tions payments. The Dawes Plan in 1924 and the Young Plan in 1929 both established schedules for German reparations payments linked to new international loans to Germany. In both plans U.S. initiative was crucial and large quantities of U.S. direct and portfolio capital flowed into Germany between 1924 and 1929 (Kindleberger, 1973, pp. 78-82). What made Germany so vulnerable was the short-term nature of much of the interbank credits. In the period between 1925 and 1928, Germany accumulated net foreign debts equivalent to about 15 percent of GNP. This international lending process suffered its first jolt during the course of 1928 when the U.S. stock market boom and rising U.S. interest rates curtailed U.S. capital outflows. The stock market boom absorbed most available funds and the halt in the movement of capital to Germany placed severe pressure on the German economy because it had become dependent on the U.S. capital flow. Later, in 1931, as the depression gathered
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