ABSTRACT
The nature of the system of controlling Allied war finance and the division of labour between the Allied powers, as was discussed in the previous chapter, were two very important things, but by what means Allied financial expenditure as a whole was to be covered was another question entirely. There were three basic methods of covering wartime expenditure: obtaining loans, increasing taxes and issuing paper currency. All three methods were used to a significant degree during the First World War, but there was significant debate about which precise constitution of the mix would be best. The most controversial of the three methods from a purely economic point of view was the inflationary issue of paper currency. As Keynes famously admitted just after the war:
Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate…an important part of the wealth of their citizens…Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. 1
