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“It Is Incumbent On Every Generation to Pay Its Own Debts As It Goes - A Principle Which If Acted On Would Save [Half] The Wars"

George Washington's picture




 

Thomas Jefferson said:

It is incumbent on every generation to pay its own debts as it goes — a principle which if acted on would save one-half the wars of the world.

He was right.

The father of modern economics – Adam Smith – agreed:

Were the expence of war to be defrayed always by a revenue raised within the year [instead of financing it with long-term public debt], the taxes from which that extraordinary revenue was drawn would last no longer than the war. The ability of private people to accumulate, though less during the war, would have been greater during the peace than under the system of funding. War would not necessarily have occasioned the destruction of any old capitals, and peace would have occasioned the accumulation of many more new. Wars would in general be more speedily concluded, and less wantonly undertaken. The people feeling, during the continuance of the war, the complete burden of it, would soon grow weary of it, and government, in order to humour them, would not be under the necessity of carrying it on longer than it was necessary to do so. The foresight of the heavy and unavoidable burdens of war would hinder the people from wantonly calling for it when there was no real or solid interest to fight for. The seasons during which the ability of private people to accumulate was somewhat impaired, would occur more rarely, and be of shorter continuance. Those on the contrary, during which that ability was in the highest vigour, would be of much longer duration than they can well be under the system of funding.

Libertarian economics writer Lew Rockwell noted in 2008:

You can line up 100 professional war historians and political scientists to talk about the 20th century, and not one is likely to mention the role of the Fed in funding US militarism. And yet it is true: the Fed is the institution that has created the money to fund the wars. In this role, it has solved a major problem that the state has confronted for all of human history. A state without money or a state that must tax its citizens to raise money for its wars is necessarily limited in its imperial ambitions. Keep in mind that this is only a problem for the state. It is not a problem for the people. The inability of the state to fund its unlimited ambitions is worth more for the people than every kind of legal check and balance. It is more valuable than all the constitutions every devised.

 

***

 

Reflecting on the calamity of this war, Ludwig von Mises wrote in 1919

One can say without exaggeration that inflation is an indispensable means of militarism. Without it, the repercussions of war on welfare become obvious much more quickly and penetratingly; war weariness would set in much earlier.

 

***

 

In the entire run-up to war, George Bush just assumed as a matter of policy that it was his decision alone whether to invade Iraq. The objections by Ron Paul and some other members of Congress and vast numbers of the American population were reduced to little more than white noise in the background. Imagine if he had to raise the money for the war through taxes. It never would have happened. But he didn’t have to. He knew the money would be there. So despite a $200 billion deficit, a $9 trillion debt, $5 trillion in outstanding debt instruments held by the public, a federal budget of $3 trillion, and falling tax receipts in 2001, Bush contemplated a war that has cost $525 billion dollars — or $4,681 per household. Imagine if he had gone to the American people to request that. What would have happened? I think we know the answer to that question. And those are government figures; the actual cost of this war will be far higher — perhaps $20,000 per household.

 

***

 

If the state has the power and is asked to choose between doing good and waging war, what will it choose? Certainly in the American context, the choice has always been for war.

Progressive economics writer Chris Martenson explains as part of his “Crash Course” on economics:

If we look at the entire sweep of history, we can make an utterly obvious claim: All wars are inflationary. Period. No exceptions.

 

***

 

So if anybody tries to tell you that you haven’t sacrificed for the war, let them know you sacrificed a large portion of your savings and your paycheck to the effort, thank you very much.

Blanchard Economic Research pointed out in 2001:

War has a profound effect on the economy, our government and its fiscal and monetary policies. These effects have consistently led to high inflation.

 

***

 

David Hackett Fischer is a Professor of History and Economic History at Brandeis. [H]is book, The Great Wave, Price Revolutions and the Rhythm of History … finds that … periods of high inflation are caused by, and cause, a breakdown in order and a loss of faith in political institutions. He also finds that war is a triggering influence on inflation, political disorder, social conflict and economic disruption.

 

***

 

Other economists agree with Professor Fischer’s link between inflation and war.

 

James Grant, the respected editor of Grant’s Interest Rate Observer, supplies us with the most timely perspective on the effect of war on inflation in the September 14 issue of his newsletter:

“War is inflationary. It is always wasteful no matter how just the cause. It is cost without income, destruction financed (more often than not) by credit creation. It is the essence of inflation.”

James Madison said:

In time of actual war, great discretionary powers are constantly given to the Executive Magistrate. Constant apprehension of War, has the same tendency to render the head too large for the body. A standing military force, with an overgrown Executive will not long be safe companions to liberty. The means of defence against foreign danger, have been always the instruments of tyranny at home. Among the Romans it was a standing maxim to excite a war, whenever a revolt was apprehended. Throughout all Europe, the armies kept up under the pretext of defending, have enslaved the people.

Madison also noted that never-ending war tends to destroy both liberty and prosperity:

Of all the enemies to public liberty war is, perhaps, the most to be dreaded, because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes; and armies, and debts, and taxes are the known instruments for bringing the many under the domination of the few. In war, too, the discretionary power of the Executive is extended; its influence in dealing out offices, honors, and emoluments is multiplied: and all the means of seducing the minds, are added to those of subduing the force, of the people. The same malignant aspect in republicanism may be traced in the inequality of fortunes, and the opportunities of fraud, growing out of a state of war, and in the degeneracy of manners and of morals, engendered by both. No nation could preserve its freedom in the midst of continual warfare.

And George Washington – in his farewell address of 1796 – said:

Overgrown military establishments are under any form of government inauspicious to liberty.

And see this.

 

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Wed, 04/18/2012 - 07:09 | 2354119 StychoKiller
StychoKiller's picture

George, old buddy - have you seen this:

Gulf seafood deformities alarm scientists

Tue, 04/17/2012 - 22:58 | 2353486 geekgrrl
geekgrrl's picture

Great post GW. It reminds me of something Thomas Paine said in Rights of Man: "In reviewing the history of the English Government, its wars and its taxes, a bystander, not blinded by prejudice, nor warped by interest, would declare, that taxes were not raised to carry on wars, but that wars were raised to carry on taxes."

If we had to pony-up all that money up front, Iraq/Afghanistan would have never, ever happened.

Tue, 04/17/2012 - 22:31 | 2353422 Money Squid
Money Squid's picture

I leave to all my illegitimate childrens (those that I know of) all of my debts. If you have any questions, please see your mother(s).

Tue, 04/17/2012 - 21:59 | 2353340 Careless Whisper
Careless Whisper's picture

Thanks GW. Isn't it time to take it up a notch? How about starting a super PAC for those few politicians that are upholding the constitution? Seems like that's a good way to work for the restoration of our Constitution. Educating people is really good but we need to do more.

 

 

Tue, 04/17/2012 - 21:48 | 2353309 windcatcher
windcatcher's picture

So true GW- The Bush/Obama regime know that the American people would never go for paying for the wars and certainly would not stand for drafting 18 year old kids to fight in those wars. Their solution is to borrow the money to indebt us and to use voluntary and mercenary soldiers to do the killing. The N.W.O strategy is to bankrupt the U.S.A to the banksters and brake up our sovereignty. They are winning- as planned.

Tue, 04/17/2012 - 21:34 | 2353276 engineertheeconomy
engineertheeconomy's picture

Insane. Why the hell would my generation pay for someone else's debt? I didn't spend the money, and nobody spent the money on me. Just a bunch of crooked banker son of a bitches printing and spending  paper money on themselves and their friends. You want us to pay for their party? We're already paying for it in the form of higher prices everywhere. Why should they steal twice from us. Plus, if you count interest, that would be three times 

Your off your ol rocker there bud

Tue, 04/17/2012 - 21:02 | 2353211 Smokey1
Smokey1's picture

Why do you give a shit what the Founding Fathers thought about debt, you fucking shit-eating, America-hating conspiracy loon ?

I'm surprised you haven't tried yet to blame 9/11 on them.

Tue, 04/17/2012 - 20:55 | 2353202 Chartist
Chartist's picture

George Bush should ride his mountain bike right into  a tree......Unless you've lost a relative in the war you should have a big glass of shut the fuck up....I can't respect the george when I doubt he has a relative lying in Indian Town Gap military cemetary.....Unless you mofos have a relative there, you should just shut the fuck up.

Tue, 04/17/2012 - 21:18 | 2353241 Chartist
Chartist's picture

and another thing GW, it's easy to compare the sacrifice of pay to that of the life of a serviceman.....With my last dying breath, I'd love to know you beyond your pseudonym and listen to you defend that position with a .45 to your head.

Tue, 04/17/2012 - 22:36 | 2353434 geekgrrl
geekgrrl's picture

How bizarre. You claim that those who haven't lost anyone due to the war should just shut up, and at the same time you threaten that you would like to hold a .45 to GW's head and have him defend his position?

I am increasingly coming to view the military as merely mercenaries of our time, and your insistence that we should bow to them in reverence (for what, I have no idea) is ludicrous. Now if the military actually fulfilled their Constitutional Oath and protected the Republic from all enemies, foreign and domestic, then I would would have a different opinion, but for now, American soldier = mercenary. The very fact that there are 25 soldier suicides for every fighting casualty is a very good indicator that the entire war is a corrupt, depraved venture. And the troops know it, deep in their bones.

My position is that good arguments and philosophies defend themselves. Poor ones, on the other hand, require guns and troops to defend them.

Wed, 04/18/2012 - 00:08 | 2353664 Money Squid
Money Squid's picture

mmmmmmm...why would you try to communicate in an intelligent, thoughtful way with an obvious retard? Just throw some insults and a few down arrows.

Wed, 04/18/2012 - 01:24 | 2353806 geekgrrl
geekgrrl's picture

Not for him, but for people who have ears to hear and eyes to see.

Tue, 04/17/2012 - 20:57 | 2353201 surf0766
surf0766's picture

"

It is incumbent on every generation to pay its own debts as it goes — a principle which if acted on would save one-half the wars of the world."

 

The baby boomers do not believe this. Their greed will not let them.

Tue, 04/17/2012 - 20:49 | 2353189 AGuy
AGuy's picture

Gordon O'bama:

"I am not a destroyer of countries. I am a liberator of them! The point is, ladies and gentleman, that Debt, for lack of a better word, is good. Debt is right, Debt works. Debt clarifies, cuts through, and crushes the essence of the evolutionary spirit. Debt, in all of its forms; debt for life, for slavery, for servitude. Propaganda has marked the upward surge of socialism. And Debt, you mark my words, will not only save Western Civiliation, but the other malfunctioning countries. Thank you very much."

Tue, 04/17/2012 - 22:06 | 2353365 Careless Whisper
Careless Whisper's picture

blashempy. please apologize to gordon gekko.

Tue, 04/17/2012 - 20:46 | 2353178 Chartist
Chartist's picture

about that quote about sacrificing savings.....Let me tell you something, you would have no income except for the trade afforded by the government or entity.....That's such crap......You have no clue....The youth being funneled through Paris Island are just cannon fodder .....

Tue, 04/17/2012 - 20:19 | 2353132 dexter_morgan
dexter_morgan's picture

who is homas Jefferson?

Tue, 04/17/2012 - 21:10 | 2353227 Agent P
Agent P's picture

He's a lightly tan colored man that tastes good on pita chips.

Tue, 04/17/2012 - 20:21 | 2353136 George Washington
George Washington's picture

Thomas' younger brother...

Tue, 04/17/2012 - 20:26 | 2353146 dexter_morgan
dexter_morgan's picture

LOL, good one! Awesome article George.

Tue, 04/17/2012 - 20:09 | 2353119 Clowns on Acid
Clowns on Acid's picture

GW - well researched post with great quotes....however your argument seems to be saying that there are no good reasons for "war".

Or..if you think that there are....a more complete article would have covered the practical criteria. Congress did vote and approved the Iraq war.

 

Tue, 04/17/2012 - 20:25 | 2353142 George Washington
George Washington's picture

Top American military leaders say that the war on terror has weakened our national security.

Which war are you talking about?

Tue, 04/17/2012 - 20:05 | 2353107 tony bonn
tony bonn's picture

good job george - as usual!!!!!!

Tue, 04/17/2012 - 20:03 | 2353104 Pejorative Requiem
Pejorative Requiem's picture

Soooooooo...... if an agressive manic self infatuated despot in charge of another country attacks a free peaceful people, they should roll over and beg as opposed to financing defense? How 'bout you bring your argument to its' fullest development? You and the Dali on a desert island........

In the case of the US, we financed winning the world from the devil in 1945. It was one of the best investments ever made. The ROI for that war was........ wow. It was irresponsible social spending and the creation of social entitlements that ruined us, not spending on self defense.

Love your stuff on control rods, though. Really scarry.

Tue, 04/17/2012 - 20:03 | 2353102 Peter Pan
Peter Pan's picture

One more thing. The most simple method of curtailing wars is to have to pay your soldiers in gold.

Tue, 04/17/2012 - 19:58 | 2353097 Peter Pan
Peter Pan's picture

The idea of each generation paying for its debts is not a new one but a good one.

One of the most dangerous features of finance has been that of interest only loans which due to lower cash flow requiements has led to excessive debt which in turn fuelled in part the bubbles we have witnessed. In other words, interest only creates and propogates an illusion of constant "doability".

Governments should therefore be subjected to interest and capital repayments on their loans as a matter of sustainability and stability.

Furthermore, all nations should be obliged to maintain a web site setting out loan amounts, purpose, interest rates and expected number of years they have remaining.

Bottom line......don't hold your breath on governments doing any of this unless lenders impose the rules.

Tue, 04/17/2012 - 19:55 | 2353087 Coldfire
Coldfire's picture

It is incumbent on every generation to pay its own debts as it goes.

Jefferson was half right. It is incumbent upon every individual to pay his own debts. The collective aggregation of debt across all of society bridging generations by the fiction known as the state is a consummate breeding ground for the corruption in which we are currently drowning. Goldman Sachs walks on top of this ocean of filth like a public finance Jesus.

Tue, 04/17/2012 - 21:47 | 2353297 e_goldstein
e_goldstein's picture

Just doing Cthulhu's work.

Tue, 04/17/2012 - 21:43 | 2353293 engineertheeconomy
engineertheeconomy's picture

Exactl. Also, when jefferson was alive, a high percentage of politicians actually represented the people. Any politician living today caught behaving the way they do now WOULD HAVE BEEN SHOT IN THE HEAD BACK THEN 

Tue, 04/17/2012 - 19:47 | 2353074 my puppy for prez
my puppy for prez's picture

George:  Thank you for channeling your "inner Libertarian".....great work!  This will go out to everyone on my contact list!

Tue, 04/17/2012 - 19:26 | 2353045 Catullus
Catullus's picture

Lew!!!!!

The only responsible thing to do is default on the government debt. The argument against amounts to "then no one will ever loan the government money again". Good. The banks just buy the government debt so they lever off it anyway.

Tue, 04/17/2012 - 19:39 | 2353063 TheElder
TheElder's picture

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

 

That handles the details...

Tue, 04/17/2012 - 19:11 | 2353018 Chartist
Chartist's picture

Man, wake the fuck up....Adam Smith was not alive when the Arabs discovered oil.....It's very profitable to perpetuate a state of war in the middle east when they have funds to back up their cause.....

Tue, 04/17/2012 - 19:45 | 2353072 my puppy for prez
my puppy for prez's picture

Way to go!  You have officially won the "Dumbest Post of the Thread" prize!

And now, I direct you to a site more receptive to such inane comments....

www.foxnews.com

Tue, 04/17/2012 - 20:37 | 2353170 Chartist
Chartist's picture

I lost a relative in the latest Iraq war so I have an opinion and personally I say fuck those who have no experience in war other than hypothetical and yet feel they can pontificate on it like they know.

Tue, 04/17/2012 - 21:37 | 2353278 Pain Train
Pain Train's picture

WOW. I'm amazed that I'm still amazed people like this exist. So let's get this straight---- because you know someone who died, you are now an expert on US foreign policy, the wisdom of launching particular wars, deficit spending, etc...

 

You're either kidding in order to get a rise out of people, or just shockingly idiotic. I'm gonna give you the benefit of the doubt...no way would someone on this site be so retarded. YOU GOT ME! Good one...

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