Circa1865

Pushed into a war he had pledged not to become involved in, Woodrow Wilson tipped what was a stalemate of exhausted combatants into an Allied victory and forced abdication of the Kaiser. The result was a ruined Germany, an expansion of communism, and the predictable rise of a German nationalist who promised to right the wrongs of Versailles. To rebuild its devastated economy, Germany turned to bilateral trade with other nations but was met with resistance from the US.  During the mid and late 1930’s, German diplomats in Brazil, Chile and Uruguay reported home that the US was “exerting very strong pressure against Germany commercially” in order to keep the market for themselves. The Times of London reported well after war began that “One of the fundamental causes of this war has been the unrelaxing efforts of Germany since 1918 to secure enough foreign markets to straighten her finances at the very same time when all her competitors were forced by their own debts to adopt exactly the same course. Continuous friction was inevitable.”

Bernhard Thuersam, www.Circa1865.com

Economic Prelude to World War

“German economic nationalism in the 1930’s was, first of all, conditioned on the horrifying experience that Germany had had with runaway inflation and currency depreciation during the early 1920’s, culminating in the monetary collapse of 1923.

In this economic climate, [German economic minister] Dr. [Hjalmar] Schacht was particularly successful in making bilateral trade agreements with individual countries, agreements which amounted to direct “barter” arrangements that angered the United States and other Western countries in totally bypassing gold and other international banking or financial arrangements.

Actually, there was nothing either diabolic or unilaterally exploitive about the barter deals. Part of the essence of barter arrangements has been neglected by historians – the deliberate overvaluation of the exchange rates of both currencies involved in the deals. May not Western anger at successful German competition through bilateral agreements, and Western desire to liquidate such competition, have been an important factor in the Western drive for war against Germany?

Lloyd Gardner has demonstrated the early hostility of the United States toward German economic controls and barter arrangements, its attempts to pressure Germany to shift to a multi-lateral. “Open Door” system for American products, and the repeated rebuffs to German proposals for bilateral exchanges between the two countries.

As early as June 26, 1933, the influential American Consul-General at Berlin, George Messersmith, was warning that such continued policies would make “Germany a danger to world peace for years to come.”

In pursuing this aggressive policy, President Roosevelt overrode AAA [Agricultural Adjustment Administration] chief George Peek, who favored accepting bilateral deals with Germany and, perhaps not coincidentally, was to be an ardent “isolationist” in the late 1930’s.

Instead, Roosevelt followed the policy of the leading interventionist and spokesman for the “Open Door” to American products, Secretary of State Cordell Hull, as well as his assistant Secretary Francis B. Sayre, son-in-law of Woodrow Wilson.

By 1935, American officials were calling Germany an “aggressor” because of its successful bilateral trade competition, and Japan was similarly castigated for much the same reasons. By late 1938, J. Pierrepont Moffat, head of the Western European Division of the [US] State Department, was complaining that German control of Central and Eastern Europe would mean “a still further extension of the area under a closed economy.”

And, more specifically, in May 1940 Assistant Secretary of State Breckenridge Long warned that a German-dominated [trade in] Europe would mean that “every commercial order will be routed to Berlin and filled under its orders somewhere in Europe rather than in the United States.”

Not only were Hull and the United States ardent in pressing an anti-German policy against its bilateral trade system, but sometimes Secretary Hull had to whip even Britain into line.

[In the mid-1930’s], the American Chamber of Commerce in Brazil repeatedly pressed the State Department to scuttle the Germany-Brazil barter deal, which the Chamber termed the “greatest single obstacle to free trade in South America.” Brazil was finally induced to cancel its agreement with Germany in exchange for a sixty-million dollar loan from the U.S.

And in late 1938, President Roosevelt asked Professor James Harvey Rogers, an economist and disciple of Irving Fisher, to make a currency study of all of South America in order to minimize “German and Italian influence on this side of the Atlantic.

In the spring of 1935, the German ambassador to Washington, desperately anxious to bring an end to American political and economic warfare, asked the United States what Germany could do to end American hostilities. The American answer, which amounted to a demand for unconditional economic surrender, was that Germany abandon its economic policy in favor of America.”

(The New Deal and the International Monetary System, Murray N. Rothbard; Watershed of Empire, Essays on New Deal Foreign Policy, Leonard Liggio, James Martin, editors, Ralph Myles Printer, 1976, excerpts, pp. 44-46)