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Catalán View Drop Down
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    Posted: 04-Mar-2009 at 16:44
Hey,

I have a single figure: 17% of Great Britain's war effort during the First World War was paid through taxes, the rest was paid through "inflation" (expansion of credit and money supply).  This is compared to the ~60%+ of the Napoleonic Wars paid through taxes.

Does anybody have any figures for a variety of countries for several wars?  I'm writing a term-paper on the Great Depression, the New Deal, inflation & how it relates to the current economic recession and Obama's stimulus plan (I believe in the Austrian school of economics, and so obviously I will have an anti-interventionist point of view in the paper).  I'm not sure what I would use these statistics for (I still have to write the outline), but I'm sure they will come in handy when I try to disprove the Second World War's role in bringing the United States out of the Great Depression. 
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Post Options Post Options   Thanks (0) Thanks(0)   Quote edgewaters Quote  Post ReplyReply Direct Link To This Post Posted: 05-Mar-2009 at 03:11

Quote I'm not sure what I would use these statistics for, butI'm sure they will come in handy when I try to disprove the Second World War's role in bringing the United States out of the Great Depression.

Never pre-judge the data before you've seen it. Always be prepared to adopt the counter-argument as your own position if the facts bear it out.



Edited by edgewaters - 05-Mar-2009 at 03:15
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Catalán Quote  Post ReplyReply Direct Link To This Post Posted: 05-Mar-2009 at 03:27
Originally posted by edgewaters edgewaters wrote:

Never pre-judge the data before you've seen it. Always be prepared to adopt the counter-argument as your own position if the facts bear it out.



Well, actually, I've read quite a bit about the Great Depression and then the depression of 1946, and I know that inflation plays a very large role in paying for wars (and that role seems to get larger with each passing war).  I'm just looking for specific statistics.  I have statistics for the United States in the First World War, and I found statistics on the United States during the Korean War and during the current war in Iraq.  Pretty interesting stuff.

In any case, once I have this term paper graded I will be glad to put it on here so that people can express their opinions.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote gcle2003 Quote  Post ReplyReply Direct Link To This Post Posted: 05-Mar-2009 at 10:39

You'll have a lot of trouble trying to disprove that WW2 didn't bring the US out of the Depression - even in fact before the US entered the war.

In general, yes, wars are inflationary, and periods of peace are (in the West since the mid-19th century at least) deflationary, so that depressions traditionally occur in peacetime Chart the price index estimates for the period 1850-now and you'll see that prices go up during periods of war, and down otherwise, which is why there was such massive deflation overall between the post-Civil War period and 1914.
 
But as Edgewaters said, look at the data, then formulate your hypothesis. Don't settle on believing something and then look for data to confirm it. That's religious thinking, not scientific.
 
For 20th century US data, search around at http://www.bls.gov.
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Al Jassas View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Al Jassas Quote  Post ReplyReply Direct Link To This Post Posted: 05-Mar-2009 at 14:17
Hello to you all
 
Back when I did a small research on the historical value of the British pound I also noticed this trend. Taking 1974 as a base (100) inflation during the Napoleonic wars reached I think 16.3 during the height of the wars (1813) while it was only 7.5 in 1790 and the value dropped to 11.6 in 1816.
 
In WWI the same trend happened. In 1913 the level was at 9.8 (which was the same as the 6 years before which indicate a stagnation in the economy). In 1919 the level was more than double at 21.9 and in 1920 it was 25.3 (a rise of 250%).
 
AL-Jassas


Edited by Al Jassas - 05-Mar-2009 at 14:30
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Omar al Hashim View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Omar al Hashim Quote  Post ReplyReply Direct Link To This Post Posted: 07-Mar-2009 at 05:56
Obviously this is due to supply and demand. During war an extra-ordinary demand is placed on commodities causing the price to rise, after the war is over commodities return to 'normal' prices. I don't know the exact definition of inflation, but I wouldn't really consider this to be true inflation.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Catalán Quote  Post ReplyReply Direct Link To This Post Posted: 17-Apr-2009 at 16:27

I'm not talking about inflation as an increase in the price levels, I'm talking about inflation as an increase in the money supply.  In other words, artificial credit inflation; how countries pay for wars (if they can't get the money, they borrow; in a world with fractional-reserve banking and central banking there is an infinite capability to make money... well, infinite until the financial system pops).
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