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It was more of the straw that broke the camel's back.
More like an excuse - Austria would have declared war on Serbia in any case, regardless of the casus belli. If a Serbian guy tripped any Austrian guy on the street, Austria would have declared war anyway. Von Hotzendorf had already laid out plans for the invasion of Serbia way before 1914.
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World war 1 was weird, why in the hell would to opposing armies play sports with each other, and act all friendly like just because the battle had stalled due to trench warfare. Even going as far as to give warnings to the other side when they were about to fire routine bombardments. Thats weird and stupid.
It's apparently stupid to realise that we're all humans after all: perhaps not all of us, actually. Not all of us are fanatics, you know.
What's more stupid: needlessly killing people for no cause, or avoiding that?
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Instead of crushing Germany, though, the allies stopped short and instead encouraged Germany to rebel against their Kaiser and make peace, promising a fair peace as they hadn't been broken yet.
They didn't want to invade Germany in the slightest: first off, because the Entente (not the Allies, just a nitpick) had no intentions of controlling entire countries of a size comparable to the German and Austro-Hungarian Empires, and because urban warfare was rightly seen as a useless loss of life which no country could bear, especially if you think about the massive losses of the war.
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Also Germany was more in the right in WW1 then Britain and America.
Why so? How is the aggressor "more in the right" than anyone else?
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America was supposed to remain neutral but Britain kept getting supplies from us while Germany couldn't do the same.
In case you don't have a dictionary available, neutral != isolated.
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Since Germany was not completely defeated, they were able to slowly gain power and, when Hitler took power..
Uh...no. Until 1933, Germany spiralled downward economically, given the French occupation of the industrial region of the Ruhr. If you check out Wikipedia a bit more, you can see that the 20s in Germany were characterised by hyperinflation (up to the point that it was cheaper to burn money rather than wood - go figure!), and a hyperinflating economy can never be powerful. What Hitler did was: first, renegotiate the treaties with the UK and France, bolster industrial production by mass-producing weapons and military supplies, recreating a military force for Germany (which was limited by the Treaty of Versailles to 100,000 men, if I remember correctly). All of that, of course, had two possibilities of development: either a stall and a terrible economic crash, or actually use those supplies for war. Hitler, obviously, tried his luck with the latter.
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Since the US had no standing army, Germany knew it would have to act quickly. When Russia collapsed and became the Soviet Union they made peace with Germany. All those German soldiers on the Eastern Front were moved to the Western Front and Germany was beginning to make ground. Then the waves of American troops came pouring in. It was a slow but steady stream that halted the Germans and eventually turned the tide.
You've forgotten the southern front!

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I mean, what do you think was going behind the scenes.
Unbridled nationalism.