Lisa Simpson

The First World War did not erupt. Governments built it, financed it, and kept it running long past the point where any rational army would have quit the field. Franz Ferdinand's assassination in Sarajevo on June 28, 1914, gave chancelleries and foreign ministries the pretext they needed. The war itself required something more durable than a pretext. It required central banks. Every major belligerent suspended the gold standard within weeks of the opening shots. Britain suspended convertibility in August 1914. Germany, France, and Austria-Hungary followed. This mattered enormously. Under a true gold standard, you cannot fund a four-year industrial slaughter. Governments run out of money and populations refuse further sacrifice. The war ends. Instead, central banks printed currency to buy government bonds, transferring the cost of the war to ordinary wage earners through inflation, a tax nobody voted for and most never identified as a tax. Ludwig von Mises watched this from Vienna and identified the mechanism precisely: inflation allows states to conscript private purchasing power without explicit confiscation. Every loaf of bread that cost more in 1917 than in 1913 represented a transfer from the buyer to the war machine. The death toll reached approximately 20 million people. The fiscal cost exceeded $200 billion in 1914 dollars. Neither number was achievable under honest money. Politicians and generals sustained the catastrophe because central banking made it financially possible to keep going. Remove the printing press and the trenches empty themselves inside three months. Sound money is a hard constraint on state violence. States hate hard constraints.