back the Germans. Additionally, the British were in tremendous debt to America for war financing of their own.

Under such a scenario, war reparations were to be paid by Germany to France, so that France could repay Great Britain, so that Great Britain could repay the United States. Such tremendous obligations placed on Germany, while Germany’s government was spending wildly to rebuild the country, sparked an inflationary crisis in their economy. This made it nearly impossible for the Germans to meet their obligations to France, and they began to default on war reparation debts. To aide the Germans in making these payments, Charles Dawes, who later served as Vice President of the United States, proposed that the U.S. Government provide additional financing to Germany. This financing, mind you, was to ensure that Germany paid France, so that France could pay Great Britain, so that Great Britain could pay the United States. Thus, America was paying itself back with its own money!

The result, nearly predictable, would be that the German economy would never recover to the point of paying back America’s original loans to France and Great Britain. Thus, while the French and the Germans were paid back by additional loans to Germany from America, America would never be repaid its original loans to its allies. Even worse, however, was that the rise of Adolf Hitler, in the aftermath of Germany’s inflationary crisis, ensured that even the new money America gave Germany would never be used to pay back France and Great Britain. In 1934, the German government announced that it was no longer going to pay the Dawes Bonds, and no nation wanted to start another war to force them. As a result, by 1936 nearly 35% of all sovereign debt bonds traded in New York were in default.

In light of such history, why do our President and Congress feel that it’s a good idea to keep loaning money to nations like Greece? Probably because they’ve never read the results of the Dawes Plan of 1924, that managed to lose America $ millions. As such, our nation, already racked with debt, is about to drive deeper into debt to bailout another socialist state. Yet again, history is screaming to be heard, but Washington isn’t listening.

Filed in: Economy, Headlines

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One Response to "We’ve Bailed-Out Before"

  1. Mike Yohe says:

    Hello Mr. Kimbrell, I like you article.
    My thoughts, first, I would like to add. The Dawes Plan brought Europe economy back after WWI. The main reason was to stop the growth of Communism. The U.S. found the same problem after WWII, except they knew no one would buy any bonds. So the U.S. sent the printing plates that printed money to Germany. It is said that Germany printed over two billion dollars of our money. We then dumped a lot of money in Japan. The biggest give away of U.S. dollars has been to Taiwan in the economical war with China.

    Point, he taxpayers have always paid. But the players are not the government they are private banks. In Germany it is the Bundesbank.

    The banks biggest fear is communism.

    Religion, in ancient Egypt every twenty to thirty years they would have to rebalance nature. This is because man used greed and got the world out of balance. To balance the world they would redistribute the wealth and bring the world back into balance and the people could be happy again.

    We missed our opportunity to rebalance when we bailed out the banks. The greed is still there bigger than ever. I am afraid it is going to get worse

    Take care,

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