Money in wars

Abstract

Money, in Cicero’s oft-cited phrase, provides “the sinews of war.” But vital as money is to making war, it is a means, not an end, and wars produce great disruption to monetary order. Wars provoke monetary crises and create opportunity for monetary reforms. The increasing intensity and cost of “total war” in the twentieth century and the development of advanced, consumer economies in which monetary transactions are diffused throughout the economy have given monetary policy great importance for military power and for potential monetary disaster. This chapter surveys the relationship between the uses of money in wartime and monetary order, focusing on the two world wars as crises in which the power of money had very different effects in wartime and in postwar consequences.