In prior wars throughout history, wars had to be funded with savings or taxes or very slow debasement of coinage. Physical coinage held by citizens could usually only be debased by their government gradually rather than diluted instantaneously, because a government couldn’t just magically change the properties of the coins that were held by households; it could only debase them over time by taxing purer coins, issuing various decrees to try to pull some of those purer coins in, and spending debased coins back out into the economy (and convincing initial recipients to accept them at the same prior value, despite the lesser precious metal content, which would only work for a time and might not even be noticed at first). However, with the widespread holding of centrally issued banknotes and bank deposits that were redeemable for specific amounts of gold, governments could change the redemptive value with the stroke of a pen or eliminate redemption all together.
This gave governments the power to instantaneously devalue a substantial part of their citizens’ savings, literally overnight, and funnel that purchasing power toward war or other government expenditures whenever they determine that the situation calls for it.
What about plunder?
“You must make it your guiding principle that the war must feed the war,” Such was Napoleon’s recommendation to Marshal Soult when he appointed the latter général en chef of the Army of the South in Spain.
Keep in mind that the Federal Reserve Act was passed (we are to suppose) December 23, 1913, and Franz Ferdinand was shot June 28, 1914.
The phrasing of “the widespread holding of centrally issued banknotes and bank deposits” may tend to mislead, because current bank notes were issued mainly by commercial banks (not the central bank) until 1934, and because bank deposits are not now nor have they ever been centrally issued, and “governments could change the redemptive value with the stroke of a pen or eliminate redemption all together” is an allusion to the Joint Resolution of 1933, which suspended the gold clause in all contracts, public or private, under the apparent authority of the Congress.
Personally, I would like to see quasi-libertarian arguments in favor of cryptocurrency as “digital gold” explain how the cryptocurrency will not itself be “disintermediated” in some sense by “account Bitcoin” just as specie-dollars were “disintermediated” by account-dollars. I suggest that the fundamental problem is not technological; rather, it is that the human psyche is uniquely vulnerable to fall victim to the bailment-lookalike fractional-reserve accounting scheme. If “dollars in my account” have the same practical spendability as “dollars in my hand”, then what is to stop me from valuing the former no less than the latter? Nothing. But the true problem is that pro-cryptocurrency people never seem to prioritize cryptocurrency spendability at the expense of cryptocurrency price (invariably denominated in dollars), which tends to show that like any other investor their interest extends little further than their desire to get something for nothing.
The excise tax on telephone calls was used to pay for the Spanish American Ware of 1898. A penny taxed on every phone call made. That at the time when of course the telephone and the usage of a great rarity. The telephone excise tax still existing in wartime I think as a “temporary” measure.