Reparations payments by Germany required under the Treaty of Versailles posed a problem. How were tax payments by German citizens to their government in German marks to be converted to dollar payments to United States lenders? Explain how these transfers might have been successfully carried out. Why was Germany unable to make the reparations payments as required under the Treaty of Versailles?
Reparations work a lot like national debt, this is money that the government has to pay, but instead of having received goods or services, the reparations are penalties. The Treaty of Versailles required Germany to pay back Great Britain and France in the local currency of pounds and francs. Germany was decimated from the war, and the further burden of the reparation payments spiraled the German economy into hyper inflation, and thus no one was willing to accept the currency of ...
This solution explains how the tax payments by German citizens in the Treaty of Versailles and how the reparation payments were unable to be made.