Inflation and War Finance

by Dr. Ron Paul

The Pentagon recently reported that it now spends roughly $8.4 billion per month waging the war in Iraq, while the additional cost of our engagement in Afghanistan brings the monthly total to a staggering $10 billion. Since 2001, Congress has spent more than $500 billion on specific appropriations for Iraq. This sum is not reflected in official budget and deficit figures. Congress has funded the war by passing a series of so-called “supplemental” spending bills, which are passed outside of the normal appropriations process and thus deemed off-budget.

The problem is that government finances war by borrowing and printing money, rather than presenting a bill directly in the form of higher taxes.

Congress and the Federal Reserve Bank have a cozy, unspoken arrangement that makes war easier to finance. 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.

State of the Union

Churchillian it was not. Yet the State of the Union seemed a success if Bush's purpose was to buy time from Congress to wait and see if his surge of U.S. forces into Iraq might yet succeed.

But when Bush started to describe the ideological war we are in, one began to understand why we are in the mess we are in.

"This war," said Bush, "is an ideological struggle. ... To prevail, we must remove the conditions that inspire blind hatred and drove 19 men to get onto airplanes and to come to kill us."

But the "conditions" that drove those 19 men "to come to kill us" is our dominance of their world, our authoritarian allies and Israel.

They were over here because we are over there.

"Free people are not drawn to violent and malignant ideologies," declared Bush. Oh? Explain, then, why 70 million Germans, under the most democratic government in their history, gave more than half their votes to Nazis and Communists in 1933? In every plebiscite he held, Hitler won a landslide. In the year of Anschluss and Munich, 1938, Hitler was Time's Man of the Year and far more popular than FDR, who lost 71 seats in the House.

In the free elections Bush demanded in Egypt, Lebanon, Palestine and Iraq, the winners were the Muslim Brotherhood, Hezbollah, Hamas and Shia militants with ties to Iran.

If a referendum were held in the Middle East on the proposition of the U.S. military out and Israel gone, how does Bush think it would come out?

This is the heart of the war we are in. Americans believe in freedom first. Millions of Muslims believe in Islam first – submission to Allah. We decide for us. Do we also decide for them?

Government Incompetence

The Army said Friday it would apologize to the families of about 275 officers killed or wounded in action who were mistakenly sent letters urging them to return to active duty.

Libertarian Hope

by Lew Rockwell

Despair is a vice that defeats the human spirit. Hope, on the other hand, is a virtue that creates and builds. This is true in business, sports, and intellectual life – indeed, in every area. We must see success in the future in order to achieve it.