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Rich Man's War, Poor Man's Fight

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    Rich Man s War, Poor Man s Fight by Nicholas von Hoffman June 27, 2006 http://www.thenation.com/doc/20060710/howl Ask George Washington what he thinks about
    Message 1 of 1 , Jul 2, 2006
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      Rich Man's War, Poor Man's Fight
      by Nicholas von Hoffman
      June 27, 2006

      Ask George Washington what he thinks about fighting a war on credit.
      Back in his day, Congress printed money to pay for the Revolutionary
      War but neglected to tax anybody to back up this funny money of
      theirs. The bills were called continentals and in due course they lost
      all their value, hence the once-popular expression, "not worth a

      When your money is not worth a continental that means you are
      suffering from inflation big time. It happened 230 years ago in our
      War of Independence from the British. We are seeing it beginning to
      happen now in our war with, well, whoever it is we are fighting. We
      may not know the names, the whereabouts or the precise whys of the
      Iraq War but the costs are approaching a trillion dollars.

      The Continental Congress was controlled by rich people and rich people
      do not like to pay taxes. Not then and not now, when we have another
      Congress controlled by rich people. Different war, same stupidity.

      For a long time after the financially disastrous mistakes of the 1776
      period, American politicians at least tried to wage pay-as-you-go
      wars. The Lincoln Administration introduced the first federal income
      tax in an attempt to pay for the Civil War. It was not enough and thus
      the greenback, as the paper dollar was called then, rapidly lost
      buying power (inflation). Gold coins, of course, did not and it was
      not until a decade or so after the Civil War that the government
      succeeded in hardening up the greenback and putting it on a par with
      the gold coin dollar. The hardening was done, however, at great pain
      to the nation's farmers and factory workers, but ain't that usually
      the way?

      In World Wars I and II enormous efforts were made to pay the costs as
      the wars were being fought. It was during the Second World War that
      taxes were first deducted from paychecks. Taxes were hiked very high,
      particularly on the rich. Perhaps the assumption was that, since they
      had so much more materially at stake than the other 98 percent of the
      population and had that much more interest in seeing that the United
      States won the war, they ought to pay more. A victorious enemy would
      be confiscating rich people's property, not family farms or factory
      workers' houses.

      Even so, a relentless drive was put on to get everyone to help pay for
      the conflict. On the home front ceaseless campaigns were conducted to
      get people to buy US government "War Bonds." Children were encouraged
      to buy "War Savings Stamps."

      Nevertheless, even with so many billions in purchasing power drained
      out of the economy via taxes and savings, prices still moved up.
      Inflation stalked the land but not as injuriously as it might have if
      the country had not been on a pay-as-you-go basis.

      At first the Vietnam War was carried out without much deficit
      spending. When President Lyndon Johnson left office in 1969, he passed
      on to his successor, Richard Nixon, a more or less balanced budget.
      Nixon, however, could not or would not hold the line and triggered a
      war-born inflation that got so bad he tried to impose price controls
      on the country.

      Controls are a poor substitute for prudent financial management. They
      could not hold back inflation but they contributed to the sense of
      waste, disorganization and social chaos, which are the handmaids of
      inflation. It took more than a decade of recession, lower wages and
      confusion before the ship was righted again.

      Now comes Iraq and an Administration which either through
      miscalculation or doctrinaire bull-headedness has ignored what every
      minister of finance from every developed country has known for 150
      years. Instead of paying for the war, George W. Bush and his
      Administration are laboring under the crackpot notion that the Lord
      will provide. Well, the Lord--or the mechanics of business and
      finance--is providing and what is being provided are dangerous dollops
      of inflation.

      It would be worse if it weren't for foreign lenders picking up the
      debts the United States has run up pursuing the terrorist ghost
      riders. As the buying power of the dollar weakens, fewer of those
      obliging foreigners will lend us money. They don't want to be paid
      back with dollars that, ravaged by inflation, are worth less.

      The government will have to pay higher interest rates to attract
      borrowers. There cannot be an adult left in America who hasn't learned
      what inflation does to one's personal finance.

      But not everybody's personal finance. People with lots of money have
      ways of protecting themselves against the damage inflation does.
      People without do not. And that may be the basis of the old saying:
      "rich man's war, poor man's fight."



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