In order to understand why I am publishing these articles, please first read the introduction. Thanks!
Governmental economic meltdowns have happened before.
Typically, it seems, the government somehow survives in some form… but often the people do not fare so well during the crisis.
Some interesting examples are:
Edward “Longshanks” The 1st had to borrow around 10 times the annual income of his kingdom to pay war debts. Most of his lenders were Jewish investors. Within a year, he had executed 300 of them, arrested more, and forced Jews to wear identifying badges. A creative, if brutal, way to deal with governmental poor finances.
Louis XVI inherited massive debt (modern equivalent of about $6 billion) from Louis XV.. The nobles were all tax exempt and he tried to level taxes with them, but they ignored it. The strain on the ordinary folks became worse – food prices, famine, unemployment, were all huge problems while the political elite continued to thrive. Solution to the economic meltdown? The French Revolution. The Russian Revolution of 1917 has some impressive similarities.
Phillip II of Spain saw his economy reach the point of 40% of his annual income went to debt payments, and yet his debt was growing. He counted on lenders and gold from the new world. The first modern national bankruptcy happened in 1557, and then again in 1560, 1576, and 1596. Eventually the total debt number was 9 times the annual income. Result? He attempted a “Hail Mary (pardon the pun) pass” to create further debt to build an armada to (among other things) defeat Protestantism. He lost. In the end, Spain lost hold of nearly all New World claims and its position as a world power.
Maybe the most famous example is the Weimar Republic
Post WWI Germany owed $420 billion in war reparations. Within a year, they were defaulting on their payments.
The sums of money to be paid by Germany were enormous. The government’s solution? Print more money. This helped them pay off debt (as it always does at first) but soon, the exchange rates became insane.
Here is a brief timeline of the marks per one U.S. dollar exchange rate:
April 1919: 12 marks
November 1921: 263 marks
January 1923: 17,000 marks
August 1923: 4.621 million marks
October 1923: 25.26 billion marks
December 1923: 4.2 trillion marks.
Further, inflation got so bad in this period that German citizens were literally using stacks of marks to heat their furnaces.
Nationally, the blame of losing the war and the economy began to fall on Jewish financiers, Socialists and Communists. When a new Chancellor came into power, he was able to transform the government, cast blame on those, and other targets, and create a new sense of national pride under the heading the NAZI party.
After WWII, England had a very tough time recovering from the war debt (it was not paid off until 2006). The vast majority of their Navy was scrapped. Rationing continued into peacetime for decades… unemployment and homelessness were a major problem. Efforts to save the economy bounced back and forth between political parties which created a boom-bust experience for most people. The Empire was dismantled, and often suddenly… resulting in some of the bloodiest civil wars in the East and Africa.