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War and Inflation in the United States from the Revolution to the Persian Gulf War

In: Economic History of Warfare and State Formation

Author

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  • Hugh Rockoff

    (Rutgers University)

Abstract

The institutional arrangements governing the creation of new 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. During wars against major powers, however, the story was very different. In major wars 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, 2016. "War and Inflation in the United States from the Revolution to the Persian Gulf War," Studies in Economic History, in: Jari Eloranta & Eric Golson & Andrei Markevich & Nikolaus Wolf (ed.), Economic History of Warfare and State Formation, pages 159-195, Springer.
    • Handle: RePEc:spr:stechp:978-981-10-1605-9_7
    DOI: 10.1007/978-981-10-1605-9_7
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    Cited by:

    1. David Lektzian & Gor Mkrtchian, 2021. "The effect of sanctions on economic freedom," Social Science Quarterly, Southwestern Social Science Association, vol. 102(6), pages 2776-2794, November.
    2. Michael D. Bordo & Mickey D. Levy, 2020. "Do Enlarged Fiscal Deficits Cause Inflation: The Historical Record," NBER Working Papers 28195, National Bureau of Economic Research, Inc.
    3. Christopher J. Coyne & Anne R. Bradley, 2019. "Ludwig von Mises on war and the economy," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 32(3), pages 215-228, September.
    4. Michael D. Bordo & Mickey D. Levy, 2021. "Do enlarged fiscal deficits cause inflation? The historical record," Economic Affairs, Wiley Blackwell, vol. 41(1), pages 59-83, February.
    5. Matthews,Ron (ed.), 2019. "The Political Economy of Defence," Cambridge Books, Cambridge University Press, number 9781108424929, January.

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