05 Apr 2013

War and the Fed

Federal Reserve, Foreign Policy 79 Comments

I’m going to be on Scott Horton’s radio program in a few minutes to talk about the connection between central banking and war. Here are two charts to supplement the interview. The first shows year/year percentage increases in the Consumer Price Index, while the second shows year/year percentage increases in the monetary base.

I think it’s pretty clear that during the World Wars the Fed played a significant role. (If you zoom in, I think you can also see patterns for Korea and Vietnam, but I have to do it again since the last time I checked was a couple of years ago.) What happens of course is that the Fed soaks up far more government debt than the private sector would be willing to absorb, allowing the government to spend more while waging war.

There’s no conspiracy here: Critics of the gold standard often explain that it would tie the government’s hands in a national emergency such as a war. Even Milton Friedman said something along these lines in one of his pop books.

79 Responses to “War and the Fed”

  1. Bob Roddis says:

    DK’s paper has some excellent citations.

    2. The austerity depression of 1920–21

    During WorldWar I federal expenditures ballooned and although the new income tax was able to partially finance the war effort, most of the financing was done through federal borrowing and by the highly accommodating monetary policy of the Federal Reserve. The role of the Federal Reserve at this time was expressed unambiguously by the New York Federal Reserve Bank Governor Benjamin Strong, who told a Congressional committee in 1921 that ‘I feel that I, or the bank at least, was their [the Treasury’s] agent and servant in those matters’ and further added that the wartime inflation caused by the low interest rates maintained by the bank were ‘inevitable, unescapable, and necessary’ for prosecuting the war (Strong, 1930).

    However, after the war ended the deficit spending of the Wilson administration and the expansionary policy of the Federal Reserve were sharply curtailed to bring a halt to the inflation. By November 1919 the Wilson administration balanced the federal budget, slashing monthly expenditures by almost 75% in a matter of months.4 The New York Federal Reserve Bank raised the discount rate by 244 basis points over the course of eight months, with other Reserve System banks following suit. Shortly after these austerity measures were taken, the 1920–21 depression was under way. Postwar industrial production in the USA peaked in January 1920 as the economy moved into a major depression, with production levels dropping by 32.5% by March 1921.5 This loss in output is second only to the Great Depression in American economic history (Romer, 1999), although its duration was considerably shorter. Declines in output were matched by precipitous drops in employment and the price level. The proximate cause of the 1920–21 depression was a deliberate fiscal and monetary retrenchment following World War I.

    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1591030

  2. Bob Roddis says:

    DK’s paper even has the Krugman Seal of Approval:

    http://krugman.blogs.nytimes.com/2012/01/23/more-than-you-want-to-know-about-warren-harding/

    But they seem to have forgotten Tom Woods’ mention of the Wilsonian “Stroke of Luck”.

  3. Blackadder says:

    Interesting, the rise of central banking seems to have coincided with a significant decrease in the frequency of wars. (Source)

    Pinker doesn’t claim that central banking is causally responsible for the decline in violence and war (nor does that strike me as being a particularly plausible claim). On the other hand, if central banking makes war more likely then this effect is being swamped by countervailing factors.

    • Major_Freedom says:

      Is it better to have fewer wars with more deaths, or more wars with fewer deaths?

      The 20th century was the most bloodiest century in all of human history, and it just so happened to have correlated with a global rise in central banking.

      • Ken B says:

        Not per capita it wasn’t.

        • Major_Freedom says:

          Still top three if you go by per capita, by most estimates.

          That’s still pretty brutal, considering how the other two are the 8th and 13th centuries, two gigantic Chinese/Mongol slaughterfests.

          And wouldn’t you know it? There was a fiat money experiment in China in the 8th century, and another fiat money experiment in the 13th century (which Marco Polo described).

          Got to be a coincidence, right? Top three most bloody centuries correlating with three major fiat money experiments?

          Ruh roh.

          • Lord Keynes says:

            WWII is not even in the top 5 most violent conflicts by per capita death rate estimates:

            (1) An Lushan Revolt | 8th
            (2) Mongol Conquests | 13th
            (3) Mideast Slave Trade | 7th–19th
            (4) Fall of Ming Dynasty | 17th
            (5) Fall of Rome | 3rd-5th | 8
            (6) Timur Lenk (Tamerlane) | 4th–15th
            (7) Killing of American Indians | 15th–19th
            (8) Atlantic Slave Trade | 15th–19th
            (9) Second World War | 20th
            (10) Taiping Rebellion | 19th

            Pinker, Steven. 2011. The Better Angels of our Nature: Why Violence has Declined. Viking, New York, NY. p. 195.

            8 most bloody events in human history all happened under commodity standards; so much for this rubbish.

            • Bob Murphy says:

              This is kind of funny. I was wondering how you guys were coming up with ancient stuff being bloodier than, say, Cambodia. And now I see it’s using “Mideast Slave Trade” as an “event” that lasted 1,200 years.

              How about “men getting jealous over their unfaithful wives”? That event has been pretty violent too.

              • Ken B says:

                Bob, long duration is an exacerbating factor! The Thirty Years War was Europe’s worst; it would have been even worse had it lasted another year or twelve.

              • Lord Keynes says:

                The most violent human society ever observed by anthropology is the stateless Amazon Waorani, a semi-nomadic group, where 60% of deaths were due to violence over the past century (Beckerman et al. 2009).

                Not even the lunatic, murderous Khmer Rouge managed that, with their death rate somewhere between 20-31% of the population.

                Other stateless societies came close to the upper estimate for the Khmer Rouge: the Amazon Jivaro (at c. 30%) and New Guinea Gebusi (c. 29%). ( Pinker 2011: 49, Figure 2–2).

                Beckerman, S., et al. 2009. “Life Histories, Blood Revenge, and Reproductive Success Among the Waorani of Ecuador,” Proceedings of the National Academy of Sciences of the United States of America 106.20: 8134–8139

                Pinker, Steven. 2011. The Better Angels of our Nature: Why Violence has Declined. Viking, New York, NY.

              • Mike T says:

                LK –

                “The most violent human society ever observed by anthropology is the stateless Amazon Waorani, a semi-nomadic group, where 60% of deaths were due to violence over the past century (Beckerman et al. 2009).”

                The society with a population of only a few thousand? In any event, perhaps Bob was on to something with the jealous husband thing: https://en.wikipedia.org/wiki/Huaorani_people#Marriage

              • Bob Roddis says:

                I don’t particularly like the terms “state” and “stateless”. What Ancap proposes is voluntary governance where protections for possessions and person are more rigorously enforced than they are now. Comparing such a proposal with a primitive society of butchers and murderers is nothing more than the typical misrepresentation of Ancap one would expert from “progressives”, especially LK.

              • Ken B says:

                Tai ping rebellion, 30 Years War, there are lots of brief intense periods of slaughter in the past. But what there was mostly was a high, constant, enduring level of violence absent from most of the world these days.

            • Major_Freedom says:

              I said 20th century.

              Not WW2.

              Red herrings top to bottom.

            • Major_Freedom says:

              “8 most bloody events in human history all happened under commodity standards; so much for this rubbish.”

              We’re not talking about isolated “events”, LK. That’s a red herring.

              We’re talking about the most bloodiest centuries.

              The An Shi war during the 8th century, and the Mongol wars during the 13th century, took place during fiat money experiments. They are typically regarded as the two most bloodiest centuries.

              Marco Polo wrote about the fiat money he saw in China.

              The 20th century is 3rd.

              • Lord Keynes says:

                “The An Shi war during the 8th century, and the Mongol wars during the 13th century, took place during fiat money experiments.”

                You saying tribal nomads like the Mongols in the 13th century used fiat money to wage war!! lol..

              • Lord Keynes says:

                Apart from which, China’s paper money was backed by gold, so it wasn’t really “fiat money” at all.

                And in the 8th century what is called “paper money” was really just IOUs for specie:

                Development of the banknote began in the Tang Dynasty during the 7th century, with local issues of paper currency, although true paper money did not appear until the 11th century, during the Song Dynasty. Its roots were in merchant receipts of deposit during the Tang Dynasty (618–907), as merchants and wholesalers desired to avoid the heavy bulk of copper coinage in large commercial transactions.

                http://en.wikipedia.org/wiki/Banknote#Banknotes_in_the_Tang_Dynasty

                This is not fiat money, so your argument for the 8th century does not work.

              • Major_Freedom says:

                “You saying tribal nomads like the Mongols in the 13th century used fiat money to wage war!! lol..”

                The Mongol *dynasty* enforced fiat money, yes.

                Marco Polo wrote about it.

              • Major_Freedom says:

                “Apart from which, China’s paper money was backed by gold, so it wasn’t really “fiat money” at all.”

                Of which they inflated far beyond the rate of gold, which was the whole point.

                “And in the 8th century what is called “paper money” was really just IOUs for specie:
                Development of the banknote began in the Tang Dynasty during the 7th century, with local issues of paper currency, although true paper money did not appear until the 11th century”

                LOL “true” paper money.

                They imposed paper money because they wanted to spend more than what was possible with gold and transferable claims to gold.

                It was 100% reserve gold.

              • Lord Keynes says:

                The Mongols made vast conquests long before they adopted Chinese monetary practices.

                See below.

                “The Mongol *dynasty* enforced fiat money, yes.”

                It was not fiat money. It was a specie standard with paper backed by specie.

              • Lord Keynes says:

                “Of which they inflated far beyond the rate of gold, which was the whole point.”

                Prove that statement.

              • Lord Keynes says:

                Your statement that it was “fiat money” is factually incorrect. Period.

                Yuan paper money in China from 1260 was backed by specie.

              • Lord Keynes says:

                The Mongol *dynasty* enforced fiat money, yes.

                Marco Polo wrote about it.

                No, M_F, he did not wrote about “fiat money” at all.

                He wrote about paper money backed by metal and freely redeemable in metal:

                When any persons happen to be possessed of paper money which from long use has become damaged, they carry it to the mint, where, upon the payment of only three percent, they may receive fresh notes in exchange. Should any be desirous of procuring gold or silver for the purposes of manufacture, such as of drinking-cups, girdles, or other articles wrought of these metals, they in like manner apply at the mint, and for their paper obtain the bullion they require.

                Thomas Wright, Travels of Marco Polo the Venetian, p. 245.

                Should have read the source you cite instead of running your mouth off.

              • Major_Freedom says:

                “Prove that statement.”

                The high/hyperinflation that transpired after.

              • Major_Freedom says:

                :”Your statement that it was “fiat money” is factually incorrect. Period.”

                False. Your statement that is was not fiat money is factually incorrect. Period.

                “Yuan paper money in China from 1260 was backed by specie.”

                Not 100%. FIAT.

              • Major_Freedom says:

                “No, M_F, he did not wrote about “fiat money” at all.”

                Yes, he did. See “Notes From Marco Polo”. He found it interesting.

                “He wrote about paper money backed by metal and freely redeemable in metal”

                It wasn’t backed by metal 100%.

              • Major_Freedom says:

                LK

                “To ensure its use in circles, Kublai’s government confiscated gold and silver from private citizens and foreign merchants. But traders received government-issued notes in exchange. Kublai Khan is considered to be the first of fiat money makers. The paper bills made collecting taxes and administering the empire much easier and reduced the cost of transporting coins. In 1287, Kublai’s minister Sangha created a new currency, Zhiyuan Chao, to deal with a budget shortfall. It was non-convertible and denominated in copper cash.

              • Lord Keynes says:

                The consequences of these new absurd comments are simple: no system with private paper credit money or public paper money convertible into and backed by metal is in fact a “commodity standard” system.

                You are using a fallacy of equivocation deliberately changing the meaning of “fiat money” at will.

                But this is your serial operating tactic when you lose: just change the meanings of word.

              • Lord Keynes says:

                The Zhiyuan Chao were introduced after the major Mongol conquests so that just undermines your original argument.

                The major Mongol conquest happened when the Mongols used no paper money.

                And the paper currency from 1260 -1282 was convertible and was not true fiat currency.

                In short, your original argument has fallen apart.

                The major Mongol invasions were not based on paper money.

              • Tel says:

                Soon after the Mongol took over China and established Yuan (1264-1368) dynasty, it followed the example of its predecessors, Tang, Song and Chin, in using paper currency. The first paper currency issued in Yuan dynasty was in 1260. Various denominations were printed, ranging from a face value of two standard coins to the highest denomination of two strings. Excessive printing year after year soon flooded the market with depreciated paper money until the face value of each certificate bore no relation whatsoever to its counterpart in silver. In 1272 a series of new issues was put in circulation and the old issues were converted into the new ones at the ratio of five to one. The new issues were printed with copper plates instead of wood blocks, as had been the case before. In 1309 another conversion became necessary. In fifty years from 1260 to 1309 Yuan’s paper money was depreciated by 1000 percent. To make the situation worse, the government often refused to exchange for new issues old certificates that had been worn out through a long period of circulation.

                http://www.silk-road.com/artl/papermoney.shtml

                It is true that the Mongols did not finance their invasion forces with paper money, they imposed the fiat currency on the people they subjugated as a method to impoverish those nations and extract their wealth. For this purpose it was quite successful.

              • Tel says:

                http://dailyreckoning.com/fiat-currency/

                Quote from Marco Polo:

                “Population and trade had greatly increased, but the emissions of paper notes were suffered to largely outrun both…All the beneficial effects of a currency that is allowed to expand with a growth of population and trade were now turned into those evil effects that flow from a currency emitted in excess of such growth. These effects were not slow to develop themselves…The best families in the empire were ruined, a new set of men came into the control of public affairs, and the country became the scene of internecine warfare and confusion.”

                Pretty much spells out Keynesian stimulus to me, almost a mirror of the present day.

              • Lord Keynes says:

                First, that is not a quote from Marco Polo.

                Your incompetent or dishonest Dailyreckoning author has taken it from a modern author called, Alexander Del Mar, Monograph on the history of money in China, from the earliest times to the present, 1881, p. 15.

                Secondly, what the quote actually says is that it was only excessive emission of paper money after 1300 that had these deleterious effects, and that the early use of paper money was GOOD for trade and eocnomic growth:

                Population and trade had greatly increased, but the emissions of paper notes were suffered to largely outrun both…All the beneficial effects of a currency that is allowed to expand with a growth of population and trade were now turned into those evil effects

              • Major_Freedom says:

                LK:

                “The consequences of these new absurd comments are simple: no system with private paper credit money or public paper money convertible into and backed by metal is in fact a “commodity standard” system.”

                You always use this flawed tactic. Every time you’re refuted, you cower and claim that what I am saying isn’t possible in the real world, so I am “really” arguing against my own theory, rather than the government’s activity.

                You seem to be completely clueless to the implication of this tactic, which is that you are conceding the facts of the government activity, that there was fiat money, but then you believe it doesn’t matter because fiat money will always exist in a laissez-faire world as well.

                Whether or not fiat money will arise in history in a free market, is entirely irrelevant to the question of whether or not governments in history have imposed fiat money by law.

                The facts of the case are that the Chinese governments in both the 8th and 13th century imposed fiat money, and were able to expand their wars more than they otherwise would have had they not inflated paper money.

                “You are using a fallacy of equivocation deliberately changing the meaning of “fiat money” at will.”

                I am not changing any meaning of fiat money. Fiat money is money made by government decree. Fiat PAPER money is the context here.

                “The Zhiyuan Chao were introduced after the major Mongol conquests so that just undermines your original argument.”

                Nonsense. The fact that they imposed paper money when they did, made it easier to engage in larger, more destructive conquests. That was the original argument.

                Does state monopoly in paper money allow states to engage in larger, more expansive wars? Yes. You continue to dodge this main point.

                “The major Mongol conquest happened when the Mongols used no paper money.”

                Those conquests would have been even larger and more destructive had the Mongol warlords been able to inflate at will, as they did after (until hyperinflation).

                That is the fact you are evading.

                “And the paper currency from 1260 -1282 was convertible and was not true fiat currency.”

                No true scotsman again. You’re on a roll.

                The paper money during that period was inflated beyond the supply of specie.

                The major conquests the Mongols engaged in were financed by inflating paper money beyond the supply of specie. This is proven by the fact that such paper ended in high/hyperinflation.

        • Blackadder says:

          Here is a list of the bloodiest conflicts in recorded history. Depending on whether you go by the low or high estimates, WWII was either the 1st or 2nd bloodiest war, and WWI was either the 4th or 5th bloodiest. The other 8 of the top 10 conflicts, however, were pre-20th century. And, as you note, these numbers aren’t adjusted to take account of the increase in overall population. Per capita things like the Mongol Conquests and the Ani Shi rebellion were likely far bloodier than even WWII.

          So wars have become less frequent, and overall fewer people have died in wars as a percentage of the overall population than in the past, though the increase in population can obscure this.

          • Major_Freedom says:

            Both the An Shi rebellion and the Mongol invasions occurred under fiat money, just FYI.

            An Shi wars: The Tang Dynasty (7th – 10th centuries AD) was the first Chinese power to impose paper money.

            Mongol wars: The Yuan Dynasty (Khans, 13th to 14th centuries AD) imposed paper money. When the Mongols travelled west to conquer Iran in the late 13th century, they brought the paper money sysem with them.

            It is widely believed by historians that paper money spread throughout Europe (starting in Sweden 1600 AD) by what they learned from the Chinese.

            • Lord Keynes says:

              “The Tang Dynasty (7th – 10th centuries AD) was the first Chinese power to impose paper money.”

              Its paper money was not fiat money, but just IOUs used by private merchants backed by specie.

              “Flying cash was never originally meant to be used as legal tender and, therefore, their circulation was limited. However, since they could be exchanged for hard currency at the capital, they were traded amongst merchants as if they were currency. It was not until the Song Dynasty and subsequent Jin occupation that paper money was officially established as a legal tender.”

              http://en.wikipedia.org/wiki/Flying_cash

              M_F reveals gross ignorance yet again.

              • Major_Freedom says:

                The state used it.

              • Lord Keynes says:

                Just as it used lots of silver and gold. So therefore silver and gold must be evil !

              • Major_Freedom says:

                “Just as it used lots of silver and gold. So therefore silver and gold must be evil !”

                Glad you admit the state used fiat money.

              • Tel says:

                If you follow your own Wikipedia link to the following…

                http://en.wikipedia.org/wiki/Economic_history_of_China_(Pre-1911)

                Paper receipts of deposit first appeared in the 10th century, but the first officially sponsored bills were introduced in Sichuan Province, where the currency was metallic and extremely heavy. Although businesses began to issue private bills of exchange, by the mid-11th century the central government introduced its paper money, produced using woodblock printing and backed by bronze coins. The Song government had also been amassing large amounts of paper tribute. Each year before 1101 CE, the prefecture of Xinan (modern Xi-xian, Anhui) alone sent 1,500,000 sheets of paper in seven different varieties to the capital at Kaifeng. In the Southern Song, standard currency bearing a marked face value, was used. However, a lack of standards caused face values to wildly fluctuate. A nationwide standard paper currency was not produced until 1274 CE, two years before the Southern Song’s fall.

                … and then it happened …

                A second, more serious attempt to intervene in the economy occurred in the late 13th century CE, when the Song Dynasty suffered from fiscal problems while trying to defend themselves against Mongol invasions. The Song chancellnor Jia Sidao attempted to solve the problem through land nationalization, a policy that was heavily opposed and later withdrawn.

                So they started out with honest specie exchangeable for coin. Then they got themselves into a pinch and tried to print their way out of trouble and it failed. Like it always does fail.

                Most of their problems came from putting stupendous resources into wall building as a result of their centralized command structure. The more decentralized command structure of the Mongols was easily able to out maneuver the wall builders and the wall building effort amounted to practically zero value to the population. So much for the wisdom of the Emperor.

            • Lord Keynes says:

              Mongol wars: The Yuan Dynasty (Khans, 13th to 14th centuries AD) imposed paper money

              (1) The Mongols were tribal nomads who made very many of their conquests before the Chinese Mongol government adopted paper money. In fact it was only in 1227 the year Genghis Khan died that Chinese Mongols adopted paper money:

              1205–1209 conquest of Western China
              1207 conquest of Siberia
              1211–1234 conquest of Northern China
              1213–1235 conquest of Jin dynasty
              1216–1220 conquest of Central Asia and Eastern Persia
              1216–1218 conquest of the Kara-Khitai
              1219-1220 conquest of Khwarazm
              1220-1223, 1235–1330 invasions of Georgia and the Caucasus
              1220–1224 of the Cumans
              1223–1236 invasion of Volga Bulgaria

              (2) Even the label “paper money ” is misleading for again it was just promissory notes backed by specie:

              In August 1260, Kublai created the first unified paper currency called Chao; bills were circulated throughout the Yuan domain with no expiration date. To guard against devaluation, the currency was convertible with silver and gold, and the government accepted tax payments in paper currency.”

              http://en.wikipedia.org/wiki/Kublai_Khan

              So logically you should say the 13th century was a bloody century under a specie standard!

              • Lord Keynes says:

                Also:

                the Mongols developed an extensive transportation infrastructure, issued paper currency based on an empire-wide silver standard,
                David Robinson, Empire’s twilight: northeast Asia under the Mongols, p. 48

              • Major_Freedom says:

                One ounce of gold “backing” a money supply doesn’t make that money supply something other than fiat.

              • Major_Freedom says:

                To guard against devaluation THAT HAD ALREADY OCCURRED.

                That’s why the Chao was considered “new”, many years AFTER the initial fiat experiment, after the Khans had already fought paper financed wars.

              • Major_Freedom says:

                And you ignored the crucial part of the passage you quoted:

                “In 1273 (that’s just 13 years after the Chao was originally issued), he issued a new series of state sponsored bills to finance his conquest of the Song, although eventually a lack of fiscal discipline and inflation turned this move into an economic disaster.”

              • Lord Keynes says:

                “One ounce of gold “backing” a money supply doesn’t make that money supply something other than fiat.”

                Simple blatant redefining of words at will.

                Fiat money is money intrinsically valueless or of little exchange value and not convertible into any commodity at a fixed rate.

              • Tel says:

                Every single one of these paper currencies started out backed by metal, and then inflated beyond the available metal supply and eventually collapsed.

                Just like our own present day currency started out backed by metal… and then inflated beyond the available metal supply… and then…

              • Major_Freedom says:

                LK:

                “Fiat money is money intrinsically valueless or of little exchange value and not convertible into any commodity at a fixed rate.”

                That’s exactly what happened in China. There were more paper notes than specie, which made the difference “worthless”, to use your phraseology.

                Given that the Chao ended in high/hyperinflation, it means that it wasn’t a commodity standard, but a fiat standard.

  4. Bob Roddis says:

    I (actually DK) repeat:

    The role of the Federal Reserve at this time was expressed unambiguously by the New York Federal Reserve Bank Governor Benjamin Strong, who told a Congressional committee in 1921 that ‘I feel that I, or the bank at least, was their [the Treasury’s] agent and servant in those matters’ and further added that the wartime inflation caused by the low interest rates maintained by the bank were ‘inevitable, unescapable, and necessary’ for prosecuting the war (Strong, 1930).

    Let’s take the flip side of the Keynesians’ argument that military Keynesianism cured the depression. Without military Keynesianism, the US war effort could not have been funded.

    And Hitler managed to stay popular because he invoked Keynesian policies:

    http://socialdemocracy21stcentury.blogspot.com/2011/09/fiscal-stimulus-in-germany-19331936.html

    • Lord Keynes says:

      And the slave trade happened under a commodity standard; therefore Austrians love slavery or are responsible for it.* blah, blah , blah

      *N.B. ironic example of roddis’s level of illogic.

      “Without military Keynesianism, the US war effort could not have been funded.”

      wow. And Japan and Germany would have won WWII. That would have really *upped* human freedom, buddy.

      • Major_Freedom says:

        “And the slave trade happened under a commodity standard; therefore Austrians love slavery or are responsible for it.* blah, blah , blah”

        Except there isn’t ONLY a correlation between central banks and sizes and extents of war.

  5. konst says:

    Is there a link for Scott Horton’s show?

  6. Bob Roddis says:

    We’ve learned from DK that the Fed enabled the US entry into WWI. We learned from Krugman that Lincoln’s funny money greenbacks enabled the north to invade the south.

    http://consultingbyrpm.com/blog/2013/03/krugman-ignores-massive-human-suffering.html

    Where is the dispute here?

    • Lord Keynes says:

      And private agents lent the UK government plenty of gold to wage war in the French revolutionary wars and Napoleonic era.

      So therefore gold must be an evil form of money and anyone who advocates it was morally responsible for those wars!

      That is the level of your illogic, roddis.

      • Lord Keynes says:

        Also, we should ban gold money!

        • Major_Freedom says:

          It already has been genius. Gold is banned as money because even if people tried to earn gold revenues, they would still have to pay taxes in the government’s paper notes, which means they have to use their earnings to acquire those paper notes from others, thus monetizing the fiat note and effectively banning gold as the universal medium of exchange.

          • Tel says:

            If it was just that then it wouldn’t be so bad, but gold is banned in other sneakier ways. For example if you own an object made of gold, and inflation causes the nominal value of the object to rise (but the actual exchange value remains constant) then you are inflicted with Capital Gains Tax, for making a “profit”, or at least for trying to avoid paying your inflation tax.

            Thus, the most useful thing about gold (i.e. being a long term store of value) is removed, and people basically have no long term store of value at all.

            • The Existential Christian says:

              ^ This. Not only that, but physical gold is considered a “collectable” and taxed at a higher rate than if it were just an investment.

      • Major_Freedom says:

        “And private agents lent the UK government plenty of gold to wage war in the French revolutionary wars and Napoleonic era.”

        …which would have been even larger and more destructive had the UK government been able to print money for war!

        You’re missing the point as usual LK. Nobody is saying that wars won’t take place with a free market in money, or a pure gold standard enforced by the state.

        They are saying that government being able to print money, makes it easier to wage unpopular, unjust wars, and it makes wars bigger and more destructive.

    • Ken B says:

      We have learned no such thing. This is like saying we learned a shoe-horn enabled me to put on shoes or a bridge enabled me to cross the creek. Made easier and enabled are different things.

    • Bob Roddis says:

      1. The magic of funny money is the ability to steal purchasing power without the victims knowing what hit them.

      2. Human beings love to commit murder. Private and public. They are all human. That is why you do not want to grant a “public” agent a special power and/or exception to the general rules thereby allowing them the right to violate the usual protections for person and property.

      • Lord Keynes says:

        (1) is irrelevant to this discussion

        (2) Your private sector SWAT team thugs in private protection agencies must have also have an “exception to the general rules thereby allowing them the right to violate the usual protections for person and property”, otherwise they would never be able to exercise any justice or enforce any rulings of private judges. Further illogic.

        Also, presumably in libertopia there would be no war, I suppose, even though (according to you) human beings love to commit murder and war!

        • Ken B says:

          They only commit murder LK after imbibing the teachings of The General Theory. That’s why the world was more peaceful per-Keynes

          • Major_Freedom says:

            Keynes was more peaceful pre-GT.

            See his “Economic Consequences of the Peace.”

            Guess what’s good for the gander, isn’t good for the geese.

        • Major_Freedom says:

          1. It’s very much related, because with the stealthy inflation tax, people who would otherwise be able to deprive the state of resources via retaining their purchasing power, are less able to do so with the state inflating what money it needs to pay for war. So the state is able to fight wars that the public would otherwise not be willing to finance through direct taxation because they know and understand direct taxation more than inflation taxation.

          2. Bad private sector security and protection teams can be deprived of revenues from sovereign consumers, because they by definition exist in a world of private market for security.

  7. steveZ says:

    Using the “deaths per capita” argument involves justifying murder because there are more people. I think murder is just as bad (immoral) in a population of 100,000,000 as is I’d in a population of 100. A falling demand curve for human life? So the punishment for killing a white guy would be less than it would be for killing a black guy (here in the US) since the are more white people. Seems like a twisted way to apply marginal utility.

    • Major_Freedom says:

      “Deaths per capita” is only used to compare deaths between populations of different sizes, to avoid concluding things like “The planet Ork with population 100 trillion, with it’s 0.0000001% murder rate, is far, far, far bloodier than Earth.”

  8. steveZ says:

    Oops typo, but you know what I mean…

  9. steveZ says:

    Apparently it’s also being used to justify the number of murders by government in the twentieth century. “We are murdering less people (per capita), so things are better now, with money creating central banks, obviously.”

  10. steveZ says:

    And really, does it matter? Is it less immoral to kill a person in china than in Canada? I understand the usefulness of per capita statistics, I’m just saying murdering innocent people is murder, regardless of the population size.

  11. Bob Roddis says:

    I just listened to the interview and it was great. Scott Horton is amazing. His example of how the regime sucks average people into supporting the inflation scam with the promise of ever-rising real estate prices was brilliant. That’s the quality of the insights I hear from him on almost every anti-war interview he does even when discussing things with anti-war leftist types.

  12. Bob Roddis says:

    Scott Horton’s sense of humor reminds me of this cartoon from Libertarian Review around 1979:

    http://www.flickr.com/photos/bob_roddis/3520131008/in/set-72157600951970959

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