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.