Some say that bankers and merchants have facilitated wars and economic crises that have impoverished the ordinary citizens time and time again over the past 2,600 years. This appears to be an outrageous claim, but this article shows it to have some justification. It also shows what we, the ordinary citizens, need to do for our protection.
Every major war has required funding for troops, supplies and weapons. When tax revenues ran short, rulers turned to the currency itself.
From at least 600 BCE in Lydia, rulers debased coins by reducing their metallic (gold or silver) content. The practice continued under the Roman and Byzantine empires, the Valois kings of France during the Hundred Years’ War, King Henry VIII in the 1540s, and German princes in the 1620s. Each time the result was the same: hyperinflation, economic crisis and mass poverty and death for ordinary citizens.
Once paper money appeared, the method became simpler. Governments printed more notes, sometimes after suspending convertibility into metal, sometimes in secret, and today under pure fiat systems without restriction. Historical cases include the Song, Yuan and Ming dynasties, the French assignats of the 1790s, and the Continental dollars of the American Revolution. All produced hyperinflation, economic collapse and severe hardship for ordinary people while allowing rulers to keep fighting.
The pattern repeated in the twentieth century. At the outbreak of the First World War most combatants suspended gold convertibility, freeing themselves to print. Heavy printing in Russia and China contributed to hyperinflation, economic breakdown and the revolutions that brought communism. Weimar Germany’s extreme money creation produced the hyperinflation and poverty that fuelled the rise of Nazism.
Britain financed its wars largely by borrowing, especially from the United States; it emerged victorious but lost its position as the world’s leading financial power and reserve-currency issuer.
Earlier examples of war finance by borrowing include King Edward III’s loans from the Bardi and Peruzzi banks during the Hundred Years’ War, and Persian financing of the Peloponnesian and Corinthian wars. In the modern era, Argentina, Zimbabwe and Venezuela—all once prosperous—suffered economic collapse after prolonged fiscal mismanagement financed by money creation.
Why was this never stopped? Under metallic currencies, merchants and moneylenders could have refused debased coins. Instead, many appear to have retained the full-value coins and passed the debased ones to the public, transferring wealth upward. Landowners often benefited from rising nominal land values resulting from the additional coins. Ordinary people either did not understand the process or lacked the power to resist, and so were the ones who suffered the most.
When paper money was convertible into gold at a fixed rate, the ability to increase money supply was tightly constrained; people could simply demand metal. The suspension of convertibility in 1914 removed that constraint. Had populations blocked the suspensions, the First World War would likely have been shorter, the subsequent Russian and Chinese revolutions might not have occurred, the conditions that enabled Stalin, Mao and Hitler might never have arisen, and the Second World War may not have occurred. Some put the human cost of these episodes at well over a hundred million deaths.
The historical record is clear: excessive expansion of the money supply has repeatedly produced economic crisis, prolonged war and impoverished ordinary citizens. Given the historical experiences, it is frankly bewildering that governments can still create money digitally with almost no limit. A single reckless administration can destroy savings and impoverish a population within one term – just by printing money excessively. It frankly beggars’ belief that the bankers, merchants and ordinary citizens still have not curtailed government’s ability to increase money supply or required government to live within its means – not operate at a loss.
We trust our politicians to do the right thing, to act in the interest of the people they represent, but is that trust well-founded? It is not. It is well known that while campaigning for office politicians offer expanded welfare and subsidies to assure their election, knowing they can finance the additional cost by digitally printing more money. This is shown in the numbers – where our successive Australian governments have increased money supply (M3) by about 350% over the past 20 years, well above GDP growth of about 50% over the same period.
Some say that as our federal debt is comparatively much lower than other western democracies, all is well. It is not. Firstly, it is far better to take remedial action early, when the pain of doing so is lower. Secondly, until government reins in its expenses, our federal debt will continue to grow. Thirdly, if our federal debt of about $1 trillion were refinanced today, the annual interest payment would be about $50 billion a year, that’s a lot of schools, hospitals and care facilities that could have been built with that money. In addition to that debt, our States together add about $600 billion of debt. So, State and Federal debt sits at about $1.6 trillion dollars – with no apparent plan to repay it.
No major Australian party—Labor, the Greens, One Nation, the Liberals or the Nationals—has shown interest in putting binding constraints on money creation. Classic Liberals is the only party that has stated an intention to do so. Its policies are however not just about government cutting its costs. Its policies will generate far more prosperity than any other party’s policies, which will increase government’s tax revenues.
Written by: Mark M.J. Morris (July 2026)