Central Banking and War

Actual bankster burial ritual

As long as there have been people, there has been war, but total war is something new, or maybe it’s a barbarous relic that has returned from the past, but either way, WWI marked a change in the way wars are fought, and WWII accelerated that change. What made that change possible?

War has always been expensive, and total war is even more so, since it involves mobilizing an entire population for war. Total war means transferring labor and capital from the production of necessary goods and services, to the production of death and destruction.

By 1913, America and every major European power had instituted a central bank. The largest war in world history, up to that point, started in 1914.

Without a central bank or other means to debase the currency, wars have to be funded through taxation or borrowing, both of which have limits. Through money printing, a central bank can hide some of the cost of war in the form of increases in the general price level. This also has the effect of deferring these costs, it takes time for an increase in the money supply to work its way through into the price level. Milton Friedman described this as the “long and variable lags” of monetary policy.

It’s no coincidence that the century of total war coincided with the century of central banking… If every American taxpayer had to submit an extra five or ten thousand dollars to the IRS this April to pay for the war, I’m quite certain it would end very quickly. The problem is that government finances war by borrowing and printing money, rather than presenting a bill directly in the form of higher taxes. When the costs are obscured, the question of whether any war is worth it becomes distorted. – Ron Paul

Dr. Paul is referring to the concept of war fatigue. Propaganda might be effective in getting people fired up for war at the outset, but as the death toll and costs mount, people begin to question why we are fighting in the first place. The state hides the human toll several ways, including not allowing the filming of caskets and embedding reporters with military units, so that the reporter sees what the powers that be want them to see. Central banking is a tool to hide the true financial costs of war. Everyone notices a tax increase, but less people make the connection from rising prices to increases in the money supply to the wars that money funds, and even fewer care.

Governments can raise revenue in three ways. Taxation is the most visible means of doing so, and it eventually meets with popular resistance. They can borrow the money they need, but this borrowing is likewise visible to the public in the form of higher interest rates – as the federal government competes for a limited amount of available credit, credit becomes scarcer for other borrowers.

Creating money out of thin air, the third option, is preferable for governments, since the process by which the political class siphons resources from society via inflation is far less direct and obvious than in the cases of taxation and borrowing. – Lew Rockwell

To end war, humanity has to change. I believe it’s possible, but it won’t happen until there are a generation of people who accept the non-aggression principle as axiomatic, and that won’t happen in our lifetimes. In the mean time, the best we can do is to try to reduce the violence, the surest way to do that is to reduce the funding sources for those directing and committing that violence. That is why, if you’re against war, you have to be against central banking.


Ron Paul’s Farewell Address

Thirty-six years after first entering congress, Dr. Ron Paul gave his most memorable, and possibly final, speech on the House floor today. I believe his farewell address will go down as one of the greatest speeches in American history. As usual, he made a clear and passionate case for peace, free markets and sound money. If you’re reading this, then you have almost certainly heard these arguments many times. I want to focus on some ideas we haven’t heard from Dr. Paul before, and some ideas he hasn’t gone into as much detail about in the past.

The Constitution has failed

Dr. Paul has traditionally couched his arguments in terms of the U.S. Constitution. After years of being a lone voice in the wilderness, it appears he’s reached the only logical conclusion he could. To paraphrase Lysander Spooner, either the Constitution allows the tyranny we have today, or it has been powerless to prevent it, and either way, it is unfit to exist. Or as Dr. Paul phrased it:

Our Constitution, which was intended to limit government power and abuse, has failed… The Constitution has not prevented the people from demanding handouts for both rich and poor in their efforts to reform the government, while ignoring the principles of a free society. All branches of our government today are controlled by individuals who use their power to undermine liberty and enhance the welfare/warfare state-and frequently their own wealth and power.


Dr. Paul has described himself as a voluntarist before; watch this if you don’t believe me. But when he is dealing with the mainstream media, he traditionally does not argue explicitly against the state. Now, that he isn’t looking to get reelected, he can say what he really feels. As I was taking notes for this article, I counted at least ten statements where Dr. Paul expressed the idea that the initiation of force is always immoral. Here is my favorite example:

First, we recognize that individuals shouldn’t initiate violence, then we give the authority to government. Eventually, the immoral use of government violence, when things goes badly, will be used to justify an individual’s “right” to do the same thing. Neither the government nor individuals have the moral right to initiate violence against another yet we are moving toward the day when both will claim this authority. If this cycle is not reversed society will break down.

All governments fail because they, by there very nature, violate the non-aggression principle. Giving a small group of people the right and obligation to initiate violence and coercion in order to “protect” society just does not work, because power always corrupts, and the more power you give someone, the more they will be corrupted. Dr. Paul recognizes this, and suggests that it’s time for humanity to take our next great moral leap forward.

The idealism of non-aggression and rejecting all offensive use of force should be tried.  The idealism of government sanctioned violence has been abused throughout history and is the primary source of poverty and war.  The theory of a society being based on individual freedom has been around for a long time.  It’s time to take a bold step and actually permit it by advancing this cause, rather than taking a step backwards as some would like us to do.

If you want more of the highlight quotes from the speech, Michael Dean of the Freedom Feens captured some of them here.

The Financial Crisis is a Moral Crisis

Someone once asked me, when did things start to go wrong in America. I thought about it for a minute, and said 1913, because that’s the year the Federal Reserve was created and the 16th and 17th Amendments were ratified. I could have also said the civil war, when habeas corpus was suspended and the first fiat paper money was printed by the federal government. I now realize both those answers are wrong.

Things were wrong from the beginning. Yes, the Constitution is the blueprint for the most limited government that has ever existed, with all the checks and balances and separation of powers that could be conceived of at the time. But the Constitution contained the seeds of it’s own destruction, the clauses relating to slavery, the power of taxation, the doctrine of sovereign immunity, and several other clauses violate either self-ownership principle or the non-aggression principle. Once you’ve compromised on the moral standard even a little bit, you’ve given up 100% of the principle, and the negative results are just a matter of time.

It is a testament to how otherwise philosophically sound the Constitution otherwise is, that it took this long to reach a state of tyranny. It is also a testament to the generations of Americans who came before us, who understood plundering their neighbors was immoral, even if it is done in the name of the common good. They would have been shocked and appalled at the idea of accumulating trillions of dollars of debt, using the unborn as collateral. Somewhere along the way, those values were lost.

Sadly, we have become accustomed to living with the illegitimate use of force by government. It is the tool for telling the people how to live, what to eat and drink, what to read and how to spend their money. To develop a truly free society, the issue of initiating force must be understood and rejected. Granting to government even a small amount of force is a dangerous concession.

Be the Change

Throughout his speech, Dr. Paul emphasized that government is not the path to a free society. The government we have is a reflection of the morals of society, of the rejection of the principles of liberty. All that can be achieved through the political process is education. We can do far more by changing ourselves, helping our families, and setting an example for others. He mentions the homeschooling movement as a positive example, since we can’t expect government run or regulated schools to provide children with an unbiased account of the ways the state threatens our liberty and safety.

Most of the change, if it is to come, will not come from the politicians, but rather from individuals, family, friends, intellectual leaders and our religious institutions.  The solution can only come from rejecting the use of coercion, compulsion, government commands, and aggressive force, to mold social and economic behavior.

There is a lot more to this speech, and I believe people will be quoting from it hundreds of years from now. Here is the video, it’s about 48 minutes long. If you have the time, watch the whole farewell address here: