The most irresponsible quote from the 2012 primary was not uttered by Reverend Jeffords, or by Bill Maher. It was uttered by a candidate. Not Michele Bauchmann or Sarah Palin. Not Mitt Romney or Jon Huntsman. It was said by Ron Paul, and I quote.
"It is no coincidence that a century of total war has coincided with a century of central banking."
If Mr. Paul is correct, we have had constant total war from October of 1911 to today. Guess my history books are wrong. First of all, how does the Honorable Ron Paul define total war? It may even be a stretch to say that we have had a century of rumors of wars. We have also not had a century of central banking.
The US Federal Reserve was established December 23, 1913. The first world war began about a year and a half later. The war was triggered when a Serbian Nationalist assassinated the heir to the throne of the Austro-Hungarian empire. Other nations joined in due to the alliances between nations and the war even spread to their colonies. First, Austria-Hungary invaded Serbia, then Germany invaded France, then Russia invaded German and then the English got involved. The US got involved when it was discovered that Germany promised to help Mexico invade the United States and German submarine activity sank a passenger ship off the coast of Ireland. But if you are a student of History, you know all of that.
The formation of the Fed happened in response to the panic of 1907. There was doubts about the liquidity of bank assets after the stock market lost 50% of it's value from the previous year. There were many runs on banks and trusts. A further recession was halted when banker JP Morgan pledged much of his own money to shore up his bank and encouraged his follow bankers to do the same. After this, Congress decided that a central bank was needed to ensure this type of panic did not happen in the future.
Of course there were the problems that led to the Great Depression and the Fed has failed to prevent other problems. In some cases, such as the era of stag-flation in the late 1970's and early 1980's, monetary policy may have made problems worse than better...by fighting energy-cost inflation with higher interest rates.
The cause of our latest recession was not really the Fed, but a lack of oversight by the Central Bank. It was assumed by a lot of people that real estate prices would continue to rise, and hence backing up securities with mortgages seemed like a good idea. As we know, it was not. The bottom fell out of the real estate market and all of America and the world has been paying the price. We have over-reacted to this problem and are not over-regulating and freezing business in it's track. But that is not the fault of the Fed or any central bank. These laws and regulations come from Congress.
But it is an irresponsible stretch to blame the wars that followed World War I on central banks. It is also irresponsible to state that we have experienced a century of total war, because we have not. After World War I, we tried to get involved in the Russian Civil War, but America did not have the stomach for it. As a result, Lenin and Stalin were able to hold on in Russia and organize the Soviet Union. That war was the longest off-shoot of World War I. It ended in 1923. The Russian Civil war was not started by a central bank, but began when Tsar Nicholas II abdicated. His problem was not just a consolidation of banking power, but of all government power. He was an autocrat who could not delegate power.
The world was at relative peace until the Chinese Civil War which began in 1927. The Japanese got involved in 1937 and the two parties united to defeat Japan. This war bled into the Second World War. The Chinese Civil war ended in 1949. The official Second World War began when Germany invaded Poland in 1939. Japan Bombed Pearl Harbor in 1941 bringing in US involvement. After Japan surrendered in 1945, the Chinese began fighting each other again. This war ended in 1949 or 1950 when two Chinas formed. The People's Republic of China, or Red China or Mainland China and Taiwan or the Republic of China. No central bank was responsible for the Chinese Civil War, the second Siano-Japanese War or the Second World War.
Another major war during this time frame was the Spanish Civil war. This was a conflict between Nationalist Spain, led by Franco and Republican Spain, led by the Government that succeeded the Government that came to power with the abdication of another ruler. The Spanish Central Bank used gold reserves to pay the Soviet Union for weapons used by the Republicans during the conflict. So banking was involved, but not a cause of the war. No central bank, and the Spanish Nationalist coup would have won years earlier and lives could have been spared...is the argument that some would have used. But all wars can be ended with a lack of funding.
After the Second World War, the Cold War began. This lasted from 1946 to 1990. It ended when the United States Military outspent the Soviet Union. There were two warm offshoots of the Cold War. The Korean conflict from 1950 to 1953. The war in Vietnam began in 1955 and ended in 1975. The United States was involved in Vietnam from 1961 to 1973. If there is hard evidence that the Fed could have exacerbated US involvement in these any wars, I would really like to see it.
After the end of the cold war, there was the Persian Gulf Conflict that began when Iraq invaded Kuwait in 1990. That was really continued when the US invaded Iraq again in 2002 and will end later this year. But, there was not a lot of action in that conflicts from April of 1991 to 2002. It was probably not banking that caused or allowed these wars to take place. Mr. Paul's argument is that without the Central Bank, it would have been more difficult for Congress to authorize these actions. But that is again a weak argument. The US got involved in Afghanistan after the Twin Tower Bombings of 2001.
There have been about 100 minor conflicts around the globe since World War I, the US has been involved directly or indirectly in many of them, but they do not count as total war.
Total war in the past century can be enveloped within these conflicts.
1914-1918--First World War
1917-1923--Russian Civil War
1927-1950--Chinese Civil War (Second Siano-Japanese War, Second World War)
1946-1990--Cold War (Korean War, Vietnam War, etc)
1990-1991--First Persian Gulf War
2001-Present--US/Afghanistan War (The War on Terror...Second US/Iraq War)
Which of these wars could have ended sooner without the involvement of central banking systems?
We have had relative world peace during these eras...
1898-1914--Between Spanish/American War and outbreak of World War I
(US involvement in WWI began in 1917 and ended in 1918)
1923-1927--Between the end of the Russian Civil war and the beginning of the Chinese Civil war
(US involvement in WWII began in 1941)
1945-1946--End of World War II to the beginning of the Cold War
1990-1991--End of the Cold War to the Invasion of Kuwait
1991-2001--Cease fire in Iraq to the bombing of the Twin Towers in New York
In the last 100 years we have had 81 years of war and 19 years of relative peace in the world. The United States has had 59 years of war and 41 years of relative peace.
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