CPs win WW1 due to no US entry, what happens to the US financial system?

[jacobk]

It's hard to say what Germany's actual politics and foreign policy would look like in the event of a CP victory, but at the very least there's not much natural friction between Germany and the US. Neither side has colonial markets to speak of, and both are going to be more interested in opening up everybody else's markets to their imports. The US circa 1920 isn't going to care much about German dominance of eastern Europe, and they'll care even less about Africa. If anything, US financiers will be lining up to invest in natural resource extraction projects in the German Congo or wherever.

There's plenty of ongoing natural friction between Germany and Great Britain, of course, but in a world where the US stayed out of WWI that's not America's problem. Really, with the inevitable social reforms on tap for Germany after the war ends, I could see the two "modern colossi" having a lot of common interest in kicking the "old empires" while they're down.

 

[Dorknought]

Did Germany have a efficient enough banking structure, capitol reserves, and cash flow to build such a thing on?

Given that after the Armistice, they were expecting The City to help finance the development of the lands Germany held from Brest-Litovsk, I’d say no.

 

[Historyrookie]

Did Germany have a efficient enough banking structure, capitol reserves, and cash flow to build such a thing on?

German banking system was not so developed compared to the british or even the French one. in addition, it is hard to see a constructive and collaborative environment with the french after the war, germany is going to dump debts, land grabing and adjustment there, particularly if luddendorf or an authoritarian goverment is there.

Then its is russia/urss. A founctioning and collaborative market would be needed there as source of raw materials, food and consumer markets, but again with luddendorf in charge brest litovsk lands will try to be vasallized and probably operacion capstone is going to be activated to kick off the bolcheviks and get control of the whole russia which mean more costs and the risk of a new war there.

A lot of fresh credit is going to be needed or the picture in europe would evolve to something autharkik in line with what would happen 25 years later, what wouldn't work....and that credit was only on the us.

 

[anotherlurker]

What do people actually mean with "less developed banking"? The main difference i see is that the Germans are traditionally more reluctant to give credit to everyone and their mother regardless of their ability to pay back.

 

[Historyrookie]

What do people actually mean with "less developed banking"? The main difference i see is that the Germans are traditionally more reluctant to give credit to everyone and their mother regardless of their ability to pay back.

Capacity of sourcing capital from internal and external saving markets,capacity of risk management and link with insurance companies, currency risk management, borrower risk evaluation systems, advanced finacing tools and instruments...and a strong/ accepted currency behind you and thinks like this...

 

[anotherlurker]

Capacity of sourcing capital from internal and external saving markets,capacity of risk management and link with insurance companies, currency risk management, borrower risk evaluation systems, advanced finacing tools and instruments...and a strong/ accepted currency behind you and thinks like this...

We're here in the early 1900s though, there's little in the form of savings becuase 99 % of the population lives payday to payday, neither are insurance companies as all prevalant as they are today, and as long as your currency is on the gold standard, which all the important ones are, things like currency risk management or some nebulous "accepted currency" status are not real issues because you're actually using gold as all other important countries.

If the French had any borrower risk evaluation system they never would have green lit giantic loans to Russia in the first place, yet that's usually pointed out as an example of the French banking system being more advanced. Did the Soviets ever pay back that money? Don't think so, so it really is just an issue of doling out cash and damn the consequences.

 

[Historyrookie]

We're here in the early 1900s though, there's little in the form of savings becuase 99 % of the population lives payday to payday, neither are insurance companies as all prevalant as they are today, and as long as your currency is on the gold standard, which all the important ones are, things like currency risk management or some nebulous "accepted currency" status are not real issues because you're actually using gold as all other important countries.

If the French had any borrower risk evaluation system they never would have green lit giantic loans to Russia in the first place, yet that's usually pointed out as an example of the French banking system being more advanced. Did the Soviets ever pay back that money? Don't think so, so it really is just an issue of doling out cash and damn the consequences.

I think wwi as it happened was out of any logic prediction scheme at that time, lending to Russia was not as risky as we see it now with insight - the country was doing well before wwi.

I also do not think that there was no savings as a whole in the begining of the Xx century - in fact it was an era of massive capital acumulation, true that not at middle or low classes but in the business and top society levels there was plenty of funding surplus.

but i am not and expert on this, someone in the forum could bring some light. i do think however that this could be developed and the problem of this 1917-18 continental system would not be the lack of banking acumen but the lack of funding itself....

 

[anotherlurker]

I think wwi as it happened was out of any logic prediction scheme at that time, lending to Russia was not as risky as we see it now with insight - the country was doing well before wwi.

I also do not think that there was no savings as a whole in the begining of the Xx century - in fact it was an era of massive capital acumulation, true that not at middle or low classes but in the business and top society levels there was plenty of funding surplus.

but i am not and expert on this, someone in the forum could bring some light. i do think however that this could be developed and the problem of this 1917-18 continental system would not be the lack of banking acumen but the lack of funding itself....

Would you loan a country that just lost a costly war, barely avoided bloody revolution and where the number of violent strikes is increasing each year? Most people would not.

But, the French state would and did because it's in their interest, get Russian militarily into position againt Germany, it's not like they financed quadruple track railways until the German border because they wanted Russia and Germany to trade more with one another. The Germans did similar things in Turkey, but were more risk averse than the French.

At that time in most countries that state itself was the main customer of the industry, tax money in exchange for railways, bridges and harbors. The industrialists grew phenomenally rich this way and it would continue after this alt WW1, the Krupps and Thyssens would see to it that the German state finances extensive railway projects in the East (funding which ends up with them), and the socialists are going to support it because more work for the workers.

 

[Historyrookie]

Would you loan a country that just lost a costly war, barely avoided bloody revolution and where the number of violent strikes is increasing each year? Most people would not.

But, the French state would and did because it's in their interest, get Russian militarily into position againt Germany, it's not like they financed quadruple track railways until the German border because they wanted Russia and Germany to trade more with one another. The Germans did similar things in Turkey, but were more risk averse than the French.

At that time in most countries that state itself was the main customer of the industry, tax money in exchange for railways, bridges and harbors. The industrialists grew phenomenally rich this way and it would continue after this alt WW1, the Krupps and Thyssens would see to it that the German state finances extensive railway projects in the East (funding which ends up with them), and the socialists are going to support it because more work for the workers.

There was political influence and government involvement and sponsorship of course, but the weight of private investment was very high. in fact governments at the era had little muscle getting tax revenues and spending money, and the volumes of public debt flying around were very low overall. Of course there was risk in russia, but banking industry is about risk management. To be conservative all time is not "good", particularly if you are good also swifting potential losses....

 

[Carl Schwamberger]

I think part of the question about banking is if there was a strong centralized bank structure in Germany similar to Britain or the US. That more efficient is getting capitol together for building a steam ship, expanding a factory or a harbor, more railway cars or whatever. It also spreads or dilutes risk.

but we really need to see some had numbers for this.

 

[marathag]

We're here in the early 1900s though, there's little in the form of savings becuase 99 % of the population lives payday to payday, neither are insurance companies as all prevalant as they are today,

Existed for Shipping,Fire Insurance was around before the ARW. Life and Health Insurance got astart after the ACW with the growth of Fraternal Organizations, and with the expansion into the west, you weren't really a Town unless you had Church, Post Office, General Store and a Bank

The Civil War was important, with the National Fiat Greenback, and the rise of National, rather than State Banks

1863
National Banks 66
State Banks 1466
Assets National Banks $16.8M State Banks $1,185M

1913
National Banks 7463
State Banks 15526
Assets National Banks $11,036M State Banks $9,267M

US Post Office also had some Banking functions between 1911 and 1966.

 

[Paolo Giusti]

I think part of the question about banking is if there was a strong centralized bank structure in Germany similar to Britain or the US. That more efficient is getting capitol together for building a steam ship, expanding a factory or a harbor, more railway cars or whatever. It also spreads or dilutes risk.

but we really need to see some had numbers for this.

Willelmine Germany had a different banking system, the so-called mixed bank.
In USA, UK and France, banks were not the first lender: stock market was the first source of credit - that is the reason securities were so common in their market as saving-tender.
In Germany (and Italy and Showa Japan) banks were the lender-of-first-resort: i.e. banks financed everything through small savings: this is why there was a lot of coupons in Germany (and why Marx called bankers coupon-cutter). This was a consequence of german corporation model (a zaibatsu-like incorporation were board of director is an OKH-like board and banks are the directors) and less evolved financial market (savings had to be mobilize by force through bankers' action).

This kind of incorporation made the financial system more stable than the Entente one (very few, rational players) but also bloodless (it was harder to make fiat-securities) and fragil (stock market crash destroyed also not-financial savings).

Germany was not

more reluctant to give credit to everyone and their mother regardless of their ability to pay back.

but was (is) uncapable of anglo-french growth since it had a more anemic financial market. But it was also utterly uncapable of burning up by itself in a 1929-like crash (since the banks would cool down the market without JPM's moral suasion).

 

[anotherlurker]

Existed for Shipping,Fire Insurance was around before the ARW. Life and Health Insurance got astart after the ACW with the growth of Fraternal Organizations, and with the expansion into the west, you weren't really a Town unless you had Church, Post Office, General Store and a Bank

The Civil War was important, with the National Fiat Greenback, and the rise of National, rather than State Banks

1863
National Banks 66
State Banks 1466
Assets National Banks $16.8M State Banks $1,185M

1913
National Banks 7463
State Banks 15526
Assets National Banks $11,036M State Banks $9,267M

US Post Office also had some Banking functions between 1911 and 1966.

Post office with banking functions existed in the 1880s in A-H already, and no one would claim A-H was financially advanced or anything like that, it's a fairly generic function for a post office, it still exists.

Do you have similar banking stats for other countries?

 

[marathag]

Post office with banking functions existed in the 1880s in A-H already, and no one would claim A-H was financially advanced or anything like that, it's a fairly generic function for a post office, it still exists.

Do you have similar banking stats for other countries?

That I don't.
The US Post Banking system, that acted as a middleman between the depositor and a series of National Banks.
The big advantage it that while the interest rate was lower than other banks and had a deposit cap, it was totally safe, a big thing before FDIC secured deposits.
What really jkilled it, was the increase in people buying savings bonds and TBills, from the success in the War Bond Drives during the War, the Greatest Generation and the Silents kept up with that, while Boomers did not.
So the Post Office Bank was gone before Boomers had any opportunity to use it, being barely out of school when it was shut down

 

[Deleted member 1487]

Given that after the Armistice, they were expecting The City to help finance the development of the lands Germany held from Brest-Litovsk, I’d say no.

Source on that?

 

[Paolo Giusti]

That I don't.
The US Post Banking system, that acted as a middleman between the depositor and a series of National Banks.
The big advantage it that while the interest rate was lower than other banks and had a deposit cap, it was totally safe, a big thing before FDIC secured deposits.
What really jkilled it, was the increase in people buying savings bonds and TBills, from the success in the War Bond Drives during the War, the Greatest Generation and the Silents kept up with that, while Boomers did not.
So the Post Office Bank was gone before Boomers had any opportunity to use it, being barely out of school when it was shut down

Italy and France have similar post banking today (Caisse des dépôts et consignations and Cassa Depositi e Prestiti): they are napoleonic invention to violently mobilize private savings - like german mixed banks, but less hyperactive and public-leaning).

 

[Dorknought]

Source on that?

I’ve forgotten now. I don’t think Lords of Finance, Bankers who broke the world, perhaps Paris 1919: Six Months that Changed the World.

 

[Deleted member 1487]

I’ve forgotten now. I don’t think Lords of Finance, Bankers who broke the world, perhaps Paris 1919: Six Months that Changed the World.

What would either of those titles have to do with what Germany thought in terms of finance in 1918? I've read part of the former, a book about the seeds of the Great Depression in the 1920s, and know the latter is about the ToV.

The Armistice agreement annulled Brest-Litovsk and required German troops to immediately evacuate all pre-war non-German territory they held in the East.

 

[Dorknought]

The Armistice agreement annulled Brest-Litovsk and required German troops to immediately evacuate all pre-war non-German territory they held in the East.

The realities that we know now we’re not instantly communicated to every German via Twitter on Nov 11. Dreams persist, and the Germans were expecting actual negotiations in 1919 for the eventual peace treaty.

 

[Carl Schwamberger]

A lot of people came to Versailles expecting negotiations. Instead they got a hastily contrived diktat that solved little and assumed a lot. Even as cynical body as the US Congress could not stomach it & the ToV started it's disintegration. By 1923 the Entente had fallen apart and the ToV was walking dead.