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The Triumvirate of Modern Warfare

Written by Gary North on April 15, 2013

Three factors have made possible the modern world’s wars: graduated taxation, the central bank, and the abolition of the gold coin standard.

The relationship between central banking and war has been known for at least 400 years. The ability of the Dutch Republic to wage what was in effect a revolutionary war against the Spanish Empire from the 1580s until 1647 was due in large part to the creation of the bank of Amsterdam in 1609. The bank was not inflationary. It operated on the basis of the gold standard. Stable money became the backbone of the revolution.

The creation of the Bank of England in 1694 enabled Britain to fight a series of wars to build its empire in the 18th century. The loss of the American colonies in the 1780s had not been expected by British leaders. They understood that the Bank of England provided an advantage in terms of raising capital for the sale of war bonds. The Americans had nothing like this. What the Americans had was a system of militias. The Americans fought what was essentially a guerrilla war against the British.

The British were successful against France between 1793 and 1815, and again it was stable finances that gave them the edge. It has long been understood that the sinews of war come from stable finances.

With the demise of the gold standard shortly after the breakout of World War I in 1914, central banks have no longer been restrained in their expansion of credit. The arrival of the income tax, and especially the graduated income tax, immediately before World War I, also enabled the mass warfare of World War I. The British got the income tax in 1911, because Asquith, the Prime Minister, along with Lloyd George and Winston Churchill, threatened to add so many peers to the House of Lords, that the Lords buckled and accepted the income tax, as well as the loss of being able to veto money bills. Two years later, the United States also ratified the income tax, or at least the Attorney General said the states had ratified it. There is considerable doubt they did. But that did not matter, since the public believed that the 16th amendment had been ratified. Also in 1913, in late December, the Federal Reserve was created. It went into operation in 1914.

The top tax bracket in 1913 was 6%, on incomes over $500,000, the equivalent today of over $11,500,000. The bottom rate was 3% incomes over $20,000, the equivalent of $469,000 today. There was no tax below $20,000. In 1916, the top rate was 13%. Then the USA entered World War I in 1917. In 1918, the top rate was 77%: 12% plus a 65% surtax.


So, in both Great Britain and the United States, the basis for mass warfare came just before World War I. The income tax, when coupled with central banking, and followed by the abolition of gold coin redeemability of the banking system, all combined to create the worst war in man’s history, World War I. It was followed by World War II. Then came the Cold War, with its massive military expenditures by the USA.

There has been an unbreakable relationship over the past century that combined the graduated income tax, central banking, the abolition of the gold standard, and the rise of empire. If the national governments had not been able to impose the income tax, they could not have borrowed as much as they did from the general public. The investors would not have believed that the central government could repay the debt. Without the abolition of the gold standard, the central banks could not have expanded money at the rate that they did. The inflation tax was imposed on the public, which was in addition to the income tax. This was true throughout Western Europe and the USA.

(For the rest of my article, click the link.)

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8 thoughts on “The Triumvirate of Modern Warfare

  1. The Federal Reserve Act passed in 1913; in 1914 the US entered World War I. Since the third central bank was imposed on the US that has always been the solution to every economic disaster private central banking causes. After the latest collapse in 2008 we are once again on the verge of another world war. The human race is insane.

  2. Easy Prophesy says:

    Is it not amazing that rich people have such a spotted picture of reality? On the one hand they feel their wealth and thus feel secure that they themselves will be insulated from harm and on the other hand they institute policies and simply DO things that are bound to end badly. Those on the poor end of the spectrum will doubtlessly rebel in open and subtle ways and the entire economy will collapse. How can it be any other way? The blinders of misinformation and propaganda will soon fall off the eyes of those still deceived. In my opinion it cannot happen soon enough to prevent major pain and anguish.

  3. North, I get a “member login” page when I click the link – did you forget to unlock the page?

  4. John Blazingstar says:

    Right, Otis. Thanks.

  5. G. Kuhns says:

    So the Army fights on it’s stomach and the Nation fights on it’s credit.

  6. Hmmm. I'm not sure about all this. If all the world wars (including the cold war) were the result of the income tax and the gold standard, what about all those wars before either of those things were in place? It's not that I am in favor of the income tax as it now exists or have any cross to bear regarding the gold standard and the central bank. I am simply wondering if blaming inevitable war resulting from ideological impasse on such things is a bridge too far in arguing economics.

  7. World wars. We never had world wars before private central banking. The 16th Amendment (never properly ratified, just "declared" the law of the land by Sec. of State Philander Knox during the congressional Christmas recess in 1913) came into being at the same time. The timing of that was no accident either.

    Only under such a system can bankers get the credit of an entire nation to make the massive loans to government to wage total war. All such nations end up hopelessly in debt to the private bankers, which is why the bankers don't care who wins or loses.

    I'm not for a return to the gold standard, but it did impose some discipline on the creation of note currency. Now the dollar is irredeemable in anything other than more paper dollars, that's when you get QE(infinity), perpetual war and hyperinflation. But if you can't look around and see the bitter harvest of closed businesses, bankruptcies and mass unemployment, you can't be helped.

  8. profitup10 says:

    “An organizer working in and for an open society is in an ideological dilemma. To begin with, he does not have a fixed truth — truth to him is relative and changing;everything to him is relative and changing. He is a political relativist.” — Saul D. Alinsky, Rules For Radicals, 1971

    Take away the money and power from DC politicians.