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The extraordinary story of Britain’s efforts to finance the First World War (bankunderground.co.uk)
63 points by hunglee2 10 months ago | hide | past | web | favorite | 17 comments

I don't understand how you can write an article like this without any mention to the gold standard.

With a floating Pound the problem of financing disappear as happened later in the Second World War. Note that they would be forced to tax heavily and emit bonds in order to retire money from the economy and avoid inflation, but it would not be a problem of 'where to get the money'.

In times of war, the veil disappear and it becomes clear that the important thing is how much the economy can really produce, not how much money the country has.

A good comment.

You don't necessarily have to tax. Saving acts like taxation, and a £10 note is just a permanent zero interest bearer bond.

Ultimately if you can't buy anything (rationing) or do anything (planning) then all you can do is pile up the money as savings.

> As the war unfolded, ministers were pilloried for rewarding investors far too generously for surrendering capital which should have been sacrificed gladly as a matter of patriotic principle

Interesting how much harder it was for the government to get money back then.

Wikipedia seems to say that WW2 cost the equivalent of $4.5 trillion, while the Iraq war is about $2.4 trillion.

The Gold Standard seemed to have caused trouble with wars: WW2 had to temporarily suspend gold trading, and it was canceled entirely around Vietnam. Now we can spend trillions with it causing hardly any day-to-day trouble: A blessing when needed, and a curse when not.

The economy is much larger today than back in the 1940s. My memory is something like 40% of the US economy was devoted to the war effort in WWII, while it would have been a couple of percent at most for the Iraq war.


Per this 2.2% of GDP in 2016 - after iraq with no 'hot' conflict. Google says 5.66% in iraq peak.

Percentages of estimated net world defense spending in 2016:

* US: ~36.2% of total world defense spending

* China: ~12.7%

* EU Countries listed: ~12.2%

* Russia: ~4.5%

How has it been a curse so far?

Quantitative easing has inflated asset prices. Downside is things like gold standards are a huge boon for asset holders and sucks for everyone else

QE would be good for asset holders then...? And gold standard would hold down asset prices. Not sure you're making sense

QE is good for asset holders as long as there is no inflation in wages to match asset bubbles. Gold standard tends to cause deflation, which is bad for debtors.

I was talking about it from a inflationary perspective. QE didn't lead to inflation in the US example because of the way it was carried out.

And wages are not inflating (relative to assets)...so I still don't get how you think QE has been bad for asset holders to date.

Niall Ferguson's Pity of War: Explaining World War I describes the finances of the participants in great detail. It's a fascinating read.

Similarly, Liaquat Ahamed's Lords of Finance is a great read about finances from World War I to the Great Depression.

You have to wonder what is currently unknown today.

Truth and freedom tend to be the first casualties of war.

It makes sense to hide the truth. Deceiving the enemy is a very important tactic of war.

Deceiving the citizens is also a very important tactic of war.

All sides of it too!

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