How Much Responsibility Does the Federal Reserve Bear for Causing World War II?

By doing the exact opposite of what it was created to do, provide liquidity to the economy during a time of crisis, the Federal Reserve caused the Great Depression to happen. As the Federal Reserve kept forcing banks to purchase government securities in the early 1930's, and making the banks pay for those securities with cash, the Federal Reserve forced the nation's money supply to decline to unprecedented levels. All of which caused money to sharply increase in value to consumers in America.

Another effect of this massive decline in dollars in circulation was to cause the dollar to gain in value vs foreign currencies. In order to combat this gain, and keep their own currencies from declining, many economies, most notably Great Britian and all her satellites, likewise caused massive declines in their own money supplies. As money gained in value in all of these countries, people around the globe became reluctant to spend their money and the result was a worldwide Depression.

At this time Germany was struggling to pay back the war debts imposed upon her at the end of World War I. As economic activity collapsed around the globe, Germany found it impossible to pay back the debts. In order to try and keep their economy afloat so that they could keep paying back the debts (one of the stipulations for failure to pay back the debts was re-occupation), the German monetary authorities started printing money like it was newsprint, and it soon became as worthless as newsprint.

As their money continued to become more and more worthless by the day, the German masses became furious. Imagine going to work one day and earning $100. And then within a week's time, it cost $100 for a cup of coffee. How would you feel? What happened to all the work that went into earning the $100? It disappeared as if it never happened. This is exactly what happened in Germany in the early 1930's.

The angry and distraught German populace did what people anywhere would do under such circumstances. They elected the most outspoken antigovernment, radical leader they could. His name was Adolph Hitler. Who, of course, went on to start World War II.


Now many of the things that happened cannot be directly blamed on the Federal Reserve. Just because the Federal Reserve made awful policy decisions and withdrew a vast amount of money from the economy when it was needed the most, did not mean that many foreign monetary authorities had to do the same. And just because those foreign monetary authorities chose to follow the Federal Reserve's awful decision, that did not mean that German monetary authorities had to hyper-inflate their money supply. And just because German monetary authorities did hyper-inflate their money supply, that did not mean that the German people had to elect Adolph Hitler.

But there is no denying what did happen. The Federal Reserve caused the Great Depression by withdrawing unprecedented levels of money from the United States economy. This caused a dollar scarcity, which forced the dollar's value to rise vs foreign currencies. In order to protect their currencies, many foreign monetary authorities also withdrew massive levels of money from their economies, causing a worldwide Depression. As a result of the worldwide Depression, the German monetary authorities hyper-inflated their money supply to try and keep their economy afloat so that they could keep paying back their war debts. As the German people's labor, as represented by the money they were being paid for their labor, was continually being rendered worthless, the German people turned to the most outspoken antigovernment leader they could find. A murdering thug who started World War II.


So how much blame does the Federal Reserve bear for causing World War II?

If the Federal Reserve had done what it was created to do in the late 1920's and early 1930's, provide liquidity to the economy during a time of crisis, money would not have risen dramatically in value and the Great Depression would never have happened. If the dollar had not gained in value vs foreign currencies, then foreign monetary authorities would not have removed massive amounts of money from their economies and the worldwide Depression would not have happened. If the worldwide Depression had not happened, Germany could have kept paying back its war debts and the German monetary authorities would not have hyper-inflated their money supply. The work of the German people would not have been destroyed, and the populace would not have elected the most radical antigovernment leader they could. Adolph Hitler would have remained a small forgotten asterik in German history and World War II would not have happened.


Lion's share is the appropriate term, I believe.