Calculators are truth tellers: Audit the Federal Reserve

Calculators are truth tellers: Audit the Federal Reserve

WASHINGTON, November 7, 2014  – The calculator was not running for office – but should have been on the ballot just the same. The calculator does not lie.  It might come in red or blue, but it is not Republican or Democrat.

The Republicans have extended their control of the House with a majority not seen since at least World War II. With eight senate race wins, two more than needed, they retook the Senate and now control Congress for the first time since 2007. Talk has immediately turned to whether or not the Republicans have some sort of ‘mandate’.

The answer is no. We’re pretty much done handing either major party a ‘mandate’. Been there. Done that. Got nothing but debt, division and disappointment.
But there can be a mandate nonetheless; the mandate goes to the calculator.

The nation’s money supply has been subject to an experiment for over 40 years. There has been a massive doubling down on this experiment over the last six.  But this all seems very arcane and mysterious – which is why we need to give the mandate to the calculator.

Because adding two and two will result in four whether you are a Democrat or a Republican, the calculator will strip away the political rhetoric. Republicans will no longer be able to hide behind the rhetoric of ‘makers’ and ‘takers’. Democrats will no longer be able to hide behind class warfare.The calculator always tells the truth.

Our money is going to three things: Politically preferred uses, speculative uses and productive uses. The calculator will show us how badly distorted this is in favor of political preferences and speculation. We will learn why our economy is not growing; an ever-smaller percentage of the money supply is going to objectively productive uses.

Let’s start with speculation. The easiest way to understand this is to imagine you’ve just bought 1,000 ‘forever’ stamps at your local post office.  At $0.49 per, you just sunk $490 into these stamps. You put them in the drawer and you’re set for postage for a while.  You have ‘hedged’ against future increases in first-class postage.

Now imagine you believe first-class postage will rise to $0.55.  Your ‘investment’ in 1,000 ‘forever’ stamps will go from being worth $490 to $550 (a $60 difference).  When you bought the stamps it was not for postage – it was to sell them once the price went up. Now worth $60 more, you find a buyer and sell them at $0.52 per ($520).

You make $30 (a six percent return) and your buyer gets $550 worth of stamps for $520 – a $30 or 6 percent savings.  You have split the difference.
Hedging happens between two parties – the buyer is guaranteed something of value at a set price and the producer is guaranteed a buyer at that price.  Speculation happens when the third party is brought into the mix – the increased value ($60 in terms of first-class postage) is shared between the original buyer (i.e. the speculator) and the third party who needs the stamps for postage.

But the returns for today’s ‘hedge funds’ (which should be called ‘speculation funds’) are far higher than six percent. Why, for example, would I do something like build a factory, hire workers and make a better mousetrap when I can borrow money for free and make 20 percent speculating in oil?

But before we get to that mousetrap, let’s look at the second thing: politically preferred uses.

This is just another way to talk about government debt.  We have forty years now of political promises that cannot possibly be kept. Republicans promise corporate welfare and defense programs.  Democrats promise social programs.  These promises have forced the Federal Reserve to increase the money supply to prop up the banking system so it can continue lending money to the government – so politicians can keep making promises that cannot possibly be kept. This game is hidden from us behind political rhetoric – but it cannot hide from the calculator.

Now back to the mousetrap. If I were to borrow money and build a factory, hire workers and acquire the raw material for my better mousetrap, I might make a profit of five to ten percent. That profit would represent the creation of real wealth because it arises from improving something – the mousetrap.

But again, why bother when I can take that same money and make 20 percent card counting at the Blackjack table of the oil market?

Why create real wealth when I can get richer stealing others’ purchasing power in terms of things like a tank of gasoline?

The calculator has the answers. On September 17th the House passed the Federal Reserve Transparency Act by a bipartisan margin of 333-92. It has languished on the desk of Senate Majority Leader Harry Reid. It should now be dusted off by Mitch McConnell and passed.

Republicans should not fool themselves. If they are looking for a mandate, they should start with their desk drawer; they’ll find it there. The mandate goes to the calculator because the calculator does not lie.

Break out the calculators; audit the Federal Reserve.


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John H. Horst
John H. Horst earned his Master of Arts in Theology from Asia Pacific Theological Seminary and holds a Master of Divinity from Bethel University. As an active member of his community, Horst is the Treasurer of three organizations including, the Mira Mesa Town Council, the San Diego Chapter of ICS2, and Pacific Lighthouse Christian Fellowship. He is currently an information security engineer and trainer. He resides in San Diego, CA with his wife and two sons. Website: Facebook: Twitter: Google+: CommunityConservative/posts The Secret to Winning the Hearts and Minds of the Next Conservative is available for purchase at Amazon and Barnes and Noble.