By 1914, before the start of World War I, Germany had become the most powerful economic and military power in Europe and was second only to the United States in the world. Four long and terrible years of war meant that, by 1918, the German economy was in ruins. The war meant that Germany could not import or export industrial goods and severely restricted trade. Resources and food were allocated to the war. The terms of the Treaty of Versailles stipulated that Germany had to pay large sums of compensation to the Allies. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an Original Essay To pay for the war, instead of raising taxes, the Kaiser borrowed enormous amounts of money by selling “war bonds” to the public. At the end of the war the country was heavily in debt. In 1921, this amount was set at £6.6 billion; a sum that Germany could not pay. In December 1922, because the German government could not pay, French and Belgian troops invaded and occupied the Ruhr to seize goods and raw materials instead of money. Despite all of Germany's economic shortcomings, it would still have been possible to make reparations if foreign countries had not imposed protective tariffs on German goods. Protective tariffs have made it difficult for Germany to overcome the economic crisis. (Anonymous, 2015) In the year 1923, the German government took a wrong step by printing more money to solve economic problems which later led to hyperinflation. In the autumn of 1923 a loaf of bread cost 200,000,000,000 marks (Anonymous, 2015). The wages earned by the workers were worthless as prices had skyrocketed due to the scarcity of resources. People who had saved money for years realized the value of those wiped out savings. At the beginning, social spending was Germany's main focus in recovering from the war. Germany has started to create transportation projects, modernization of power plants and gas plants to cope with the growing unemployment rate. As statistics show, in 1913 the government spent about 20.5 per resident; by 1925 it had risen to almost 65 marks per resident and finally in 1929 it reached over one hundred marks per resident. Remember: this is just an example. Get a custom paper from our expert writers now. Get a Custom Essay Municipal finance finally collapsed in the 1930s (Castillo, 2003). Further exacerbating Germany's economic problems, income tax revenues began to decline. In 1913, more than 53 percent of all tax revenue came from income, but by 1925 the percentage dropped to 28 percent. As income tax returns declined, the government began to depend much more on state commerce, property taxes, and profits made from municipal services, such as power plants. (Castillo, 2003).