Economics Questions

Re: Do modern wars really require inflation and/or borrowing?

In Restraint of State — Mon, 10 Jan 2011 23:13:01 GMT

agreed with Kaz

Re: Do modern wars really require inflation and/or borrowing?

Kaz — Mon, 10 Jan 2011 22:47:40 GMT

Couldn't they be funded solely by taxation (no inflation, no borrowing), if the taxpayers were willing to pay for it?

IIRC, a Mises Daily article that I read a long time ago said that WWI could not have been fought without borrowing, but I don't know how that could be true.

The problem here is the myth that either inflation or borrowing requires the Fed.

If we dissolved the Fed tomorrow, Congress would simply take over the control of how much fiat paper money is created...which would result in REAL hyperinflation.

Meanwhile, Congress would also take over the selling of notes and bonds to raise money for its deficit, through the Treasury (as with its printing of dollars).

In fact, everything bad about the Fed would be amplified by its dissolution, unless we first got a law passed creating a free market in money, allowing private issuers to compete to replace the monopoly dollar.

Re: Do modern wars really require inflation and/or borrowing?

Caley McKibbin — Mon, 10 Jan 2011 10:22:07 GMT

He that borrows wins.

Re: Do modern wars really require inflation and/or borrowing?

Kaiser434 — Mon, 10 Jan 2011 00:39:57 GMT

You have to think too that most of the time war is sold to the public on intangibles. Nationalism, They're-godless-heathens-ism, homeland security, all the hijackers from one country make another one responsible, etc. In a situation like that its important not to balance the intangible rhetoric with too much tangible pain of implementation. Just like in commercial goods, financing allows the state to have what it wants now without causing the tax base to feel all the pain now. Just like commercial financing they get in over their heads and make stupid choices because of it. How many wars would start or last if the government was held to the standard of accounting for all costs as a flat tax payable by direct debit from pay stubs and reduction of welfare benefit? A little entry stating ($200 for the Iraq war). Lots of patriots when its just some guy going to die and interest your kids will pay but when we're talking about the beer money and direct TV payment war suddenly becomes something the common guy has a serious opinion on.

Re: Do modern wars really require inflation and/or borrowing?

Sieben — Sun, 09 Jan 2011 18:10:09 GMT

I don't think we can know if monetary policy is *essential* to the state, but it certainly makes their job easier. Its just a form of taxation people don't understand.

If the state tries to maximize its short term revenue extraction, then maybe you could say its essential. But the state has other reasons to not loot as much as possible this year. It will hurt growth in subsequent years. Sure they might not care about the country's growth 20 years from now but policy does make both short and long term differences.

Re: Do modern wars really require inflation and/or borrowing?

Kaiser434 — Sun, 09 Jan 2011 15:52:35 GMT

That seems like an odd question. Basically by listing taxation as an alternative to borrowing you're asking if directly stealing funds is a viable alternative to borrowing money and stealing to pay it back. Sure its an alternative. If the taxpayers were willing to pay for it they wouldn't be taxpayers.

Re: Do modern wars really require inflation and/or borrowing?

Lyle — Fri, 07 Jan 2011 23:01:56 GMT

The fact that the government does borrow should be evidence of its necessity, even in selling war bonds to the American people. The fact that the government does not raise taxes to pay the entire bill of war should be evidence that the taxpayers are not willing to pay for it, even in the refusal of the American people to buy war bonds.

Re: Do modern wars really require inflation and/or borrowing?

BrianAnderson — Fri, 07 Jan 2011 23:00:52 GMT

This one?

Do modern wars really require inflation and/or borrowing?

No2statism — Fri, 07 Jan 2011 22:53:09 GMT

Couldn't they be funded solely by taxation (no inflation, no borrowing), if the taxpayers were willing to pay for it?

IIRC, a Mises Daily article that I read a long time ago said that WWI could not have been fought without borrowing, but I don't know how that could be true.