Found at: David Stockman's Corner
The Epochal Consequences Of Woodrow Wilson’s War
Remarks by David Stockman
Committee for the Republic
Washington DC January 20, 2015
My humble thesis tonight is that the entire 20th Century was a giant mistake.
And that you can put the blame for this monumental error squarely on
Thomas Woodrow Wilson——-a megalomaniacal madman who was the very worst
President in American history……..well, except for the last two.
His unforgiveable error was to put the United States into the Great
War for utterly no good reason of national interest. The European war
posed not an iota of threat to the safety and security of the citizens
of Lincoln NE, or Worcester MA or Sacramento CA. In that respect,
Wilson’s putative defense of “freedom of the seas” and the rights of
neutrals was an empty shibboleth; his call to make the world safe for
democracy, a preposterous pipe dream.
Actually, his thinly veiled reason for plunging the US into the
cauldron of the Great War was to obtain a seat at the peace conference
table——so that he could remake the world in response to god’s calling.
But this was a world about which he was blatantly ignorant; a task
for which he was temperamentally unsuited; and an utter chimera based on
14 points that were so abstractly devoid of substance as to constitute
mental play dough.
Or, as his alter-ego and sycophant, Colonel House, put it: Intervention positioned Wilson to play “The noblest part that has ever come to the son of man”. America
thus plunged into Europe’s carnage, and forevermore shed its
century-long Republican tradition of anti-militarism and
non-intervention in the quarrels of the Old World.
Needless to say, there was absolutely nothing noble that came of
Wilson’s intervention. It led to a peace of vengeful victors, triumphant
nationalists and avaricious imperialists—-when the war would have
otherwise ended in a bedraggled peace of mutually exhausted bankrupts
and discredited war parties on both sides.
By so altering the course of history, Wilson’s war bankrupted Europe and midwifed 20th century totalitarianism in Russia and Germany.
These developments, in turn, eventually led to the Great Depression,
the Welfare State and Keynesian economics, World War II, the holocaust,
the Cold War, the permanent Warfare State and its military-industrial
They also spawned Nixon’s 1971 destruction of sound money, Reagan’s
failure to tame Big Government and Greenspan’s destructive cult of
monetary central planning.
So, too, flowed the Bush’s wars of intervention and occupation,
their fatal blow to the failed states in the lands of Islam foolishly
created by the imperialist map-makers at Versailles and the resulting
endless waves of blowback and terrorism now afflicting the world.
And not the least of the ills begotten in Wilson’s war is the modern
rogue regime of central bank money printing, and the Bernanke-Yellen
plague of bubble economics which never stops showering the 1% with the
monumental windfalls from central bank enabled speculation.
Consider the building blocks of that lamentable edifice.
First, had the war ended in 1917 by a mutual withdrawal from the
utterly stalemated trenches of the Western Front, as it was destined to,
there would have been no disastrous summer offensive by the Kerensky
government, or subsequent massive mutiny in Petrograd that enabled
Lenin’s flukish seizure of power in November. That is, the 20th
century would not have been saddled with a Stalinist nightmare or with a
Soviet state that poisoned the peace of nations for 75 years, while the
nuclear sword of Damocles hung over the planet.
Likewise, there would have been no abomination known as the
Versailles peace treaty; no “stab in the back” legends owing to the
Weimar government’s forced signing of the “war guilt” clause; no
continuance of England’s brutal post-armistice blockade that delivered
Germany’s women and children into starvation and death and left a
demobilized 3-million man army destitute, bitter and on a permanent
political rampage of vengeance.
So too, there would have been no acquiescence in the dismemberment of
Germany and the spreading of its parts and pieces to Poland,
Czechoslovakia, Denmark, France, Austria and Italy—–with the consequent
revanchist agitation that nourished the Nazi’s with patriotic public
support in the rump of the fatherland.
Nor would there have materialized the French occupation of the Ruhr
and the war reparations crisis that led to the destruction of the German
middle class in the 1923 hyperinflation; and, finally, the history
books would have never recorded the Hitlerian ascent to power and all
the evils that flowed thereupon.
In short, on the approximate 100th anniversary of Sarajevo, the world has been turned upside down.
The war of victors made possible by Woodrow Wilson destroyed the
liberal international economic order—that is, honest money, relatively
free trade, rising international capital flows and rapidly growing
global economic integration—-which had blossomed during the 40-year span
between 1870 and 1914.
That golden age had brought rising living standards, stable prices,
massive capital investment, prolific technological progress and pacific
relations among the major nations——a condition that was never equaled,
either before or since.
Now, owing to Wilson’s fetid patrimony, we have the opposite: A world
of the Warfare State, the Welfare State, Central Bank omnipotence and a
crushing burden of private and public debts. That is, a thoroughgoing
statist regime that is fundamentally inimical to capitalist prosperity,
free market governance of economic life and the flourishing of private
liberty and constitutional safeguards against the encroachments of the
So Wilson has a lot to answer for—-and my allotted 30 minutes can
hardly accommodate the full extent of the indictment. But let me try to
summarize his own “war guilt” in eight major propositions——a couple of
which my give rise to a disagreement or two.
Proposition #1: Starting
with the generic context——the Great War was about nothing worth dying
for and engaged no recognizable principle of human betterment. There
were many blackish hats, but no white ones.
Instead, it was an avoidable calamity issuing from a cacophony of political incompetence, cowardice, avarice and tomfoolery.
Blame the bombastic and impetuous Kaiser Wilhelm for setting the
stage with his foolish dismissal of Bismarck in 1890, failure to renew
the Russian reinsurance treaty shortly thereafter and his quixotic
build-up of the German Navy after the turn of the century.
Blame the French for lashing themselves to a war declaration that
could be triggered by the intrigues of a decadent court in St.
Petersburg where the Czar still claimed divine rights and the Czarina
ruled behind the scenes on the hideous advice of Rasputin.
Likewise, censure Russia’s foreign minister Sazonov for his delusions
of greater Slavic grandeur that had encouraged Serbia’s provocations
after Sarajevo; and castigate the doddering emperor Franz Joseph for
hanging onto power into his 67th year on the throne and thereby leaving his crumbling empire vulnerable to the suicidal impulses of General Conrad’s war party.
So too, indict the duplicitous German Chancellor, Bethmann-Hollweg,
for allowing the Austrians to believe that the Kaiser endorsed their
declaration of war on Serbia; and pillory Winston Churchill and London’s
war party for failing to recognize that the Schlieffen Plan’s invasion
through Belgium was no threat to England, but a unavoidable German
defense against a two-front war.
But after all that—- most especially don’t talk about the defense of
democracy, the vindication of liberalism or the thwarting of Prussian
autocracy and militarism.
The British War party led by the likes of Churchill and Kitchener was
all about the glory of empire, not the vindication of democracy;
France’ principal war aim was the revanchist drive to recover
Alsace-Lorrain—–mainly a German speaking territory for 600 years until
it was conquered by Louis XIV.
In any event, German autocracy was already on its last leg as
betokened by the arrival of universal social insurance and the election
of a socialist-liberal majority in the Reichstag on the eve of the war;
and the Austro-Hungarian, Balkan and Ottoman goulash of nationalities,
respectively, would have erupted in interminable regional conflicts,
regardless of who won the Great War.
In short, nothing of principle or higher morality was at stake in the outcome.
Proposition # 2:
The war posed no national security threat whatsoever to the US.
Presumably, of course, the danger was not the Entente powers—but
Germany and its allies.
But how so? After the Schlieffen Plan offensive failed on September
11, 1914, the German Army became incarcerated in a bloody, bankrupting,
two-front land war that ensured its inexorable demise. Likewise, after
the battle of Jutland in May 1916, the great German surface fleet was
bottled up in its homeports—-an inert flotilla of steel that posed no
threat to the American coast 4,000 miles away.
As for the rest of the central powers, the Ottoman and Hapsburg
empires already had an appointment with the dustbin of history. Need we
even bother with the fourth member—-that is, Bulgaria?
Wilson’s pretexts for war on Germany—–submarine warfare and the
Zimmerman telegram—-are not half what they are cracked-up to be by
Warfare State historians.
As to the so-called freedom of the seas and neutral shipping rights,
the story is blatantly simple. In November 1914, England declared the
North Sea to be a “war zone”; threatened neutral shipping with deadly
sea mines; declared that anything which could conceivably be of use to
the German army—directly or indirectly—-to be contraband that would be
seized or destroyed; and announced that the resulting blockade of German
ports was designed to starve it into submission.
A few months later, Germany announced its submarine warfare policy
designed to the stem the flow of food, raw materials and armaments to
England in retaliation. It was the desperate antidote of a land power
to England’s crushing sea-borne blockade.
Accordingly, there existed a state of total warfare in the northern
European waters—-and the traditional “rights” of neutrals were
irrelevant and disregarded by both sides. In arming merchantmen and
stowing munitions on passenger liners, England was hypocritical and
utterly cavalier about the resulting mortal danger to innocent
civilians—–as exemplified by the 4.3 million rifle cartridges and
hundreds of tons of other munitions carried in the hull of the
Likewise, German resort to so-called “unrestricted submarine warfare”
in February 1917 was brutal and stupid, but came in response to massive
domestic political pressure during what was known as the “turnip
winter” in Germany. By then, the country was starving from the English
Before he resigned on principle in June 1915, Secretary William
Jennings Bryan got it right. Had he been less diplomatic he would have
said never should American boys be crucified on the cross of Cunard
liner state room so that a few thousand wealthy plutocrat could exercise
a putative “right” to wallow in luxury while knowingly cruising into in
As to the Zimmerman telegram, it was never delivered to Mexico, but
was sent from Berlin as an internal diplomatic communique to the German
ambassador in Washington, who had labored mightily to keep his country
out of war with the US, and was intercepted by British intelligence,
which sat on it for more than a month waiting for an opportune moment to
incite America into war hysteria.
In fact, this so-called bombshell was actually just an internal
foreign ministry rumination about a possible plan to approach the
Mexican president regarding an alliance in the event that the US first went to war with Germany.
Why is this surprising or a casus belli? Did not the entente bribe
Italy into the war with promises of large chunks of Austria? Did not the
hapless Rumanians finally join the entente when they were promised
Transylvania? Did not the Greeks bargain endlessly over the Turkish
territories they were to be awarded for joining the allies? Did not
Lawrence of Arabia bribe the Sherif of Mecca with the promise of vast
Arabian lands to be extracted from the Turks?
Why, then, would the German’s—-if at war with the USA—- not promise the return of Texas?
Europe had expected a short war, and actually got one when the
Schlieffen plan offensive bogged down 30 miles outside of Paris on the
Marne River in mid-September 1914. Within three months, the Western
Front had formed and coagulated into blood and mud——a ghastly 400 mile
corridor of senseless carnage, unspeakable slaughter and incessant
military stupidity that stretched from the Flanders coast across Belgium
and northern France to the Swiss frontier.
The next four years witnessed an undulating line of trenches, barbed
wire entanglements, tunnels, artillery emplacements and shell-pocked
scorched earth that rarely moved more than a few miles in either
direction, and which ultimately claimed more than 4 million casualties
on the Allied side and 3.5 million on the German side.
If there was any doubt that Wilson’s catastrophic intervention
converted a war of attrition, stalemate and eventual mutual exhaustion
into Pyrrhic victory for the allies, it was memorialized in four
developments during 1916.
In the first, the Germans wagered everything on a massive offensive
designed to overrun the fortresses of Verdun——the historic defensive
battlements on France’s northeast border that had stood since Roman
times, and which had been massively reinforced after the France’s
humiliating defeat in Franco-Prussian War of 1870.
But notwithstanding the mobilization of 100 divisions, the greatest
artillery bombardment campaign every recorded until then, and repeated
infantry offensives from February through November that resulted in
upwards of 400,000 German casualties, the Verdun offensive failed.
The second event was its mirror image—-the massive British and French
offensive known as the battle of the Somme, which commenced with
equally destructive artillery barrages on July 1, 1916 and then for
three month sent waves of infantry into the maws of German machine guns
and artillery. It too ended in colossal failure, but only after more
than 600,000 English and French casualties including a quarter million
In between these bloodbaths, the stalemate was reinforced by the
naval showdown at Jutland that cost the British far more sunken ships
and drowned sailors than the Germans, but also caused the Germans to
retire their surface fleet to port and never again challenge the Royal
Navy in open water combat.
Finally, by year-end 1916 the German generals who had destroyed the
Russian armies in the East with only a tiny one-ninth fraction of the
German army—Generals Hindenburg and Ludendorff —were given command of
the Western Front. Presently, they radically changed Germany’s war
strategy by recognizing that the growing allied superiority in manpower,
owing to the British homeland draft of 1916 and mobilization of forces
from throughout the empire, made a German offensive breakthrough will
The result was the Hindenburg Line—a military marvel based on a
checkerboard array of hardened pillbox machine gunners and maneuver
forces rather than mass infantry on the front lines, and an intricate
labyrinth of highly engineered tunnels, deep earth shelters, rail
connections, heavy artillery and flexible reserves in the rear. It was
also augmented by the transfer of Germany’s eastern armies to the
western front—-giving it 200 divisions and 4 million men on the
This precluded any hope of Entente victory. By 1917 there were not
enough able-bodied draft age men left in France and England to overcome
the Hindenburg Line, which, in turn, was designed to bleed white the
entente armies led by butchers like Generals Haig and Joffre until their
governments sued for peace.
Thus, with the Russian army’s disintegration in the east and the
stalemate frozen indefinitely in the west by early 1917, it was only a
matter of months before mutinies among the French lines, demoralization
in London, mass starvation and privation in Germany and bankruptcy all
around would have led to a peace of exhaustion and a European-wide
political revolt against the war makers.
Wilson’s intervention thus did not remake the world. But it did radically re-channel the contours of 20th century history. And, as they say, not in a good way.
Wilson’s epochal error not only produced the abomination of Versailles
and all its progeny, but also the transformation of the Federal Reserve
from a passive “banker’s bank” to an interventionist central bank
knee-deep in Wall Street, government finance and macroeconomic
This, too, was a crucial historical hinge point because Carter Glass’
1913 act forbid the new Reserve banks to even own government bonds;
empowered them only to passively discount for cash good commercial
credits and receivables brought to the rediscount window by member
banks; and contemplated no open market interventions in debt markets or
any remit with respect to GDP growth, jobs, inflation, housing or all
the rest of modern day monetary central planning targets.
In fact, Carter Glass’ “banker’s bank” didn’t care whether the growth
rate was positive 4%, negative 4% or anything in-between; its modest
job was to channel liquidity into the banking system in response to the
ebb and flow of commerce and production.
Jobs, growth and prosperity were to remain the unplanned outcome of
millions of producers, consumers, investors, savers, entrepreneurs and
speculators operating on the free market, not the business of the state.
But Wilson’s war took the national debt from about $1 billion or $11
per capita—–a level which had been maintained since the Battle of
Gettysburg—-to $27 billion, including upwards of $10 billion re-loaned
to the allies to enable them to continue the war. There is not a chance
that this massive eruption of Federal borrowing could have been financed
out of domestic savings in the private market.
So the Fed charter was changed owing to the exigencies of war to
permit it to own government debt and to discount private loans
collateralized by Treasury paper.
In due course, the famous and massive Liberty Bond drives became a
glorified Ponzi scheme. Patriotic Americans borrowed money from their
banks and pledged their war bonds; the banks borrowed money from the
Fed, and re-pledged their customer’s collateral. The Reserve banks, in
turn, created the billions they loaned to the commercial banks out of
thin air, thereby pegging interest rates low for the duration of the
When Wilson was done saving the world, America had an interventionist
central bank schooled in the art of interest rate pegging and rampant
expansion of fiat credit not anchored in the real bills of commerce and
trade; and its incipient Warfare and Welfare states had an agency of
public debt monetization that could permit massive government spending
without the inconvenience of high taxes on the people or the crowding
out of business investment by high interest rates on the private market
Proposition # 6:
By prolonging the war and massively increasing the level of debt and
money printing on all sides, Wilson’s folly prevented a proper post-war
resumption of the classical gold standard at the pre-war parities.
This failure of resumption, in turn, paved the way for the breakdown
of monetary order and world trade in 1931—–a break which turned a
standard post-war economic cleansing into the Great Depression, and a
decade of protectionism, beggar-thy-neighbor currency manipulation and
ultimately rearmament and statist dirigisme.
In essence, the English and French governments had raised billions
from their citizens on the solemn promise that it would be repaid at the
pre-war parities; that the war bonds were money good in gold.
But the combatant governments had printed too much fiat currency and
inflation during the war, and through domestic regimentation, heavy
taxation and unfathomable combat destruction of economic life in
northern France had drastically impaired their private economies.
Accordingly, under Churchill’s foolish leadership England re-pegged
to gold at the old parity in 1925, but had no political will or capacity
to reduce bloated war-time wages, costs and prices in a commensurate
manner, or to live with the austerity and shrunken living standards that
honest liquidation of its war debts required.
At the same time, France ended up betraying its war time lenders, and
re-pegged the Franc two years later at a drastically depreciated level.
This resulted in a spurt of beggar-thy-neighbor prosperity and the
accumulation of pound sterling claims that would eventually blow-up the
London money market and the sterling based “gold exchange standard” that
the Bank of England and British Treasury had peddled as a poor man’s
way back on gold.
Yet under this “gold lite” contraption, France, Holland, Sweden and
other surplus countries accumulated huge amounts of sterling liabilities
in lieu of settling their accounts in bullion—–that is, they loaned
billions to the British. They did this on the promise and the confidence
that the pound sterling would remain at $4.87 per dollar come hell or
high water—-just as it had for 200 years of peacetime before.
But British politicians betrayed their promises and their central
bank creditors September 1931 by suspending redemption and floating the
pound——-shattering the parity and causing the decade-long struggle for
resumption of an honest gold standard to fail. Depressionary
contraction of world trade, capital flows and capitalist enterprise
Proposition # 7:
By turning America overnight into the granary, arsenal and banker of
the Entente, the US economy was distorted, bloated and deformed into a
giant, but unstable and unsustainable global exporter and creditor.
During the war years, for example, US exports increased by 4X and GDP
soared from $40 billion to $90 billion. Incomes and land prices soared
in the farm belt, and steel, chemical, machinery, munitions and ship
construction boomed like never before—–in substantial part because Uncle
Sam essentially provided vendor finance to the bankrupt allies in
desperate need of both military and civilian goods.
Under classic rules, there should have been a nasty correction after
the war—-as the world got back to honest money and sound finance. But
it didn’t happen because the newly unleashed Fed fueled an incredible
boom on Wall Street and a massive junk bond market in foreign loans.
In today economic scale, the latter amounted to upwards of $2
trillion and, in effect, kept the war boom in exports and capital
spending going right up until 1929. Accordingly, the great collapse of
1929-1932 was not a mysterious failure of capitalism; it was the delayed
liquidation of Wilson’s war boom.
After the crash, exports and capital spending plunged by 80% when the
foreign junk bond binge ended in the face of massive defaults abroad;
and that, in turn, led to a traumatic liquidation of industrial
inventories and a collapse of credit fueled purchases of consumer
durables like refrigerators and autos. The latter, for example, dropped
from 5 million to 1.5 million units per year after 1929.
Proposition # 8: In
short, the Great Depression was a unique historical event owing to the
vast financial deformations of the Great War——deformations which were
drastically exaggerated by its prolongation from Wilson’s intervention
and the massive credit expansion unleashed by the Fed and Bank of
England during and after the war.
Stated differently, the trauma of the 1930s was not the result of the
inherent flaws or purported cyclical instabilities of free market
capitalism; it was, instead, the delayed legacy of the financial carnage
of the Great War and the failed 1920s efforts to restore the liberal
order of sound money, open trade and unimpeded money and capital flows.
But this trauma was thoroughly misunderstood, and therefore did give
rise to the curse of Keynesian economics and did unleash the politicians
to meddle in virtually every aspect of economic life, culminating in
the statist and crony capitalist dystopia that has emerged in this
Needless to say, that is Thomas Woodrow Wilson’s worst sin of all.