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War and Inflation in the United States from the Revolution to the First Iraq War

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  • Hugh Rockoff

    (Department of Economics Rutgers University)

Abstract

The institutional arrangements governing the creation of money in the United States have changed dramatically since the Revolution. Yet beneath the surface the story of wartime money creation has remained much the same. During wars against minor powers, the government was able to fund the war by borrowing and levying taxes. In major wars, however, there came a point when further increases in taxes could not be undertaken for administrative or political reasons, and further increases in borrowing could not be undertaken except at higher interest rates; rates that exceeded what was considered fair based on prewar norms. At those moments governments turned to the printing press. The result was substantial inflation.

Suggested Citation

  • Hugh Rockoff, 2015. "War and Inflation in the United States from the Revolution to the First Iraq War," Departmental Working Papers 201516, Rutgers University, Department of Economics.
  • Handle: RePEc:rut:rutres:201516
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    References listed on IDEAS

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    1. Barro, Robert J., 1987. "Government spending, interest rates, prices, and budget deficits in the United Kingdom, 1701-1918," Journal of Monetary Economics, Elsevier, vol. 20(2), pages 221-247, September.
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    4. Kang, Sung Won & Rockoff, Hugh, 2015. "Capitalizing patriotism: the Liberty loans of World War I," Financial History Review, Cambridge University Press, vol. 22(1), pages 45-78, April.
    5. Calomiris, Charles W., 1988. "Institutional Failure, Monetary Scarcity, and the Depreciation of the Continental," The Journal of Economic History, Cambridge University Press, vol. 48(1), pages 47-68, March.
    6. Keynes, John Maynard, 1919. "The Economic Consequences of the Peace," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number keynes1919.
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    Cited by:

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    2. Ulrich Eydam & Florian Leupold, 2023. "What is it good for? On the Inflationary Effects of Military Conflicts," CEPA Discussion Papers 65, Center for Economic Policy Analysis.

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    More about this item

    Keywords

    war; inflation;

    JEL classification:

    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative

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