Why Banks Love War
Joshua Philipp, Valentin Schmid, 10 Jan 18

War is the most expensive enterprise in history and the most profitable to fund

"The Battle of Waterloo" by William Sadler. London banks gave Napoleon 5 million pounds to finance the battle. (Public Domain)

“War benefits nobody, not even the victor,” goes the saying, and everybody agrees. So why is it that humanity has fought so many bloody wars, especially in the last century?

The chief commander of the air force in national socialist Germany, Hermann Göring, had a compelling answer. “The people don’t want war. … Why would some poor slob on a farm want to risk his life in a war when the best that he can get out of it is to come back to his farm in one piece?” he said at the Nuremberg trials, in a conversation with journalist Gustave Gilbert in 1946. “But, after all, it is the leaders of the country who determine the policy, and it is always a simple matter to drag the people along, whether it is a democracy or a fascist dictatorship or a parliament or a communist dictatorship.”

So the leaders of countries that wage wars of aggression, or make it seem like preemptive strikes are necessary for self-defense, must see some benefits of war for themselves, whether it be more power or fame, or getting the local economy out of a depression. However, it is not the national socialist dictator of Germany, the communist dictator of the Soviet Union, or the president of the United States who benefits most—in fact, many times, they also don’t benefit at all.

There is one party that always benefits, no matter which side wins. It is the party that finances the war from far away and collects interest on the blood of innocents.

War Finance in History

Since the beginning of time, the only sector from which the political leaders of a country could borrow enough money to spend on the most wasteful enterprise in human history was the banking sector. Then and now, financing war only through taxation was impossible because of its devastating effects on the economy and the resulting popular backlash.

Before the advent of modern banking and credit, kings needed to borrow gold coin from goldsmiths and the nobility to equip their armies. And although medieval wars were often long and brutal, they were limited in scope because of the constraints on financing as well as the limited technology and the smaller size of the population.

This changed with the creation of the privately owned Bank of England in 1694, which allowed the British government to finance its war efforts through bond sales. The central bank was in existence just seven years before the new century kicked off with the War of the Spanish Succession in 1701.

The banks owning the Bank of England—and hundreds of financial institutions after it—found that there was a limit to lending to productive enterprise, which economizes on human and physical capital. Because war destroys both, its demand on lending, and therefore its potential to profit the banks, is limitless.

The House of Rothschild

Mayer Amschel Rothschild, the banking dynasty’s patriarch. (Public Domain)

It was around 100 years later, however, that war finance through private banks was brought to perfection by the Rothschild family. The banking dynasty’s patriarch, Mayer Amschel Rothschild, founded the first bank in Frankfurt, Germany, in the 1760s, with his sons later expanding the operations to Paris, London, Vienna, and Naples.

Through their banking network, the family made their first fortune during the Napoleonic Wars by speculating with money from German Prince William of Hesse-Kassel. The Rothschilds were supposed to invest it in British government bonds, but instead used it for trading in war materials. They later returned the money with the interest that would have been earned by putting it in British government bonds, taking the surplus profits and thus violating their fiduciary duty.

However, the family also helped, and profited, by smuggling gold through France to Spain to fund the duke of Wellington’s expeditions against Napoleon, and provided loans to the British government directly.

Some historians then claim the Rothschilds were involved in the first big episode of banks financing both sides in a war, when, according to Robert McNair Wilson, the author of “Promise to Pay,” the banks in London gave Napoleon 5 million pounds to give it a second go at Waterloo. Even though the odds of Napoleon winning were low, historically the defeated nation would have to make good on the debts it owed to international financiers, as happened again with Germany after World War I and World War II.  The financiers always win.

Whether the Rothschilds crashed the British government bond market—after they got news in advance of Wellington’s victory at Waterloo in 1815—in order to then buy up the paper on the cheap, or whether they just bought it up because of the victory, is again disputed.

Most historians agree, however, that the Rothschild family, because of its war dealings, became the wealthiest dynasty in the 19th century, and many estimates still rank it in the top tier of the wealthiest families today. And although other names are more popular in international finance in the 21st century, is it merely a coincidence that the Rothschild-owned The Economist newspaper always favors war over peaceful solutions, whether it be in Afghanistan, Iraq, Libya, or Syria?

American Involvement

After British and other European banks were dominant in financing most wars in the 19th century, including the American Civil War, American banks returned the favor in the 20th century.

John Moody writes in “The Masters of Capital,” about World War I: “Not only did England and France pay for their supplies with money furnished by Wall Street, but they made their purchases through the same medium. … Inevitably, the house of [JPMorgan] was selected for this important task.

American infantry soldiers on the march towards the Rhine in 1918. (Hulton Archive/Getty Images)

“Thus, the war had given Wall Street an entirely new role. Hitherto it has been exclusively the headquarters of finance; now it became the greatest industrial mart the world had ever known. In addition to selling stocks and bonds, financing railroads, and performing the other tasks of a great banking center, Wall Street began to deal in shells, cannon, submarines, blankets, clothing, shoes, canned meats, wheat, and the thousands of other articles needed for the prosecution of a great war.”

Some historians, like Robert Ferrell in his book “Woodrow Wilson and World War I,” even accuse President Woodrow Wilson of entering World War I to protect American banks from loan losses, lest their customers France and England lose the war.

If Ferrell is correct—and this is a contentious issue—Americans, who voted for Wilson in 1916 on a “no war” platform, got dragged into a war they didn’t want but their leaders deemed necessary because of nefarious financial dealings kept out of the public eye.


It was, of course, the people of the United States, and not their presidents, who paid for this and other wars with not only their blood but also higher taxes and inflation, to pay for the added government debt after the war was over.

World War I was the deadliest conflict in the history of humanity, consuming the most lives in the shortest period of time. This was due not only to advances in war technology, but also the governments’ suspension of the gold standard. Governments, therefore, could borrow almost limitless amounts to consume the capital and people of their nations.

And although the leader of warring Germany, William II, had to abdicate, Germany’s financiers, as well as the international financiers who had supported Germany, were unscathed, as Germany’s people had to make good on the war debt through crippling reparations and hyperinflation.

Media Propaganda

In the United States, very similar to The Economist and other mainstream media war propaganda of today, newspapers were instrumental for the politicians and the financiers to sway popular sentiment toward World War I, at least according the remarks of one observer in the Congressional Record:

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