Central Banking is the Health of the (Warfare) State

My old colleague, Paul-Martin Foss, founder and President of the Carl Menger Center for the Study of Money and Banking, has a review of Campaign for Liberty Chairman Ron Paul’s important new antiwar manifesto, Swords into Plowshares.  Paul-Martin’s review focus on Dr. Paul’s examination of the link between central banking and an interventionist foreign policy:

Only the hardest of hearts and most closed of minds could read Dr. Paul’s new book and fail to be convinced of the futility of war. But what interests us the most is Dr. Paul’s discussion of the connection between central banking and war. Almost since the first banks were developed, bankers have funded government wars in exchange for receiving privileges from government. The relationship continues today, but very few politicians ever touch on it. So what does Dr. Paul have to say about central banking and warmaking?

Dr. Paul’s book starts off with personal reminiscences of life during times of war. It includes his personal experiences during World War II, his awareness of the possibility of being drafted to fight in Korea, and his eventual drafting into the Air Force during the Vietnam War. Included among his personal recollections are his comments on rationing during World War II. As a child, that was just the system that was in place, but his future understanding of Austrian economics allowed him to look back on that period of time and realize how detrimental to an economy war could be. In particular, it allowed Dr. Paul to continuously fight against those economists who repeat the lie that government spending in World War II pulled the United States out of the Great Depression. Au contraire – the government war effort did nothing for the common man, as the rationing system merely extended the misery of the Depression.

…..

Throughout the first half of the book, Dr. Paul sprinkles in comments about the economic destructiveness of war, but in Chapter Nine he really gets to the heart of the matter. Economic factors always play a major role in war, often with one side seeking to gain an economic advantage over the other and using war to try to bring that about. Dr. Paul bemoans the wastefulness of military spending.

When we hear that the US just spent $X billion for drone missiles, we must immediately ask: “instead of what?” In other words, what else could have been achieved if that $X billion had been spent by the individuals who earned the money rather than by some nameless bureaucrat serving a powerful special interest? It should be obvious which scenario would most benefit the economy.

This hearkens back to the great French economist Frederic Bastiat’s lesson on what is seen and unseen. Too many people in the United States love to tout the “jobs” created by the military-industrial complex. But all that defense contractors produce is overpriced, under-performing military hardware whose ultimate final goal is either to be destroyed in combat or to be retired a few years down the road as obsolete. How much better would it be if, instead of producing things to be destroyed, all that money could be used to produce items of actual value to consumers, investing in capital equipment that will be cared for and repaired and that will produce things that consumers actually want.

……

In Chapter Ten, Dr. Paul gets into the heart of central banking and the important part central banks play in war. Governments can only borrow and tax so much before lenders cease to lend and taxpayers get fed up. So governments call on central banks to debase the currency, funding their wars silently and indirectly through inflation. This connection between central banking and warmaking is one that so many fail to see. Many antiwar activists fail to understand the role that central banks play in funding war. But there are also some people who oppose the Federal Reserve and central banking yet who remain bellicose in their foreign policy positions. Dr. Paul makes a great case for why central banking interventionism and foreign policy interventionism go hand in hand – you can’t have one without the other.

Read the whole review here.

If you have not yet done so, you can order your copy of Swords into Plowshares here. And consider ordering some extra copies to give to your anti-war friends who don’t understand why if you want to end the wars you must End the Fed.