Defense, Controls, and Inflation.pdf - The Ludwig von Mises Institute

34 Defense, Controls, and Inflationenced in their conduct by anything that affects the tax assessment.Tax assessment is a far more vital factor than interestrates in influencing decisions of people as to what they are goingto do. I have the impression that the present tax setup ratherencourages people to make investment expenditures that arenot strictly necessary.I want the taxes to do the opposite, anyhow for the next twoyears. I stress my two years, because I think otherwise peoplewould say, "This is hopeless from the point of view of American• business, which is essentially expansionary. People will neverstand for that sort of thing."If you say, "This is for two years only; we are going to make asevere tax deterrent to capital expenditure, which will be somethingstronger than a high interest rate," and if you combinethat with ordinary taxation on the consumer, I think that youcould, for the next two years, get away with a system that allowsthe essentials of a free economy to remain without having anyexcessive amount of inflation.CHAIRMAN LEVI: I now refer you to the outline in frontof you, "The Role of Monetary Policy": c'I. Can inflation beavoided simply by preventing an increase in the supply ofmoney or by reducing the supply to offset an increase in therate of use?" Then these questions are asked as to the rate ofuse: "A. Are changes in the rate of use of money likely to occurwith mobilization? With mobilization and an announced no'ninHationarypolicy? Are changes likely to be significant?" Wouldsomeone like to speak on this point at this time?MR. ARNOLD: I am not going to speak to the point. I simplyraise the question for enlightenment. Talking about inflation,just what do we mean? There is a vast difference between theinflation in Germany and in Italy and in France and the declineof the value of our dollar, and yet we seem to be lumping thewhole thing as one phenomenon. What is it, and how muchinflation, with our tremendous productive capacity, can we expect,and what kind of inflation are we talking about? I wouldlike to have someone enlighten me on that.CHAIRMAN LEVI: Mr. Mints, would you like to enlighten Mr.Arnold?