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How Essential Money Is During The Times Of War

The beginning of central bank-controlled money coincided with the outbreak of the First World War. In order to understand the connection between unsound money and war, we need to look at three major factors. Because unsound money affects the value of goods and services exchanged between nations and makes trade flows a political matter, it creates resentment between governments and the citizens of the countries involved.

To make matters worse, the government may continue to manufacture money until its currency is utterly worthless, rather than merely until it runs out. The government's ability to wage war was limited by the taxes it could collect while the currency was sound. As a result of using unsound money, it is much easier for it to acquire riches since it is limited by the amount of money that can be created before the currency is destroyed.

With essential money, people have a reduced time preference, which allows them to focus more on cooperation than conflict.

Money Is The Means Of Exchange

The only way commerce can spread beyond the confines of tiny communities characterized by intimate interpersonal connections is via the use of money as a medium. The pricing mechanism must operate if prices are priced in a currency that is accepted by the people who use it. When a single currency is used throughout a big region, it makes it simpler and more convenient to do business there.

For peaceful coexistence, people must have a stake in each other's well-being via trading with each other. International commerce is made more difficult by the volatility of prices and the fluctuation of currency values, which makes the conditions of trade unpredictable and frequently detrimental to long-term economic planning.

Low Time Preference Are Less Likely To Engage In Conflict

Low-time preference persons are less likely to engage in conflict because they are more prone to concentrate on the future than those who are more concerned with the here and now. Intelligent and forward-thinking individuals know that conflict is inherently damaging by its very nature, and that those who engage in it will certainly suffer greater losses than those who refrain from participating in it altogether.

On the basis of respecting each other's wishes, civilized societies operate. If there are problems, they try to resolve them peacefully. People are more inclined to part ways and avoid each other if a peaceful solution cannot be reached than to continue to agitate and stay in conflict. The lack of crime, bloodshed, and conflict in affluent civilized civilizations may be attributed to this.

Sound money constrains governments' capacity to fund military activities, making it more probable that countries will remain peaceful or have fewer conflicts with one another on a national level. When European rulers wished to wage war against each other in the 19th century, they had to raise taxes on their people to pay for their armies. Only monarchs who use their military defensively, rather than aggressively, may benefit in the long term from such a strategy.

A hand holding a lot of paper money
A hand holding a lot of paper money

Money As A Payment Of Taxes

Combatants fighting on their own turf, close to their people and supply lines always have an edge over attackers. Citizens would gladly pay taxes to protect themselves against foreign invaders if their monarch concentrated on defensive action. Unpopularity among the people and high expenses of fighting enemy forces on home territory are two consequences of long-term overseas operations.

This may explain why the twentieth century was the bloodiest. The twentieth century was the deadliest, according to the 2005 UN Human Development Report12. Even when large European countries went to war, it was typically short and between trained forces.

The Franco-Prussian War (1870–1871), which lasted 9 months and killed over 150,000 people, was sponsored by the cheap government money of the twentieth century. Due to the gold standard, European countries had to budget for war, invest money on military preparation, and hope for a decisive victory.

Trying to raise taxes to re-arm the troops and change the tide was a logistical and economic losing struggle. It was wiser to attempt to negotiate a peace with as little casualties as possible. It was during the Napoleonic Wars that the gold standard was firmly embraced throughout Europe, following the French Revolution's disastrous experiments with inflation.

Summary

There are a considerable number of companies in advanced economies that focus on war as a business, and hence are dependent on the continuation of war in order to stay afloat. Only government expenditure keeps them alive and requires ever-increasing armaments spending, which is their only source of income.

About The Authors

William Willis

William Willis - William Willis is a freelance writer and social media manager who specializes in assisting finance professionals and Fintech entrepreneurs in growing their online audience and attracting more paying customers. William worked as a bank teller and virtual assistant for financial firms in the United States and the United Kingdom for six years before beginning her writing career. William is a strong force in the workplace, inspiring others to work hard and excel with her optimistic attitude and boundless energy. He enjoys hiking, crocheting, and playing video games with her grandchildren in her spare time.

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