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The Fed Financing War

Posted by Connor on January 30th, 2007

Ron Paul‘s weekly column, titled “Inflation and War Finance”, is worth a read. Here’s my favorite chunk (emphasis is mine):

As the war in Iraq surges forward, and the administration ponders military action against Iran, it’s important to ask ourselves an overlooked question: Can we really afford it? 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.

Congress and the Federal Reserve Bank have a cozy, unspoken arrangement that makes war easier to finance [editor's note: cozy, unspoken arrangement = conspiracy]. Congress has an insatiable appetite for new spending, but raising taxes is politically unpopular. The Federal Reserve, however, is happy to accommodate deficit spending by creating new money through the Treasury Department. In exchange, Congress leaves the Fed alone to operate free of pesky oversight and free of political scrutiny. Monetary policy is utterly ignored in Washington, even though the Federal Reserve system is a creation of Congress.

The result of this arrangement is inflation. And inflation finances war.

Economist Lawrence Parks has explained how the creation of the Federal Reserve Bank in 1913 made possible our involvement in World War I. Without the ability to create new money, the federal government never could have afforded the enormous mobilization of men and material. Prior to that, American wars were financed through taxes and borrowing, both of which have limits. But government printing presses, at least in theory, have no limits. That’s why the money supply has nearly tripled just since 1990.

We are in a dire situation that is only going further down the crapper. The dollar is being rapidly diluted in its spending power as a result of Fed-created inflation because of an administration writing itself blank checks in the “war on terror”. Congress needs to cut the purse strings of war now. We must demand fiscal accountability of our government with audited transparency so that the average taxpayer can see just where his/her money is being spent.

As we build permanent military bases and a $1 billion embassy in Iraq, we need to keep asking whether it’s really worth it. Congress should at least fund the war in an honest way so the American people can judge for themselves.

Is it worth it?

Answer: No.

Read quotes about the “Federal” Reserve on Quoty

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8 comments so far. Care to chime in?

Amen

#1 Chris | January 30th, 2007 9:31 AM

Everybody ought to read Revelation chapter 18 in its entirety.

Connor has ended his blog entry by saying we are building permanent military bases in Iraq, and a one billion dollar embassy in the Green Zone. My recent reading has exposed many people claiming that the proposed surge of 21,500 soldiers is really solely to be used to protect the fragile situation of security of the Green Zone and its embassy which is currently under construction.

This surge in protection of our new billion dollar embassy and the 14 permanent military bases leads me to believe that Washington is deceiving us.

Everyone ought to see the video Freedom To Facism, which prominently features Ron Paul. I believe it is on GoogleVideo.

#2 Kelly Winterton | January 30th, 2007 9:52 AM

Freedom to Fascism can (and should!) be viewed here.

Indeed, “the elect are being deceived”. Far too many people believe whatever the media and government carefully craft and spoon feed to the public. I’d be surprised if 5% of the public knew about the large bases we’re building in Iraq. Instead, the news emphasizes the construction we’re supposedly doing in Iraqi cities, leading most to believe that we’re building roads, schools, and hospitals, when in fact most of our resources are being diverted to build up permanent installations.

Sadly, we’re not leaving Iraq anytime soon. This is exactly why Congress must grow a pair and cut the purse strings. Passing these “non-binding resolutions” shows the cowardice of those we’ve elected into office. Let’s pass a binding resolution, people!

#3 Connor | January 30th, 2007 9:56 AM

Revelation chapter 18 deals entirely with the financial collapse of our economy. I interpret the chapter to say that our financial situation WILL happen very suddenly, and will catch many of us by surprise. To surmise that this economic collapse will be the result of military spending is not difficult to believe…

#4 Kelly Winterton | January 30th, 2007 10:23 AM

Amen on Revelation 18 Kelly.

This post makes a very good point Connor. I was thinking the same thing the other day when Bush announced that we would be giving another 10 billion dollars for the training of Afganistan’s military and police.

We definitely can’t afford this, and this sort of arguement will convince many that the war is not worth it.

On the other hand, many have already been convinced by the cost in lives of US soldiers (over 3000 now) that the war is not worth it.

On the other hand, many were already convinced by the cost in Iraqi lives (estimated at 655,000 last year)(or how about the child mortality rates in 2005 released by the UN of 122,000 kids under 5 years of age dying in Iraq in that year) that the price was not worth it.

Madeleine Albright thought the price was still worth it in the 90′s when she was told that sanctions had resulted in 500,000 deaths of small children in Iraq.

Though many weren’t convinced by the cost in lives that the Iraq war wasn’t worth it, hopefully the loss in dollars will hit them where it really hurts.

Of course war is always profitable for the big war industry corporations, but when it really comes alive to the average joe, we might be able to send a message to our leaders.

#5 Curtis | January 30th, 2007 3:22 PM

It is 11:59 P.M. Do you know where your emergency preparedness levels are right now?

#6 Michael L. Mc Kee | January 30th, 2007 5:01 PM

And now it is revealed that in order to help pay for 245 billion dollars for the lovely war, Bush will squeeze healthcare spending by 100 billion dollars over the next 5 years.

http://english.aljazeera.net/NR/exeres/2DDB659D-FACB-4155-BD38-E2394F411C57.htm

#7 Curtis | February 4th, 2007 10:52 AM

Well, of course.. Gone are the days where wars (properly declared according to the Constitution) were funded by bonds and taxes. Since the people would obviously not respond favorably to higher taxes, the Fed was (illegally) created to finance the government with whatever money it needs, at the expense of each American citizen. All too wisely did Henry Ford once say:

It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.

#8 Connor | February 4th, 2007 11:41 AM

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