How the War Is Paid For

1916

"It is only true in a limited sense," observes one English financial critic, "that a nation can pay for war out of its accumulated wealth, and its ability to do so does not alter the fact that the war is actually paid for, by somebody, as it proceeds. In so far as we pay for the war by borrowing in America, we hire Americans to pay for it now and promise to repay them some day, so handing the debt on to the future. American investors who buy our bonds pay American producers of munitions for the goods they sell us now, and we shall be taxed after the war to pay the investors when the bonds mature and to pay their interest in the meantime.

"In so far as we pay for the war by selling securities back to America, we pay for it out of accumulated wealth. American investors who buy back Pennsylvania bonds from us pay the munition makers. Both these processes we are employing. The extent to which we are making use of the latter is known only by the authorities, but we may fairly hope that it is not greater than the extent of our loans to our allies and Dominions. If so, our capital resources are not being diminished."