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Vanity: How did the US pay off WW2 debt?

Posted on 09/26/2009 2:00:32 PM PDT by tired1

My understanding is that WW2 debt was close to our current level of GNP/debt. What were the mechanisms of paying it down? Did the destruction of Axis countries industrial base create a captive market for the US? How was lend Lease and the Marshall plan paid off?

Any insights would be appreciated, thanks.


TOPICS: Business/Economy; History; Military/Veterans
KEYWORDS: debt; wwii
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1 posted on 09/26/2009 2:00:32 PM PDT by tired1
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To: tired1

There were no Medicare and Medicaid programs back then. Plus we were beginning our Baby Boom so our Social Security costs were minimal.


2 posted on 09/26/2009 2:02:11 PM PDT by MinorityRepublican
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To: tired1

still paying it


3 posted on 09/26/2009 2:02:40 PM PDT by Lib-Lickers 2
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To: tired1
They didn't. The economy expanded, they paid the interest and the national debt had gone from 250 billion to 400 billion by the '70s.

Debt doesn't matter if the interest from your investments exceeds the interest from your debt. Inflating away your debt's value helps too.

4 posted on 09/26/2009 2:05:18 PM PDT by ketsu (It’s not a campaign. It’s a taxpayer-funded farewell tour.)
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To: tired1
I believe most of the industrialized nations of the world had just had their industries turned to rubble. Of all the nations involved, only the US had not been bombed. We produced lots and lots of manufactured goods and huge amounts of food too. We sold all we could to everyone in the world.

Now it's the 21st century and we don't make so much stuff anymore, and we are no longer the only game in town. Recovery will be much, much slower.

And keep in mind -- we are currently in a hole, and we are currently digging as fast as we can. Recovery cannot even begin until we realize that no one can spend their way out of debt.

5 posted on 09/26/2009 2:05:37 PM PDT by ClearCase_guy (Play the Race Card -- lose the game.)
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To: tired1

U.S. War Bonds...that we’re still paying for to this day...


6 posted on 09/26/2009 2:05:57 PM PDT by kellynla (Freedom of speech makes it easier to spot the idiots! Semper Fi!)
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To: tired1

My first thought would be that the returning work force of fighters had been expenses to the government, but suddenly became positive contributors.


7 posted on 09/26/2009 2:06:49 PM PDT by HogsBreath
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To: tired1
Correct me if I am wrong. Over half of the industrial world was destroyed in WW2. The work had to be done here. The US had the industrial base intact and plenty of natural resources to supply it. No environmental restraints and regulation to hold us back at the time.
8 posted on 09/26/2009 2:07:09 PM PDT by dancusa (Czars Czuck)
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To: tired1

That federal excise tax on your phone bill was enacted more than 100 years ago to pay for the Spanish American War. Apparently we are still paying for that too.


9 posted on 09/26/2009 2:09:39 PM PDT by The Great RJ ("The problem with socialism is that you eventually run out of other people's money." M. Thatcher)
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To: tired1
How was lend Lease and the Marshall plan paid off?

These were NEVER paid off by the receiving countries (with a few exceptions).

10 posted on 09/26/2009 2:12:32 PM PDT by 2banana (My common ground with terrorists - they want to die for islam and we want to kill them)
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To: dancusa
Correct me if I am wrong. Over half of the industrial world was destroyed in WW2. The work had to be done here. The US had the industrial base intact and plenty of natural resources to supply it. No environmental restraints and regulation to hold us back at the time.
The US also had industrial (union) workers making as much, if not more, than engineers do today. That does a lot to spur consumption.

When American companies gutted the "rust belt" for cheaper shores and crappier products the current decline became inevitable.

11 posted on 09/26/2009 2:13:06 PM PDT by ketsu (It’s not a campaign. It’s a taxpayer-funded farewell tour.)
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To: tired1

The Federal Government ran balanced budgets until 1970, with year to year variations, not adding to the national debt. As the economy grew the debt as a percentage of GDP shrank. The government not so much paid off the “credit card” as not adding to it.


12 posted on 09/26/2009 2:15:47 PM PDT by C19fan
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To: tired1
Basically, the expenses stopped and the taxes didn't. We demobbed the troops, mothballed the ships, sold or cut up the old aircraft and armaments.
We also had the only intact industrial infrastructure, so, if folks who were rebuilding wanted manufactured goods, they bought ‘em from us
With the end of the expenses, the government had a surplus to retire some or all of the debt.

If we got rid of Medicaid, Medicare, and disassembled our welfare state, the government would be in good shape in pretty short order. Unfortunately, there are a whole bunch of people who vote for that stuff, so it ain't gonna happen.

13 posted on 09/26/2009 2:19:08 PM PDT by Little Ray (Obama is a kamikaze president aimed at the heart of this Republic.)
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To: tired1

We inflated the money supply and paid it off with cheap dollars. Yeah, inflation was less than it was during the worst periods of modern economic history, but we were a bit more honest then. Then we got some more debt. So we’re not better off in net.


14 posted on 09/26/2009 2:22:04 PM PDT by RKV (He who has the guns makes the rules)
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To: tired1
It wasn't just the destruction of the Axis industrial base. 90% of the industry outside the US had been destroyed.

We had a war-induced monopoly on industrial production.

15 posted on 09/26/2009 2:25:50 PM PDT by mc6809e
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To: C19fan

16 posted on 09/26/2009 2:26:34 PM PDT by RKV (He who has the guns makes the rules)
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To: C19fan
The Federal Government ran balanced budgets until 1970, with year to year variations, not adding to the national debt.

The 'Great Society' starting kicking in post 1970. Rules and regulation stagnating capitalism amd freedom starting their choke hold at that time. Taxes and fees raised to pay for all the programs were being instituted in that era.

It has all snowballed since then.

The libs all blamed it on paying for Viet Nam.

17 posted on 09/26/2009 2:27:25 PM PDT by dancusa (Czars Czuck)
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To: RKV

Interesting that the percentage hit its low point under Carter, then started back up under Reagan.


18 posted on 09/26/2009 2:31:56 PM PDT by Sherman Logan ("The price of freedom is the toleration of imperfections." Thomas Sowell)
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To: tired1
No comparison to W.W.II to what is happening today.
We no longer have a diversified industrial base and the export capacity we had then. Not to mention we were then the largest creditor nation as to now the largest debtor nation.

Our debt is expanding at a compounded annual rate of 8.5% plus. Even at the most generous GDP growth rate of a consistent 5% plus we cannot catch up or pay it off.

We are one step from a massive financial meltdown that probably can't be stopped, The Fed has no more magic bullets and has done a great deal to put us in this mess.

19 posted on 09/26/2009 2:34:14 PM PDT by Captain Peter Blood
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To: ketsu
The US also had industrial (union) workers making as much, if not more, than engineers do today. That does a lot to spur consumption.

That's the old broken window fallacy again.

Artificially holding wages above their market rate may spur consumption among union workers but it depresses consumption among the consumers who are now having to overpay for those union made products.

It would be more accurate to say the American economy flourished despite union wages.

20 posted on 09/26/2009 2:36:22 PM PDT by SeeSharp
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