The DISH

Unbossed and unbought news and information you can use

Vol. 8 No. 42…Dedicated to the Dialogue on Race…October 21, 2005

Intuit’s Vibe

The Industry of Life

By Anonymous

Conversation brief,

Manufactured smile,

Chuckles in a circuit, a network full of style,

Production equals meaning,

Shipments of the heart,

Virtues by the package, life's assembled parts,

A factory of mates

Running by the trust,

Monetary love, economic lust,

Business in a boom,

Inflation tips the crest,

Working for the dollar, slaving for the rest,

The industry of life,

The industry of need,

Monopolies at work, the rising stock of greed.

Venue for an Artist

The Many Evils of Inflation (Excerpt)

By Hans F. Sennholz

Many people know how to earn money; few are aware of what the Federal Reserve System, acting on behalf of the U.S. Government, is doing to their money. It is inflating and depreciating the dollar at various rates--at double-digit rates during the 1970s and early 80s and at single-digit rates ever since. The present dollar is worth no more than 10 cents of the 1970-dollar and 50 cents of the 1980-dollar.

Inflation covertly transfers income and wealth from creditors to all debtors. Inflation is a pernicious form of taxation. Authorities of money and banking, rather than taxing authorities, redistribute income and wealth. Placed on every person in the form of higher prices, the application does not fall equally and simultaneously on every buyer. Those who receive the newly created money first may actually benefit as goods prices readjust rather slowly. Others who receive it later or not at all will have to tighten their belts. Inflation ravishes the savings of countless Americans and turns many into prodigal spenders and debtors.

The biggest debtor also is the biggest inflation profiteer. With some eight trillion dollars in debt, the Federal Government is by far the biggest winner. Inflationary policies conducted for long periods of time not only foster the growth of government but also depress economic activity. Standards of living may stagnate or even decline as growing budget deficits thwart capital accumulation and investment that are sustaining the standards.

Inflation misleads businessmen in their investment decisions, which causes much waste and many bankruptcies. In fact, it is the root cause of the boom-and-bust cycle, which wreaks havoc on economic activity. Indeed, inflation breeds many evils of which most Americans are unaware.

There is no conscience in politics. Policies may be changed, reformed and adjusted because they are ineffective, unproductive and unpopular, but rarely ever because they are immoral. Debt may be a grievous bondage to an honorable man, but it may be a “national bond,” which, in President Roosevelt’s words, “is owed not only by the nation but also to the nation.” Politicians have a code of laws to observe and obey; honesty in matters of debt and money is not one of them. If it is true that we cannot do wrong without suffering wrong, we must brace for more grief to come.

About Me: Hans F. Sennholz is Professor Emeritus at Grove City College and Adjunct Scholar of the Mises Institute. He is the winner of the 2004 Gary G. Schlarbaum Prize. For Dr. Sennholz’s complete essay on inflation and other articles, log on to http://mises.org/story/1846.

Bit of History

Friedrich August von Hayek (1899-1992)

Friedrich August von Hayek was born in Vienna, Austria on May 8, 1899. He served in the Austro-Hungarian Army on the Italian Front during WWI (1917-1918). Following his military service (1918-1921), Hayek studied law, psychology and economics at the University of Vienna, where he earned doctorates in law and political science. Hayek worked as a legal consultant for the Austrian government on the Peace Treaty from 1921-1926.

In 1927, Hayek assumed the directorship of the Austrian Institute for Trade Cycle Research. He became a major critic of John Maynard Keynes’ fiscal policy prescriptions to combat depression. He argued that busts were healthy and necessary readjustments. The way to avoid them was to avoid booms. Hayek wrote Prices and Production (1931) in which he argued high unemployment was a result of central bank increases in the money supply that drive down interest rates, making credit cheap. In response to cheap credit, investments increase to artificially high levels with too much long and not enough short term investments. Hayek believed Keynesian policies inevitably cause inflation, and that to keep unemployment low, the central bank would have to increase the money supply faster and faster, causing inflation to get higher and higher.

After publishing Prices and Production, Hayek became Tooke Professor of Economic Science and Statistics at the University of London, a position he held until 1950. Over the course of his tenure, Hayek wrote The Pure Theory of Capital (1941) and The Road to Serfdom (1944) in which he held that governmental control of or intervention in markets forestalls economic ailments, such as inflation, unemployment or depression. He believed government interventions should be avoided; they “lead to the kind of ultimate domestic disaster that paves the way for totalitarian takeover by a Hitler.” Hayek became a naturalized British citizen in 1938.

As Professor of Social and Moral Science at the University of Chicago (1950-1962), he wrote The Counter-Revolution of Science: Studies in the Abuse of Reason, The Sensory Order: An Inquiry into the Foundations of Theoretical Psychology and The Constitution of Liberty in which Hayek distinguished his classical liberalism from conservatism. In the book’s postscript, Hayek rejected conservatism on the grounds that moral and religious ideals are not "proper objects of coercion" and that conservatism is hostile to internationalism and prone to a strident nationalism.

In 1962, Hayek returned to Europe, accepting a chair as professor of economic policy at the University of Freiburg in Breisgau, West Germany. He focused his written efforts on analyzing the spontaneous emergence of legal and moral orders in Law, Legislation and Order (1973). After retiring from Freiburg (1968), Hayek taught at the University of Salzburg in Austria until his retirement nine years later.

In 1974, Hayek shared the Nobel Prize for Economics with Swedish economist Gunnar Myrdal. In 1988, he published Fatal Conceit in which he sought to explain the intellectuals' attraction to socialism and the error of their beliefs. The economic policies of former British Prime Minister Margaret Thatcher were significantly influenced by his ideas. Friedrich August von Hayek died on March 23, 1992. (Sources: www.mises.org, www.econlib.org, www.igreens.org.uk, and www.cato.org)

Hood Notes

Some Sobering Statistics

For the first time in more than two years, the unemployment rate rose to 5.1 percent. Hurricane Katrina, which laid waste to a large section of the Gulf Coast, is blamed for the up-tick in unemployment. In reality, the employment situation has been bad since 2001. The labor force participation rate has fallen; many of the jobless have ceased any measured job search activities, which may account for this relatively low number. The millions that lost manufacturing jobs have settled for lower wage service sector positions, work part-time or are part of the underground economy. The unemployment rate may have risen, but it is a meaningless measure of the welfare loss experienced by workers and the unemployed in this country.

On October 18, 2005, the national debt briefly stood at $8,004,429,291,835.62. It has risen an average $1.63 billion daily since September 2004. The deficit for the year-ending September 30, 2005 was $319 billion, considerably less than the $412 billion for 2004 and less than forecasted, but still the third largest budget deficit in the nation’s history.

Other sobering statistics include bankruptcy and foreclosure rates, rising fuel and food prices and a rising cost of living as real incomes fall. And, the nation’s trade deficit continues to soar. One can only wonder, what talking heads touting this “good economy” are smoking.

Politics Y2K5

Tax-Simplification Proposals

On the heels of approving historically huge tax breaks, which disproportionately benefited the nation’s wealthiest citizens, George W. Bush commissioned a nine-member panel to make recommendations to simplify the nation’s income tax system. The final report of the Advisory Panel on Federal Tax Reform is due November 1. According to published news reports, the advisory panel will propose two plans. If either plan is adopted, most deductions, credits, savings incentives and other tax breaks will be eliminated and replaced with a few simpler benefits requiring less paperwork.

The panel’s plans will be submitted to Treasury Secretary John Snow and the White House before it is presented to Congress. Some or all of the panel’s proposals could be included in any final draft sent to Capitol Hill sometime next year.

Proposed changes include reducing from six to four the number of income tax brackets. The lowest bracket would increase from 10 to 15 percent. A majority of taxpayers would fall into this bracket. However, this change eliminates the current 10 percent bracket, in effect, raising taxes on some of the nation’s poorest individuals and families.

The panel will propose abolishing the alternative minimum tax, a boon for wealthy and some middle class taxpayers. With a 15 percent tax rate on capital gains and dividends, wealthy taxpayers with a lot of investment income would be the biggest beneficiaries of this change.

Other proposed changes involve itemized deductions. For example, the plan eliminates the federal tax deduction for state and local taxes paid, converts the mortgage interest deduction to a credit and caps deductions for health insurance.

While the proposed change would retain the earned income credit, employee fringe benefits, such as child-care and life insurance, would be taxed. In addition, a single-family credit will replace a number of personal and family tax breaks. Wealthier individuals and families will benefit from the elimination of income tests, which currently disqualify them for certain tax breaks. Retirement, health and education benefits and savings accounts would be replaced by three savings accounts funded with taxed income, so these accounts can grow and be withdrawn with no tax consequences

No conservative tax proposal is complete without investment incentives and the regressive flat or consumption tax. A proposal incorporates elements of the consumption tax in a simplified system and allows businesses to immediately write off the cost of new equipment.

If allowed to become law in their current forms, whether the consolidated tax brackets or a consumption tax within a simplified tax system, the advisory panel’s plans disproportionately benefit the nation’s wealthiest citizens.

News You Use

Stop Social Service Cuts

The new Forbes list of 400 richest Americans contains 374 billionaires. Since conservative Republicans gained control of all three branches of federal government, the number of billionaires has risen. War-profiteering with lucrative no-bid contracts, rising oil and energy prices, tax cuts and cheap credit have been a boom for certain wealthy families. As the number of rich Americans increased, homelessness and the ranks of the poor rose. Thanks in part to outsourcing, mergers and acquisitions, illegal immigration, H1-B Visas, etc., the jobs that pay a descent wage have evaporated. Coupled all this with inflation, the result has been a decline in real income for most US citizens.

The tattered social safety net that exists to assist poor and middle-income families and individuals is slated to be further shredded as Congress contemplates federal budget cuts to fund reconstruction of the hurricane-ravaged Gulf Coast. On the chopping block are food stamps, Medicaid, Temporary Assistance for Needy Families (TANF), federal student loans and the school lunch program. Ironically, there is no concerted congressional effort to roll back or stop newly proposed tax cuts for the wealthiest Americans.

A “virtual march” on Washington to lobby members of Congress to stop social service cuts has been organized by labor unions, Campaign for America’s Future, USAction and others. Members of the “virtual” community are being asked to telephone, email or fax their elected representatives and voice their opposition to efforts by Congress to fund Gulf Coast reconstruction on the backs of our poorest citizens.

Given dissatisfaction with the Bush administration’s handling of the war in Iraq and the economy, your telephone call, email or fax just might make a difference. At , you can join the “virtual march,” sign the “Reverse Robin Hood Budget” petition and contact your elected representatives. It only takes a few minutes.

Disgruntled says: I recently read "Luis Posada and Bush's Drinking" by Saul Landau, a fellow at the Institute for Policy Studies. Succinctly, the author connects some dots to tie George W. Bush's refusal to extradite terrorist Luis Posada Carriles to Venezuela to Bush being back on the bottle. Remember how Bush supposedly went cold turkey off drugs and booze at age 40 to kick off his political career? Apparently, Bush used a combination of exercise and religion, as opposed to Alcoholics Anonymous, to effect his miraculous transformation from a boozer to a born-again Christian. Well, now there is a lot of speculation that Bush has done some serious backsliding and is hitting the bottle big time.

Disgruntled feels! Deep Shit! Creative Loafing columnist Cliff Bostock did a wonderful write up on a dialogue between Deepak Chopra and James Hillman on "War, Peace and the American Imagination" held at Emory University. (See www.creativeloafingbestof.com for 9-29). Bostock closed his column with Hillman's response to a question posed by a member of the audience. The man expressed hope arch-types that conduct war evolve. "Hillman told the man he could choose to believe whatever has the most fruitful effect on his life, but, he said, 'It's no good to be wishful....We shouldn't leave this room hoping and wishing. We should leave struggling. We are in deep shit!'"

Disgruntled wants to know: News reports indicate Special Prosecutor Patrick Fitzgerald may be close to handing down indictments in the outing of CIA operative Valerie Plame. For weeks, the focus has been on Bush political mastermind Karl Rove and Cheney's loyal lieutenant Lewis Libby. On the heels of dust stirred up by Judith Miller's testimony and a fourth visit to the grand jury by Rove, evidence is coming out about the White House Iraq Group, a "situation room" led by White House chief of staff Andrew Card to sell the war on Iraq. Dick Cheney regularly attended the group's meetings. Some in the intelligence community have accused Cheney of cherry-picking intelligence to build a flimsy case for the war. Under the circumstances, who truly believes neither George W. Bush nor Cheney had a hand in leaking information in an attempt to discredit Plame's spouse, Joseph Wilson, a critic of the war?

Mailbox: E-Mails, Faxes and Telephone Calls

Email paulcraigroberts@yahoo.com George W. Bush will go down in history as the president who fiddled while America lost its superpower status. Bush used deceit and hysteria to lead America into a war that is bleeding the US economically, militarily, and diplomatically. The war is being fought with hundreds of billions of dollars borrowed from foreigners. The war is bleeding the military of troops and commitments. The war has ended the US claim to moral leadership and exposed the US as a reckless and aggressive power. Focused on a concocted "war on terrorism," the Bush administration diverted money from the New Orleans levees to Iraq, with the consequence that the US now has a $100 billion rebuild bill on top of the war bill. The US is so short of troops that neo-conservatives are advocating the use of foreign mercenaries paid with US citizenship. US efforts to isolate Iran have been blocked by Russia and China, nuclear powers that Bush cannot bully. The Iraqi war has three beneficiaries: (1) al Qaeda, (2) Iran and (3) US war industries and Bush-Cheney cronies who receive no-bid contracts. Everyone else is a loser.

E-mail www.Venezuelanalysis.com Gregory Wilpert reports that Venezuela's Central Bank Director- Domingo Maza Zavala - confirmed that several months ago the bank transferred $20 billion of its slightly over $30 billion in foreign currency reserves from the US to Basilea, the Bank for International Settlements in Switzerland. The decision to make the transfer had been reached about four months ago and little by little the reserves have been transferred to Europe. According to Maza Zavala, "the US dollar has been depreciating relative to Euros."

E-mail www.chicagotribune.com If Delphi, which filed for Chapter 11 protection on Saturday, gets what it seeks in wage and benefit reductions from union members, the pay for members of the United Auto Workers could shrink to as little as $10 an hour from the current $27. Their benefits almost certainly would drop as well. Those drastic cuts would come not only as a blow to thousands of Delphi workers, but they also could set the pattern for negotiations between the union and the Big Three domestic automakers, which for years have struggled to find ways to lower their costs on the assembly line. "In one fell swoop, US auto workers are going from being solidly in the middle class to being part of the working poor by earning $10 an hour," said Harley Shaiken, a University of California-Berkeley labor expert. (Rick Popely, Jim Mateja and Steve Franklin)

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