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Countries are still paying off debt from World War 1 (qz.com)
162 points by gamechangr on Nov 1, 2014 | hide | past | web | favorite | 78 comments



On a related note, shells fired during WWI are still killing people today. Hell of a thing, to fire a weapon and kill someone a hundred years later.

http://www.bbc.co.uk/news/world-europe-26654314


The most recent casualty of the U.S. Civil War lived to see Obama voted into office. He is unlikely to be the last.

UXO is a hell of a thing.


[flagged]


Maybe an OT: prefix to your comment would have avoided the down-votes.


The last Civil War veteran died in 1956; the last to have seen combat died in 1953.

http://en.wikipedia.org/wiki/Albert_Woolson

http://en.wikipedia.org/wiki/James_Hard

And the last Revolutionary War veteran died in 1866. (The year after our Civil War ended, in case you don't know much American history.)

http://en.wikipedia.org/wiki/Lemuel_Cook


They're talking about unexploded ordnance: http://en.wikipedia.org/wiki/Unexploded_ordinance

I don't know if there's a more recent example of Civil War UXO causing injuries, but here's a news article about a man killed in February 2008: http://www.foxnews.com/story/2008/05/02/virginia-man-killed-...


That is the incident I was thinking of, although I seem to have misremembered the date of it.


And I was providing context.


Not terribly uncommon. Landmines and the like are still scattered all around many parts of the planet. And, just a few years ago near where I live in CA, a train exploded due to long buried WW2 munitions (a train had derailed at some point in a rainstorm and a great number of warheads got buried in the mud).


And WWII aerial photographs are still used to find unexploded weapons: http://ncap.org.uk/case-studies/explosive-ordnance-disposal Quite something to take a photograph 70 years ago that saves a life today.


This is a fairly common thing. Parts of Tegal airport were dug up recently to detonate unexploded ordinance, its found fairly frequently in Germany.


It happens in the US too, occasionally. The campus of my alma mater, along with a good chunk of the surrounding neighborhood, was taken over by the U.S. Army during both World Wars and used as an artillery range and, during World War I, a chemical weapons development center. (See: http://en.wikipedia.org/wiki/Camp_American_University)

As a result, even up to the mid-1990s, when I was there, it was not unusual to see a block or two closed off periodically because someone digging had found unexploded ordnance there. And due to the chemical weapons work, these discoveries were more disconcerting than usual, because who knew if it was just a standard high-explosive shell or something loaded with mustard gas, or worse?


Misleading. The debts in question could have been paid off years ago if anyone had wanted to, but they were at such low rates of interest that it was better to pay off more recent debts instead.


How is that misleading? That's typically how one fails to pay their debts -- by priority.


I suppose there's a suggestion that due to some horrible infrastructure or mismanagement they've been left unpaid. As in, the nature of national debts and the these countries deal with debt is irresponsible or unfair or impractical or all three at once.

Or that the scale of the war can be appraised form its cost to society, just as a matter of perspective.

The reality it seems, is much more mundane, as you point out. That suggestion though, is what maybe the piece is suggesting by its headline. That kind of controversial commentary is why I'd clicked on it to begin with, but if I'd known that it was just being literal about the topic, it wouldn't be nearly as appealing.

Still, it's kind of crazy that these old debts are still lingering around. Just in a broader, historical sense.


Your last sentence is what made me click, so there's that. Didn't load for me though.


True. In 1990 Germany had €125 million debt outstanding. Easy to pay off if they wanted. Instead a new contract was signed with 20 annual installments.


And note that those 125 million were only outstanding because their payment had been frozen while the country was divided. Someone made a HUGE profit on what were fore decades essentially super-junk bonds.


It's hardly misleading. The article itself explains why these bonds were paid off now and not earlier.


I should have said that the headline was misleading. I agree, the article itself is fine.


The country next to Germany, Austria, has to pay to both the allied forces and soviets (russia) for WW 1 & WW 2: much of the former land mass that formed Austria (it's now tiny), a lot of money, gold, natural ressources (like rare earth and food to the soviets) and as usual after wars they captured and removed all valuable technology. The allied bombed many cities and railway stations and 10% didn't exploded and many are still in the ground (the chemical ignotion mechanism is still active and several bombs detonate each year).


Is your comment supposed to make someone feel sorry about a country that helped start wars that led to tens of millions of lost lives and devastated much of the continent for decades?


I'm British and live in Germany. My grandparents and my wife's grandparents fought on different sides of WWII. In WWI my grandfather won the Military Medal (the highest possible recognition for a non-commisioned soldier) aged 19.

My children have dual nationality. Let's apportion your Nazi blame on them shall we?

Attitudes like yours solve nothing.


The country did not start the war, people did. People who are not here anymore. And yet we make the people of today and tomorrow pay for what the people of yesterday did. That's ludicrous.


It would be rather silly to feel sorry for a country, but why not feel sorry for the people living there? After all Hitler was elected in 1933, which means that anybody who was below 30 when the peace was made couldn't be considered guilty, and Hitler only got 30ish percent anyway.

Unless you want to go the collective guilt or blood guilt route.


As your comment would suggest, we then _shouldn't_ sympathise with a country because of their history. After all, we can safely assume that everyone in that the country in question is an evil person looking to go start wars.


WW1 was supposedly started by assassination of some Austrian aristocrat, which doesn't look like "Austria helping start a war" in this case. Although I admit that I know relatively little about history and maybe there some other reasons I'm not aware of.

But even then, Austro-Hungary was an empire before WW1 and was left in more or less its current borders afterwards (like 1/10th of what it was before? I'm guessing here, but I remember it was a huge difference on the maps). I'd say that's enough of a reparations for any state.


Technicalities about "helping" start either war aside (I'll let someone else more knowledgable in this area argue that), yes I do feel sorry for them, it's just basic human empathy.


Governments have rarelybpaid down debt in absolute terms (there are exceptions eg Australia at one point). Generally it shrinks as a percentage if GDP at best. If nominal GDP ever stops growing it will never be paid off. Hence 2% inflation targets...


The US has massively paid down debt at several points in history. And several countries have gone vary close to zero debt. The real issue is debt is like crack to elected officials as you get to seemingly spend money without apparently raising taxes.


Australia reached zero long term debt in the mid 2000s. The only debt that remained was a rolling short term bond intended to create a stable liquid asset for banks.


Taking on debt is also necessary for a functioning financial system with the US gov playing an important role as global debtor of last resort. Money has no intrinsic value, and the only way to save it is for someone else to borrow and spend it!

Inflation is basically a tax on savings, which is not that bad when you consider again that money has no value. A low inflation rate then creates subtle pressure for people to invest money productively (or just spend it) as they lose out if they just hide it under their mattress. A high inflationary rate is not good, of course, as you basically can't save at all, while deflation is also bad because it rewards saving and causes value to evaporate (since money has no intrinsic value, things produced have to be bought and used...).


This is a very Keynesian way to look at things that isn't necessarily absolutely true. There are a lot of times when this ideal of "slight inflation" is detrimental given the actual output of said policies.


For example, when? There are very fundamental truths here; e.g. consumption has to match production with very few exceptions, no matter how much someone has to save (or can't spend according to what they are earning). You might be able to save for a rainy day (or retirement), but it is impossible for the world to do that (instead, they must invest for the future to prepare for that rainy day).

I'm not sure you could find a single serious economist who would claim "slight inflation is bad;" i.e. would argue that 2-3% is worse than 0%. Maybe a libertarian, but there is a good reason we never vote them into power.


You might not vote them into part, but the people you do appoint them into power, since Alan Greenspan has argued for zero inflation has the best policy in the long run.

I'm not saying that it isn't a misguided theory - I'm far too ignorant to honestly argue macroeconomics - but I disagree with your representation of it as a settled argument, disputed only by cranks.


Economist here. In my view you're exactly right. Though there has been a merging of Neo-Keynesian and Neoclassical modeling methods in recent decades, interpretation thereof is still a battle.


You have no idea what you're talking about.

Inflation is a tax on savings, but that's alright because money has no value?! But if money actually had no value, there would be no use for it.

Consumption "has to" match production?! What's that supppsed to mean? If I produce something no one wants, people "have to" consume it anyway?

You say inflation is good because it motivates people to invest (because their money loses value just sitting in a bank), but why wouldn't people want to invest even if their money was gaining in value? The purchasing power of whatever money you earn through investments is increased by deflation too, so the sooner you make a good investment, the better off you'll be.


Money has no intrinsic value, it only has value based on trust that the money We receive can be used to purchase other goods. The value of money is set by the markets (and indirectly by prices, wages, and printing new bills).

If you produce and no one buys, then you stop producing because you are providing no value; simple. If your production is non perishable, you could pay rent and upkeep to stockpile it, but value is lost regardless.

People have an incentive not to invest because investing is risky. Many would just sit on a gold hoard than to risk losing it, but that behavior doesn't solve any consumption problems (worse, it leads to temporary deflation, since that gold is taken out of circulation).

This isn't rocket sicence, most of us have college degrees, this is just Econ 101.


You've just said that everything produced must be consumed. Now you have a more realistic model, with stocks. You are still missing waste. Keep improving it, and you may come into something useful.

You seem to have misunderstood you Econ 101 classes because "supply" isn't the same thing as "production", "demand" isn't equivalent to "consumption", and "intrinsic value" is a completely artificial construct.

Also, people save mostly because they want to spend later, invest mostly because they want to have more money, and consume mostly because they want the wealth. Inflation and deflation have very complex and often non-intuitive relations with those three. You can't just extrapolate from Econ 101, not even after you understand it right.


I didn't confuse production and consumption with supply and demand, which anyways determines costs and is not the point. We simply have little capacity to save production like we can save water in a reservoir. People save because they want to spend later, sure, but again, that is irrelevant, because production can't be saved in general someone else must borrow.

Investments require taking on risk and...they actually require skills to do right (e.g. Doing your homework). So you might want to invest to get rich, but you might not want to invest because you aren't good at it or do t want to become poor. It still has to be incentivized, especially when most people just want comfortable lives.

You seem to have an agenda in introducing more relationshios above this one simple fact. So make your point rather than just claiming my ignorance, because no points were argued in your post.


> production can't be saved in general someone else must borrow

What's that supposed to mean?


You're not addressing my post, where I tried to highlight the silliness of your earlier claims.

How does consumption "have to" match production? How do you figure "money has no value"? Now you're talking about "intrinsic value" but earlier it was just plain "value".

People save money for a reason you know. If money has no value, as you originally claimed, then there's no reason to save or possess it. If money has no "intrinsic value" that doesn't make your original claim any less confused.

But to be precise, value is purely subjective. We've been using the word somewhat ambiguously. Value is utility as a means towards an end. Money, as a medium of exchange, has utility as a means towards countless ends, and that's exactly why everyone wants it.

You say people have a disincentive to invest because it's risky, but I don't see a point there. It all depends on the investment opportunity, and the investor's tolerance to risk etc, ie. the circumstances. Some people do invest, some don't. So what?

You say that not investing doesn't "solve any consumption problems", but what the hell might those be? Again, why does consumption "have to" match production? What does that mean? What's a "consumption problem" and whose problem is it, and why?

Why is (price-)deflation a problem, considering it means our purchasing power is increasing? Do you really want to claim people want less stuff for their money?

Don't pretend you're giving me an economics lesson.


How is investing NOT risky if inflation occurs? All you are doing is pressuring people into investing (aka gambling, because there is no guaranteed ROI) and causing a fluctuation of returns amongst people who "invest."

Some of us actually have advanced degrees in Economics, so let's not act like you're Krugman himself.


>If I produce something no one wants, people "have to" consume it anyway?

You go out of business and stop producing.


I know that, but the OP didn't seem to. He claimed consumption "has to" match production.


It does, in the same way that effects have to match causes. The only time production can run free with "no consumption" is when someone personally bankrolls extra production, and in that case they're actually the consumer.


So you're telling me that if I produce a bunch of shit-sandwiches and no one wants them, for whatever mysterious reason, then if I produce some more anyway, suddenly I'm the sole consumer of said sandwiches?

How does that make sense, considering no one has even eaten (=consumed) one?


If you're making them while knowing you won't sell them, you're not actually putting them on the market. You're making them for yourself. So either the production should be completely ignored when talking about producer/consumer, or you're the real consumer here. You don't have to eat them, you're a collector.

But that's just closing a minor loophole. People do not often intentionally produce market products with no intent to sell, and it'll make them run out of money. The overall rule is pretty solid even if you don't close the minor loophole.


>or something compels producers to refrain from production that would go unconsumed

Yeah, they run out of money. The rest is a rounding error.

>I could be on a sacred mission to provide everyone in the world with a shit-sandwich

You're not a producer in the market sense then. Consumption is a market term, it doesn't mean anyone has to eat the sandwich.

To put it simply: The original statement was "consumption has to match production with very few exceptions". Zealotry outside of markets is one of those few exceptions; it's very rare. Otherwise market forces compel them to match.


From what I've heard, 0% inflation would be best, but that risks getting into deflation (eg -5% 'inflation'). So 2% inflation is worse than 0%, but better than risking deflation.


0% risks stagnation, which means investment isn't envouraged or discouraged. Even 1% inflation slightly encourages investment, and really the scale only needs to be tipped a bit to keep the economy moving forward toward growth.


I don't get that argument. Perhaps you want something like Demurrage (https://en.wikipedia.org/wiki/Demurrage_(currency)), which could give you that incentive without debasing the currency.


If you're talking about the natural costs of holding money, those are miniscule. If you're talking about a tax I don't see how it avoids debasing the currency, or is meaningfully different from inflation. It just makes things more complicated because people can attempt to avoid paying.


Inflation encourages "investment" which is another way of saying inflation encourages gambling.


The problem with 0% inflation is that people with money have no incentive to risk it.

IMO you need a cycle of inflation between 2-7% to keep things healthy. Dollars stockpiled in some account are not doing anyone any good.


Dollars stockpiled in an account will be lent by the bank at a low interest rate (since they have to be invested with little risk). Dollars saved under a mattress actually lead to deflation while they aren't being used, which can mess things up even more.


>Dollars stockpiled in some account are not doing anyone any good.

Why is it that Keynesians believe that money just gets stuffed under a mattress or stockpiled somewhere? It is loaned out at X% interest rates to people who need present-day liquidity to fuel growth. What do you think the VC industry is based on, Keynesian economics?


The reality today is that most banks dump deposits into fixed income securities, the vast majority of which in 2014 are Treasury instruments.

VC investments are a completely different universe. None of the $7 trillion in deposit balance is going to a VC.

Right now, smaller businesses are starved of loan capital, and if you don't offer the high growth rates that VCs need to succeed, it is difficult to get loans.


This is one possible dynamic of a monetary system, but it is not how things must work by any stretch. Until the Bretton-Woods agreement gold was shipped from country to country to settle trade imbalances. Money was an IOU for gold and not a method of nullifying debt with currency.


"rarely paid down debt" --- agreed, but mostly because with inflation...it doesn't make good economic sense


no better read than "Debt, the first 5,000 years" to realize you can't possibly be cynical enough about the nature of debt.

http://www.amazon.com/Debt-First-5-000-Years-ebook/dp/B00513...


From the Amazon description:

> He also brilliantly demonstrates that the language of the ancient works of law and religion (words like “guilt,” “sin,” and “redemption”) derive in large part from ancient debates about debt, and shape even our most basic ideas of right and wrong.

Did he just rewrite Nietzsche's "Genealogy of Morals"?


It was only 100 years ago. Countries are still issuing 100 year bonds today. http://www.bloomberg.com/news/2014-03-12/mexico-said-to-sell...


A quote from an econ professor:

"Economists hate war because it's the equivalent of taking your economy out the back and shooting it"


Ah, that's nothing. The brits still haven't paid off the loan some guy named William III took out in the 1690's.

Shirkers.


The people from the bank do visit, but Liz set the corgis on them last time while Philip waved a shotgun around and shouted something rather rude, so they are leaving it another decade or two before they try again.


>So the solution to this was brokered by the future US vice-president Charles Dawe, who in 1924 proposed that the US lend money to Germany to fund its reparation payments to France and the UK, who in turn would use the money to repay their war debts. The solution was so good that Dawes won the Nobel Peace Prize the next year in recognition. And the plan worked.

Wow.


One could argue that the true cost of war can never be repaid.


I recall a bond from the 1700's in London that isn't being paid off. It had a structure that made it better to simply pay the interest rather than pay out the full bond.

Looking it up, I think it was probably a british Consul. A type of perpetual bond. Which in the case, you have very little reason to redeem it. http://en.wikipedia.org/wiki/Consol_(bond)


Until fairly recently before QE the 4% consol was well under par around 70 and so would have been costly to redeem.

I looked at buying some of the consols for my ISA last month - its one of the few ways of getting a safe investment that pays more than inflation.


The 4% Consol is the one being redeemed. Not entirely clear why - they could buy it back cheaper in the market than paying par.


I know I was vaguely looked at the 4% consuls as investment before the crash they where selling for around 60/70 in 2008


Even worse than that,

http://en.wikipedia.org/wiki/External_debt_of_Haiti

France demanded that Haiti pay the modern equivalent of $21 billion in debt for the "loss of men and slave colony".


Here's an example of 19th century debt in NYC

http://www.nytimes.com/2009/02/13/nyregion/13jerome.html?pag...


Wars would be over sooner if it wasn't for debt.


Germany makes it's last World War 1 payment 2010

http://www.spiegel.de/international/germany/legacy-of-versai...


Had it not been for WWI, most of the globe might still be under colonial rules.


Didn't the main release of colonial nations happen after WW2?

Most of Africa, Palestine/Israel, India/Pakistan/Bangladesh, etc.


wow




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