# How Money Wars Become Real Wars A devaluation is a pay cut imposed on a whole country in one decision, and because its gains come out of other countries' orders and jobs, every defensive reply passes the pain on: currency war becomes trade war, and historically the bottom step is a shooting war. A war paid by printing sends nobody a bill up front, which is why it starts easier and runs longer than a war paid by visible taxes. - Date: 2026-07-15 - Canonical: https://thenaturalstate.org/essays/how-money-wars-become-real-wars/ --- One decision can cut every wage and every saving in a country at once. Nobody votes for it and nobody negotiates it. The damage doesn't stop at that country's border. The same power that cuts wages at home pays for wars abroad, and it never sends the bill up front. That decision is a devaluation, a pay cut imposed on a whole country at once, and the same stroke makes the country's goods cheaper for foreigners. Those cheaper goods take orders and jobs from workers in other countries. Because those countries carry the same debts and the same politics, they can't just absorb that hit, so they either cut their own currency in reply or block the goods with tariffs [taxes on imported goods]. Every defensive move injures the next country, so the moves multiply. That's the staircase. One devaluation, then a round of devaluations, then a trade war, and historically the bottom step is a shooting war. Then printing pays for it. A war eats real things. Someone must hand over the labour, the steel, the fuel, and the food. If the bill arrives as a visible tax, citizens weigh the war against it, and the war has to keep earning its keep. If the government and central bank create new money to cover the bill, the cost still lands on citizens, but it arrives a year or more later, spread across every shopping basket, with no label on it. Hiding the bill lowers the political price of starting a war and cuts the feedback that would end one. That's the whole trick, and it's centuries old. The mechanism is the same one the rest of the argument runs on. A debt-based system can't allow prices to fall, so governments pull a lever that changes the value of everyone's money without asking them. Most of the time that lever is pulled to stop prices falling, so the savings technology should have delivered never reach you. In wartime the same lever funds the war. Money outranks law. When a state can fund itself by diluting the currency, your consent becomes decorative on its biggest decisions, and war is the biggest. ## How one country's devaluation becomes everybody's trade war A devaluation does its first damage at home. When a government cuts its currency's exchange rate, everything imported jumps in price at once, and every wage and every saving in that currency buys less. Nobody negotiated a pay cut with a single worker, but every worker got one. Malawi is the cleanest recent example. The kwacha was devalued by roughly 44% in a day, a national supermarket chain closed for a day to relabel its goods, and nobody got a 44% pay rise to match. On the long-term exchange rate chart a devaluation shows up as a cliff rather than a slope, because someone decided it that day. Where a currency floats, the cut is slower and comes through interest rates and money creation instead of a decree. The direction and the victim are the same. Why would a government do that to its own people? Debt and jobs. A country loaded with debt can't allow deflation, because falling prices and wages make fixed debts unpayable. And a devaluation is the fastest way to make your workers cheaper to the rest of the world without a single wage negotiation. Exports get cheaper abroad, order books fill for a while, and the government calls it restoring competitiveness. Strip the euphemism and it's a mass, involuntary wage cut that would never pass a vote if proposed as a wage law. Say you're the government next door. Your competitor's goods just got cheaper in your own market. Your factories lose orders through no fault of their own. And you're carrying the same debts, so you can't tolerate the falling prices and lost jobs that their devaluation just pushed onto you. You have three options. Accept the job losses, which puts the whole hit on your own workers and is politically fatal. Devalue your currency to match, which cuts your own citizens' wages and passes the problem to a third country. Or put up tariffs, which raises prices for your consumers and invites retaliation. Every option hands the pain to somebody else, because the move that started it wasn't creating anything. One country grabs a bigger slice of world demand by cutting its people's wages. That's why it escalates rather than settles. When a government can change what its own money is worth, it holds a lever that forces every other government's hand. Economists call the result competitive devaluation, a race where each country cheapens its money to defend exports, and each round leaves everyone's savings in those currencies worth less. When currencies can't be cut fast enough or credibly enough, countries reach for tariffs instead. Tariffs shrink trade. Shrinking trade makes real things feel scarcer, and scarcity is the raw fuel of us-versus-them politics inside each country and between them. There's a well studied pattern in social psychology that groups turn hostile when made to compete over scarce resources, and creating new money manufactures exactly that feeling across a whole country, because more money chasing the same goods makes essentials feel rarer than they are. When trade seizes up and countries start taking what they need by threat instead of paying for it, you've arrived at blockades and gunboats. You can find every piece of that chain in the 1930s. Tariff walls went up. Countries left gold one by one, and each departure gave a brief edge and forced the next country off. The value of world trade collapsed by roughly two thirds, and the decade ended in the worst war in history. Currency war becomes trade war becomes hot war, and afterwards the winners declare a currency reset under new rules, which begins the cycle again. Tariffs don't even deliver what they promise, because they collide with technology. When imports get taxed, domestic firms face higher input costs while customers still demand low prices, so they automate faster instead of hiring. The trade war raises prices, sours relations between countries, and the jobs still don't come back. ## Why printing makes wars easier to start and longer to run What a war consumes each day is set by physics and logistics, not by how it's paid for. What the funding choice decides is who hands those resources over, whether they can see themselves doing it, and how many days the war goes on. A government has three ways to raise the resources. It can tax now, it can borrow, or it can create new money. Everything about a war's politics flows from which one you pick. ### Easier to start If war means a tax bill, the leader pays a political price on day one. Households see the deduction and know what it's for, and attach it to the leader's choice. The war has to clear a high bar of public conviction before the first shot. If war can be funded by creating money, the cost reaches households twelve to eighteen months later, because new money works through the economy with a lag, and it arrives as higher food, fuel, and rent prices that can be blamed on supply chains, speculators, the enemy, or anything else. The bar drops. Wars that could never have survived a visible bill now clear it. When leaders can push the cost onto savers without asking, aggression gets cheaper for the person deciding, and things that get cheaper happen more often. What the hidden lever raises explains why states at war keep reaching for it, century after century. In 2019 the entire corporate profit of the United States was about 2.25 trillion dollars, while money creation in the covid years ran about 5 trillion a year. Seizing every dollar of profit from every company in the country couldn't have raised what the new-money lever raised, and no one voted on the part the central bank financed. Taxes have a ceiling because people resist them. Dilution's ceiling is only the point where people abandon the currency itself, and that's much further away. The United States is the extreme case, because the world holds its bonds. Every state with a printing press has a smaller version of the same arithmetic. ### Longer to run Left to money, wars end through feedback: either the public refuses to keep paying, or the treasury runs dry. Funding a war by debasement [funding the state by creating new money, which waters down everyone else's money] cuts both of those. The public can't refuse a cost it can't see or trace. And the treasury doesn't run dry, because it refills itself with new claims on the whole nation's savings. A reserve currency issuer [the country whose money the world uses for trade and savings] can go one better and draw on foreigners' savings too. The world holds its bonds, and the world's savings get diluted along with everyone else's. The long pattern is that empires fund war by issuing claims on other people's labour, and that currency regimes backed by conquest and extraction outlive the ones that aren't. The money funds the war and the war's extraction props up the money. When the extraction slows, the money goes with it. Borrowing is the case in between, and where it ends up depends on who buys the bonds and at what rate. If citizens voluntarily buy war bonds at a rate the market sets, borrowing behaves like a tax you can see and agreed to. The moment the central bank buys the bonds, or caps the interest rate by promising to buy however many it takes, borrowing collapses into printing. The bond is the costume the new money wears. The European powers cut their currencies loose from gold within weeks of the First World War starting. That was one of the first things they did, which tells you what keeping honest money would have cost them. Weimar is the direct case. Germany printed to meet its obligations, the printing destroyed the middle class's savings, and out of the wreckage people reached for the strongman, and then the next war. Debasement funded the last war, and the social breakdown it left behind invited the leaders who started the next one. ## The same war, paid two ways ### Paid by visible taxes 1. The government chooses war and must present the bill in the same breath. A tax rise, this year, on people who can see it's them. 2. The legislature votes. Cost and decision are welded together in public. 3. You see the deduction on your payslip and you know what it's for. The war has a price tag in every household's budget. 4. Consent stays on trial. As the tax bites, people weigh the war against the bill. If it stops being worth it, pressure builds and the war must shrink or end. 5. Spending can't outrun what taxation and honest borrowing can raise, and there's a real ceiling on both because people resist, evade, and vote. So the war must stay small, stay short, or keep proving itself. ### Paid by debasement 1. The government chooses war and presents no bill. It issues bonds [government IOUs]. 2. The central bank creates new money to buy those bonds, or holds the interest rate down by standing ready to buy. No household sees a new deduction anywhere. 3. The state spends the new money first, at today's prices, on weapons, contractors, and soldiers' pay. The first spender of new money gets full value. That step has a name, the Cantillon effect [whoever receives new money first wins, whoever receives it last loses]. 4. The new money works outward through the economy. A year or more later, prices are higher for food, fuel, and rent. Wages adjust late and rarely catch up fully. 5. Everyone holding the currency pays a slice. It comes out of the nurse's savings, the pensioner's fixed pension, and the bonds the foreigner holds. The tax is real, but it goes by the name inflation, and the government blames the weather, the supply chains, or the enemy. The excuses change by the decade. The lever doesn't. 6. Because there's no line item, there's no vote, no one to hold to account, and no natural stopping point. The war draws down the whole society's stored work, quietly, for as long as confidence in the money holds. 7. If nothing else stops it, the end is a currency crisis rather than a tax revolt. Inflation accelerates, confidence cracks, and the regime resets the money under new rules, usually after the war has consumed far more than any openly funded war could have. A day of war costs the same steel, fuel, and labour whichever way it's paid for. What the funding changes is visibility, consent, feedback, and incidence [who actually ends up paying], and those four decide how many of those days there are. A tax-funded war has to convince you. A debasement-funded war only has to keep you from noticing. A visible tax can at least be designed, aimed at those most able to pay. The inflation tax aims itself, and it lands hardest on cash savers, pensioners, and anyone whose pay moves late, the people furthest from the new money. ## What this argument has to survive ### "War has many causes beyond money." True, and I'd never write otherwise. Human motives are tangled, and money is usually not what people are fighting over. It's the enabler. The claim is about how often wars start, how long they run, and how a fight over currencies climbs into a fight with weapons. Money whose value a government can change without asking makes war cheaper to start and easier to sustain. The spark can come from anywhere, ambition, fear, ideology, and sometimes, as the staircase above shows, from a fight over money itself. The funding mechanism decides whether the fire can spread. ### "Modern institutions prevent this escalation now." Institutions run on monetary incentives, and when money breaks, those incentives break with it. The standard international rescue package for an indebted country arrives with conditions, and one of them is a devaluation. Those institutions administer the race to debase. They don't prevent it. ### "Printing and war is correlation, not causation." The mechanism carries the argument without the correlation. When a leader can move the cost of aggression onto savers invisibly, aggression becomes easier for the person choosing it. You don't need a scatter plot to see that lowering the price of something produces more of it. ### "Devaluation is a legitimate tool for rebalancing trade." Whatever it does for exports and imports, at home it's an unvoted pay cut on every citizen at once. If a government proposed the same thing openly as a wage law, an unvoted pay cut across every payslip and pension, imposed on Tuesday, it would never pass. Doing it through the exchange rate changes the visibility, not the substance. ## What changes when the lever goes Remove the lever and accountability rises. A government that can't dilute must fund every project, including war, through visible taxes, honest borrowing, or savings it already holds, choices citizens can see and contest. That's the sense in which a money nobody can print is a peace technology. It works on cost, not character. Coercion gets expensive again, because on hard money every hour of war drains the war-maker's hoard instead of everyone else's, and the feedback that ends wars comes back to life. Fixing money doesn't abolish war. It re-prices war back to its true cost, and that's where the claim stops.