AHC: United States goes bankrupt for WW2

Zachariah

Banned
Why wouldn't they increase taxes once war happens? They would eventually raise taxes once the foreign situation changes. Why would they persist in this way once the government needs more money?
Civil unrest, perhaps? Or simply self-interest- plenty of that in Congress. Or a sharp, premature increase in anti-'communist', nationalist sentiment, amidst accusations that increasing tax rates to any greater extent would be 'un-American' and 'unconstitutional'. And the more that income inequality grows as a result, the richer that the wealthiest Americans become; the greater the power they can wield as individuals becomes, the weaker that the USA and its institutions become, and the more vulnerable it becomes to corruption and nepotism, effectively transitioning from a democracy into an oligarchy. And in WW2, the USA could conceivably get involved in Lend-Lease programs far earlier, with government funds for this also siphoned off and diverted by profiteers to fund their foreign investments, making it far costlier for the USA- still more so, if the largest recipients of Lend-Lease all wind up losing regardless, leaving the USA to pick up the tab themselves.
 
How about a banking crises. Have US banks lend twice the amount of $ to Nazi getmany. Let’s say certain ideological sympathetic bank executives approve loans. When Germany enters war stops paying (was already paying old loans with new loans in 1939).

The Government can bail out the banks, or in the worse case scenario, take over them.
 
Civil unrest, perhaps? Or simply self-interest- plenty of that in Congress. Or a sharp, premature increase in anti-'communist', nationalist sentiment, amidst accusations that increasing tax rates to any greater extent would be 'un-American' and 'unconstitutional'. And the more that income inequality grows as a result, the richer that the wealthiest Americans become; the greater the power they can wield as individuals becomes, the weaker that the USA and its institutions become, and the more vulnerable it becomes to corruption and nepotism, effectively transitioning from a democracy into an oligarchy. And in WW2, the USA could conceivably get involved in Lend-Lease programs far earlier, with government funds for this also siphoned off and diverted by profiteers to fund their foreign investments, making it far costlier for the USA- still more so, if the largest recipients of Lend-Lease all wind up losing regardless, leaving the USA to pick up the tab themselves.

It is in the interests of the elite for taxes to be raised in this case to fund the military. When the Nazis and Japanese take over places they didn't respect American investment so all the money invested in China for example is lost to them if the war is lost. And for lend lease it was understood by the government that none of it was going to be returned and it was going to be produced at a loss for the government. It was better to pay money and have the British, Chinese, and then Russians fight than American lives lost.
 

Lusitania

Donor
The Government can bail out the banks, or in the worse case scenario, take over them.
Yes they could I was looking at a scenario where this would lead to government printing $ to support the bank to save off run on the banks. I t would still and US government suddenly left with hyperinflation as economic activity slows, government prints $ to pay for things while conservatives refuse to let government raise taxes. Export and imports decrease reducing government excise taxes. Then WWII blows up and government hamstrung and private enterprise also hurting due to worse economic condition (no new deal). When Japan attacks government increases expenditure and by war end it cannot pay its huge debt and defaults on its loans and bonds. People loose their savings and country "bankrupt".

Note: I know I am over simplifying it but using broad strokes was trying to outline a scenario where we technically met the threads main objective.
 
Yes they could I was looking at a scenario where this would lead to government printing $ to support the bank to save off run on the banks. I t would still and US government suddenly left with hyperinflation as economic activity slows, government prints $ to pay for things while conservatives refuse to let government raise taxes. Export and imports decrease reducing government excise taxes. Then WWII blows up and government hamstrung and private enterprise also hurting due to worse economic condition (no new deal). When Japan attacks government increases expenditure and by war end it cannot pay its huge debt and defaults on its loans and bonds. People loose their savings and country "bankrupt".

Note: I know I am over simplifying it but using broad strokes was trying to outline a scenario where we technically met the threads main objective.

Except the United States will be in the position of being the only large intact industrial power on the planet if WWII goes anything like OTL with France falling. Where is the rest of the non-communist nation's going to trade with if not the US.
 

RousseauX

Donor
Civil unrest, perhaps? Or simply self-interest- plenty of that in Congress. Or a sharp, premature increase in anti-'communist', nationalist sentiment, amidst accusations that increasing tax rates to any greater extent would be 'un-American' and 'unconstitutional'. And the more that income inequality grows as a result, the richer that the wealthiest Americans become; the greater the power they can wield as individuals becomes, the weaker that the USA and its institutions become, and the more vulnerable it becomes to corruption and nepotism, effectively transitioning from a democracy into an oligarchy. And in WW2, the USA could conceivably get involved in Lend-Lease programs far earlier, with government funds for this also siphoned off and diverted by profiteers to fund their foreign investments, making it far costlier for the USA- still more so, if the largest recipients of Lend-Lease all wind up losing regardless, leaving the USA to pick up the tab themselves.
None of which were relevant in the 1940s during a war, a wartime government had enormous legitimacy to undertake extraordinary measures
 

RousseauX

Donor
Yes they could I was looking at a scenario where this would lead to government printing $ to support the bank to save off run on the banks. I t would still and US government suddenly left with hyperinflation as economic activity slows, government prints $ to pay for things while conservatives refuse to let government raise taxes. Export and imports decrease reducing government excise taxes. Then WWII blows up and government hamstrung and private enterprise also hurting due to worse economic condition (no new deal). When Japan attacks government increases expenditure and by war end it cannot pay its huge debt and defaults on its loans and bonds. People loose their savings and country "bankrupt".

Note: I know I am over simplifying it but using broad strokes was trying to outline a scenario where we technically met the threads main objective.

1) Hyperinflation isn't really possible in a system of rationing and price fixing (you can't spend money even if you have a lot of it)

2) Capitalizing banks doesn't lead to inflation: the US pumped trillions after 2008 into asset prices and banks without inflation.

3) Taxes are meaningless when the government controls enough of the economy

4) No sovereign government holding debt denominated in its own currency needs ever default on it


The problem is that you are not clear what an economic collapse actually mean
 
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RousseauX

Donor
hint: Nazi Germany didn't collapse economically until at a couple of weeks before the war ended even though they had much weaker economic base and policies: and that was mostly because they started to lose important pieces of territory to the Soviets
 

Zachariah

Banned
None of which were relevant in the 1940s during a war, a wartime government had enormous legitimacy to undertake extraordinary measures
1) Hyperinflation isn't really possible in a system of rationing and price fixing (you can't spend money even if you have a lot of it)

2) Capitalizing banks doesn't lead to inflation: the US pumped trillions after 2008 into asset prices and banks without inflation.

3) Taxes are meaningless when the government controls enough of the economy

4) No sovereign government holding debt denominated in its own currency needs ever default on it


The problem is that you are not clear what an economic collapse actually mean
Except that we're not talking about a POD in the 1940's, during a war. And thus, we're not necessarily dealing with OTL's WW2. The point of challenges is to try and meet them; care to give it a try? Or is the challenge too great?
 
Through WWII and shortly after there was a massive movement of capitol to the US from around the globe. Between wartime purchases, and interest on loans, the US banks sopped up a large chunk of the 'surplus capitol' existing in 1939. To get to a economically insolvent economy you have to prevent that monetary flow somehow
 

RousseauX

Donor
Except that we're not talking about a POD in the 1940's, during a war. And thus, we're not necessarily dealing with OTL's WW2. The point of challenges is to try and meet them; care to give it a try? Or is the challenge too great?
Do you expect the US to undertake control over the economy like the UK and every other wartime country in the World Wars did?
 
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