No, the Treaty of Versaillies did NOT lead to hyperinflation OR the Nazis

The widespread view is that the Treaty of Versailles was so harsh that it led to the Weimar hyperinflation, the rise of Hitler, and the Second World War. It was an armistice for twenty years, they said. This is despite the fact that historians have, for decades now, worked to dispel the myth that it was any of these things. So, was it as bad as has been claimed? Did it place all the blame on Germany? Were the reparations as crushing as believed? And did this treaty and its reparations ultimately lead to the hyperinflation and the rise of National Socialism? Let's find out. We'll start by figuring out where this myth started. Oh, it was here in The Economic Consequences of the Peace by Lord Baron Keynes. Clemenceau's aim was to weaken and destroy Germany in every possible way. He had no intention of leaving Germany in a position to practice a vast commercial activity. "...the policy of reducing Germany to servitude for a generation, of degrading the lives of millions of human beings, and of depriving a whole nation of happiness, should be abhorrent and detestable. Abhorrent and detestable, even if it were possible, even if it enriched ourselves, even if it did not sow the decay of the whole civilized life of Europe. Some preach it in the name of justice. In the great events of man's history, in the unwinding of the complex fates of nations, justice is not so simple, and if it were, nations are not authorized by religion or by natural morals to visit on the children of their enemies the misdoings of parents or of their rulers." Bearing in mind that he was a member of the Bloomsbury Group, a bunch of proto-hippies, and one of only 16,000 conscientious objectors in Britain during the First World War, which should give you an idea to the nature of his personality, he famously painted the Treaty of Versailles as a Carthaginian peace. The Romans had wiped Carthage off the map, and supposedly spread salt over the land so nothing could grow there again. Well, Keynes said that that's what the Versailles Treaty was all about. Destroying Germany, and turning her into little more than a vassal state. And obviously that was a bad thing, and Keynes was against it, as are many National Socialists today. Keynes' words had an immediate influence on people at the time. "...the book became an immediate best-seller. Over 100,000 copies were bought worldwide in the first six months alone. The economic consequences had an enormous impact on thinking about reparations throughout the world. The biggest change occurred in Britain. Even before the peace conference had adjourned in June 1919, Lloyd George had already begun to have second thoughts about the Treaty." Even today, authors continue to believe Keynes' narrative, like this self-proclaimed Marxist. "...the Allies were determined to exact their pound of flesh and more by imposing the brutal Treaty of Versailles in the summer of 1919. The aim of these victorious men of peace, the leaders of the Entente, was simply to bleed Germany white and reduce the country to a semi-vassal state. Thus, the Versailles Treaty was one of the most oppressive and predatory treaties in history, an act of plunder perpetrated by a gang of thieves against a weak and defenceless German people, all in the name of justice, liberty and democracy. The hallmarks of capitalist hypocrisy." The irony is not lost on me how a Marxist is spouting the exact same argument about Versailles that a Nazi does. But how much of Keynes' view was true? Well, let's tackle the three biggest myths surrounding the Treaty of Versailles. 1. The War Guilt Clause. 2. The reparations were much too harsh and crippled the German economy, like Sell was just saying, leading to the hyperinflation and the Great Depression. And 3. The idea that, because of all this, Versailles led to the rise of the Nazis. We'll start with the first one. Article 231 of the Treaty of Versailles is the so-called War Guilt Clause. The idea goes that the Allies wanted to place all the blame and guilt for the war on Germany, and Article 231 is where they stated this. Except when you actually read it, it doesn't say that at all. "...that the Allied and Associated Governments affirm and Germany accepts the responsibility of Germany and her allies for causing all the loss and damage to which the Allied and Associated Governments and their nationals had been subjected as a consequence of the war imposed upon them by the aggression of Germany and her allies." Look at the text. At no point does it say that Germany was responsible for the outbreak of war. It doesn't say it. It does say that Germany was the aggressor against the Western Allies, which she was. She mounted an unprovoked invasion of neutral Belgium and then France And there's no denying that. But it doesn't say that she started the war, or was guilty for it. It only says that she will take responsibility for the losses and damage Germany inflicted upon the countries she invaded. That's it. No guilt. Just pay for the damage you inflicted. In Article 231, Allied concern was purely financial, and there was no mention of war guilt, unilateral or otherwise. On the principle of collective financial responsibility, the same clause, mutatis mutandis, appeared in the Austrian and Hungarian treaties, but neither state viewed it as a war-guilt clause. And yet, this idea that Article 231 contained a war-guilt clause continues to be argued to this day. Why? Because the German government wanted you to think that. They deliberately mistranslated and misinterpreted the article to convince the public that the Allies were wrong, and that Germany was the victim. Their propaganda was intense, and ultimately won, with Lord Baron Keynes himself siding with them at the time. This is a well and carefully drafted article, for the President could read it as a statement of admission on Germany's part of moral responsibility for bringing about the war, while the Prime Minister could explain it as an admission of financial liability for the general costs of the war. No Keynes, you're wrong. There was no moral responsibility or war-guilt built into the treaty. You're only seeing it because you're actively looking for it, or trying to distort the truth. It's not actually there. Yet, when the text of the treaty was first shown to the German people in May 1919, the German people were shocked by its content. "...few could see themselves as others then saw them, and could understand the bitterness of continental Allied opinion after four years of harsh occupation, and some thought the text could not be seriously meant. Neither their leaders nor the Allies had prepared them for such a document, which did not meet their assumptions about a just peace." The fact is that the German people, and everyone else as well, were deceived by the German government over the idea of war-guilt. Worse, because everyone believed the myth and stood by the official narrative which was that the Treaty of Versailles was a Carthaginian peace, this allowed so-called revisionist historians, aka denialists, to claim that they were the ones who were standing up for the truth, and that Germany was justified in its actions later on in the Second World War. By 1927, nine years after Versailles, there was an impressive library of worthy and substantial books by so-called revisionist scholars, which had at least factually obliterated the Versailles war-guilt verdict. So, by pretending that there was a war-guilt clause, Keynes has helped the Nazis to justify what they did, and has given legitimacy to the revisionist historians who later denied the big H of World War Two. I'm not saying the name because I want to get around the bots. But there was no war-guilt clause, and so Keynes was wrong, the German government was wrong, and so are the Nazis and the denialists. Myth number one busted. Probably the major criticism of the Treaty of Versailles is that the crushing reparations ultimately destroyed the Weimar economy, leading to the Weimar hyperinflation. Again, this stems from what Keynes said. To many, these reparations were not only unjustified, but also crippling to the Germans. They say it resulted in the hyperinflation, the Great Depression, and thus the rise of Hitler. In fact, this was the exact narrative I was taught in college. Versailles reparations bad. But is this really the case? Well, clearly, the German government and the Reichsbank didn't want to pay out of their own pocket for the war that they had enlarged, and then lost. In the ten worst-hit areas of France alone, three million Frenchmen were displaced, 600,000 homes destroyed, 20,000 factories and 4,000 villages entirely wiped out. 1.5 million Frenchmen had lost their lives repelling the invader. And who did all this damage? Was it the Netherlands, who invaded Belgium in order to strike at France? No, it was Germany. Germany was the aggressor. She devastated huge parts of Belgium and France, and then expected the victims to pay for the losses that Reichsbank-funded German soldiers had inflicted upon them. Therefore, German propaganda, in collusion with proto-Nazis like Lord Baron Keynes, did their best to convince the Allied public that the reparations of Versailles were far too hard on the poor, innocent Germans. And somehow this actually worked. In fact, it still does work. Many are convinced, to this day, that this is what happened. But this propaganda took time to take effect. Before Versailles was signed, only the Allied leaders and Lord Baron Keynes were convinced that the Germans were right. The public at large wanted the Germans to pay. So Allied politicians schemed to make the Versailles reparations look large to please the public, without them actually being large. The reason why was because they falsely believed that Germany couldn't actually pay these crippling reparations, a view that Keynes had convinced them of. "...the Allies were, from the very beginning of the negotiations, handicapped by their adherence to the spurious monetary doctrines of present-day Etatist economics. They were convinced that the payments represented a danger to the maintenance of monetary stability in Germany, and that Germany could not pay unless its balance of trade were favourable." Mises goes on to say that currency stability has nothing to do with the balance of payments or trade, but is due entirely to inflation. And he's correct there. "...this entanglement of mercantilist fallacies led them not to fix the total amount due in the peace treaty itself, but to defer the decision to later negotiations." This is true, except it's not quite the full picture. So, not many people know this, but Germany actually counter-offered the Allies. Instead of paying massive reparations, Germany offered to hand over massive amounts of territory. This would look impressive on the map, but would actually yield very little to the Allies compared to Germany just paying the bill, and so the counter-offer was rejected. But the reason it was offered in the first place was because the German government knew that the Allied politicians were only trying to placate their people at home, not actually wanting to make Germany pay. And so they were offering a solution to this problem of trying to make it look like Germany was being financially punished, when in reality, she wasn't. "...for this reason, along with hope that public expectation would abate in time, no figure was specified in the treaty. Germany was delighted. It too expected figures to shrink over time, wish to postpone the evil day, and gain the propaganda advantage of claiming it was forced to fight a blank check. In 1921, the victors found a way to disguise a total bill for all Central Powers of 50,000,000,000 gold marks, $12.5 billion, in an ostensible total of 132,000,000,000 gold marks, $33,000,000,000. While remaining in the realm of reality, this enabled the victors to boast of large sums, and the Weimar Republic to bemoan vast burdens that did not exist." So, it was their belief in status-machentalist fallacies, and the idea that demanding payments would lead to economic instability, a view Lord Baron Keynes was championing, that led them to not even want to bother punishing Germany with reparations. But, because they had to pretend to punish Germany to make the public at home feel like they hadn't fought the war for no reason, which they had, they didn't fix the reparations amount in the Versailles Treaty. Thus, they delayed the reparations amount for as long as they could, hiding the true figures under larger numbers that were false, yet continued to boast about how punishing the reparations were. In reality though, the reparations were not punishing to Germany at all. To reiterate, the total sum Germany was obliged to pay in reparations was effectively 50 billion gold marks, yet even this was only a nominal figure. Experts recognized that the bonds could not be marketed at nominal value at the interest rate of only 5%. Estimates of the 1921 present value ranged between 25 billion gold marks, Keynes, and 35 billion Firth. But it is clear that the extent of the obligation Germany was to meet in 1921 was considerably less than 50 billion gold marks in value. Worse, Germany made one full payment in 1921, and then barely paid a fraction of the remaining payments. Even when the Allies lowered their requirements, Germany reduced them further, and then refused to pay. And this was before the hyperinflation. After the hyperinflation, the numbers get even worse. The Germans had paid 1.5 billion gold marks worth of reparations by 1923, but the hyperinflation netted 15 billion gold marks worth of obligations in bank accounts held by foreigners in Germany. So they actually gained more wealth from abroad than they paid out. In addition, Mises gives statistics showing that Germany borrowed 20.5 million Reichsmarks from foreign countries, and only paid 10.8 million in reparations between September 1924 and July 1931. Again, they were taking in more than they were paying back. Tamka explains that of the 7 billion that Germany supposedly paid in cash for reparations, only 2 billion of that was actually paid for by Germany, and the rest were from foreign loans which were later defaulted on. Another source, quoted by Tamka, confirms this, pointing out that more foreign currency flowed into German coffers than left it in reparations payments in the period between 1921 and 1933. In fact, it's safe to say that, after 1921, the Germans hardly paid any reparations at all, and overall, the Allies effectively paid the reparations to themselves. The anti-reparations campaign resulted in a complete fiasco for the Allies, and in the full success of Germany's refusal to pay. What the Germans did pay, they paid out of foreign borrowings, which they later repudiated. Thus, the whole burden, in fact, fell on foreigners. That's right, you heard that correctly. The Germans never paid their reparations. And they could have paid them. There are various accounts that show that a small increase in taxation, we're talking a percent or two, and thus a small decrease in consumption would have allowed the Germans to pay the reparations. Yet the German government refused to do this. After 1871, France, with a much smaller economy than Germany's fifty years later, paid nearly as much in two years, by French estimates, to liberate its territory as the Weimar Republic paid from 1919 to 1932. The Germans could pay, but their leaders bowed to German public pressure not to pay, and thus did all they could to resist paying. So the sacrifice of millions of British, French, American, Belgian and other soldiers in one of the biggest and brutal conflicts in human history was all for naught. They were betrayed by their own governments, their own politicians, and sold out by their socialists, central bankers, and so-called economists like Lord Baron Keynes. Lions led by donkeys, funded and devoured by pigs. Remember that next time your country calls you up to fight. Finally, we have the idea that the Versailles Treaty led to the rise of the Nazis. They say that the war-guilt and the crippling reparations led to the hyperinflation and the Great Depression, and all this helped the Nazis rise to power. According to the leaders of the Entente, the German people and the Central Powers bore the full responsibility for the war, and therefore had to pay the full cost for their heinous and treacherous acts. This revenge of the victors was to sow the seeds of hatred within Germany for years to come, and help to fan the flames of German nationalism. In this way, it also helped to prepare the way for the rise of Hitler and the nightmare of the Second World War. The majority of the historians in the victorious Allied countries took it for granted that there was no war-guilt question whatever in regard to the Second World War. They seemed to be agreed that no one could or ever would question the assumption that Hitler and the National Socialists were entirely responsible for the outbreak of war on September 1st 1939, despite the fact that, even in 1919, some able scholars had questioned the validity of the war-guilt clause of the Versailles Treaty. So, the idea put forth by the Marxist Socialists, the National Socialists, and the Denialists is that the Versailles Treaty was so crushing, and placed all the war-guilt on Germany, that the Germans reacted to this by going to war in 1939. Therefore, these Socialists are arguing that the blame for the Second World War, and everything that happened within it, should be placed on the Allies. And the Treaty of Versailles is proof of that, apparently. So I hope you can see now how dangerous it is when you have a so-called Great Economist like Lord Baron Keynes pushing a false narrative that there's a war-guilt clause in the Treaty of Versailles, and how dangerous it is for Keynes and others to promote this myth that the reparations were so crippling. John Maynard Keynes effectively gave ammunition to the totalitarian ideologues who were able to leverage that, even to this day, to push their religions. The fact is though, as explained earlier in the video, there was no war-guilt clause in the Treaty of Versailles. That was German and Keynesian propaganda. And the reparations were not harsh at all. In fact, the Germans didn't pay the reparations. So the reparations didn't cripple the German economy, as Keynes said it would, and thus didn't lead to the hyperinflation, or the Great Depression. But there is one more element to this that we need to tackle. "...foreign observers have entirely misunderstood the role played by the Treaty of Versailles in the agitation of the Nazis. The nucleus of their propaganda was not the unfairness of the Treaty, it was the stab-in-the-back legend." We are, the Germans used to say, the most powerful nation in Europe, even in the world. The war has evidenced a new hour in invincibility. We can, if we want to, put to rout all other nations. But the Jews have stabbed us in the back. "...the Nazis mentioned the Treaty only in order to demonstrate the full villainy of the Jews." The stab-in-the-back legend is the idea that the German army was winning the First World War, but then the Jews came along and stabbed them in the back. It didn't actually start off with the accusation against the Jews, but evolved over time to where it was said that the Germans were betrayed by their Jewish or Jewish-influenced politicians and businessmen. Friedrich Ebert himself actually contributed to the legend by telling the troops in 1918 that no enemy has overcome you. Yet that didn't stop others accusing socialists like Ebert from being in the pay of his Jewish masters. Emperor Wilhelm II was the first German Emperor to offer the hand of friendship to the Marxist leaders, not suspecting that they were scoundrels without any sense of honour. While they held the imperial hand in theirs, the other hand was already feeling for the dagger. Just to point out, in case you've not seen my videos on National Socialism, Hitler believed that the Marxists were Jews. So here he's referring to the Marxists as Jews, and he sets this up earlier in the book and later too. Watch my Hitler Socialism video for more details on that. The good news is that historians have shown that the stab-in-the-back idea is a myth. In a nutshell, the German army was defeated in 1918, and was falling back. But German propaganda didn't tell the people what was going on. So, when the mutiny occurred, followed by the revolution, they were taken off guard. The German army leaders, especially Ludendorff and Hindenburg, didn't want to admit that they had led their nation to defeat. So they created the idea that the German army was undefeated, but had been stabbed in the back by a conspiracy in the homeland. Well, this is all documented. Numerous historians have shown this to be the case. And it is a myth. The German army was defeated on the battlefield. And while the home front did collapse, it wasn't a stab-in-the-back. The whole nation, including the army, was collapsing. So the stab-in-the-back myth is a myth. And the Treaty of Versailles being harsh and leading to economic collapse is also a myth. So neither could have led to the Second World War, because both ideas weren't really a thing. But it was the myths of both of these things that were used by the Nazis to gain popularity, and they went to war for other reasons. So the blame for the Second World War should rest on whoever it was that invented the myth that the Versailles Treaty was too harsh. Oh, and it was Lord Baron Keynes. That's right folks, Lord Baron Keynes. John Maynard Keynes was the reason the Second World War happened. Who would have thunk? Obviously I'm being slightly tongue-in-cheek here, but there is an element of truth to it. Keynes was the one who propagated the myth of Versailles, which the National Socialists and Hitler used to gain popularity. So, while he isn't the cause, he certainly played his part in the rise of Hitler. So there you go, lots of myths debunked today. For more myth-busting videos, check out these ones here. Thanks for watching, bye for now.