Germany. Much of the extra money supply was absorbed by the war loans fortunate for the western countries while rationing out the controlled prices. Borrowing vs. Taxing When a conflict leads to higher governmental expenditures, the population financing the war is either paying directly (and immediately) or indirectly (and maybe delayed). Hence, war finance is can be divided into two categories: Direct or indirect financing. The former comprises taxes through which the population bears directly the burden, the latter includes borrowing or increasing the money supply. Empirical studies have established a connection between a leader's tax policy and subsequent punitive electoral consequences as they represent a permanent transfer of purchasing power by the taxpayer to the government. From a political perspective, borrowing is a more convenient way to finance wars because it can minimize the potential electoral consequences. Levying higher tax rates has an immediate effect on the population, whereas borrowing goes along with delayed repercussions. The advantage of borrowing is that it likely transfers the financial burden to a future government and consequently does not affect the current leader's prospects of a potential re-election. Second, borrowing itself is an accepted tool for the state to carry out its duties such as exerting expansive fiscal policies. That means because borrowing affects people only indirectly and is an accepted measure in general, it makes war a more diffuse target for critics, because it will be just one of the government's numerous debt sources. Of course, borrowing contributes to the increase of debt that causes also contentious debates. But particularly in the case of the United States, it can be observed that the hazard of a government shutdown is politically an undesirable outcome, even for the opposition. Having no alternatives, the Congress invariably passes legislation to increase the debt ceiling. This certainty guarantees that borrowing minimalizes any political costs. To conclude, wartime borrowing is politically advantageous relative to war taxation: It is just an - although often a significant one - additional source of debt, which blurs the traces of the initiator as the ultimate repayment takes place long after the leader who started the war has stepped down. These characteristics reduce the political costs for the current leader and causes borrowing to generally be more attractive and politically viable than introduction of war taxes. History of different perspectives on War finance in the US Financing a war requires the government to