Understanding Your Dollar: The Tale of the Tape

The Future of Money – Part one of seven  - Devaluing the dollar

Government devalues the dollar
Government devalues the dollar

WASHINGTON,  January 1, 2015 – The “tale of the tape” idiom comes from comparing measurements between two boxers, in particular their reach. It has become common today in other sports where comparisons are made between opponents, and the analysis then called “the tale of the tape.”

As we head into this new year and start reading about those who are lining up to run for President in 2016, this is where we need to start.  We need to understand how the U.S. Dollar tells the “tale of the tape.”

If we can get this one thing right: understanding that money – the dollar – is a unit of measurement just like an ‘inch’ or ‘foot’, everything else will fall into place nicely.  We’ll actually be able to pull away from our ideological corners where we live other peoples’ lives (maybe Jon Stewart’s or Rush Limbaugh’s) as we try to out-ridicule each other.

We might actually be able to start talking to each other instead of past each other about our future.

Suspecting that everyone reading this has, at one point or another, rented a place to live lets use this foundational analogy.  If you were asked “what is the square footage of your home/apartment?” your answer would be relatively close to exact.

We just tend to know things like this.  For example, our house in San Diego is 1,697 square feet and in the real estate market, rent is generally priced by the square foot.  If my house were to rent for $1,697, that would be $1.00/square foot.  Pretty simple to get our heads wrapped around this, right?

READ MORE: Understanding your dollar: Whose money is it anyway?

But there are two parts to that “equation.”  The first is the “ruler” or “tape.”  The second is the dollar.

This is probably the point where you might want to give up and click out to the next article.  Please hang in (even if you were a jock in the 80’s… you can do it… I’ll even help with the homework – some things never change).

Let’s start with the first part of the way we set rent.  You can probably open your desk drawer and find a ruler lying around somewhere in there.  And if not you probably have a tape measure somewhere.  Either way, think of a ruler – 12 inches, or one foot.

Now imagine I am your landlord.  And imagine I just come along and arbitrarily decide to ‘devalue’ the ‘foot’.  A ‘foot’ is no longer 12 inches; it will now be six inches.

If its morning and you haven’t hit the coffee yet, you’re probably saying something like: “Man, it’s too early for this.  Let me coffee up and then I can think about a foot being only six inches.”

By the time you’re coffeed up, though, you’re on to something else more pressing.

Until your rent bill shows up at the end of the month.

Remember, I’m your landlord and you’re renting my 1,697 square foot home.  And you’re paying $1 per square foot.  Pull out that ruler now and draw yourself a ‘square foot’ – assuming, of course, that 12 inches equals a foot.  Now account for the fact that I just ‘devalued’ your ‘foot’ from 12 inches to six.

You have to take that 12 inch square foot and draw a line with your ruler up and down through the middle of the square, and left to right through the middle.  The foot is now only six inches, so a square foot last month is now four square feet this month.  Last month you paid me $1,697.  This month you owe me $6,788.

Your rent just quadrupled!

Now if you can actually put yourself in these shoes, you’re saying: “Now wait just a minute!  Who the hell made you king such that you get to tell the rest of us that one foot is now six inches when it has been 12 inches for what, forever?”

Now we’re getting somewhere.  Only now we have to look at the other side of the equation.

The “powers that be” cannot ‘devalue’ a foot, but they can devalue a dollar.  It happens a lot more gradually than me just arbitrarily saying a foot is now six inches.  But make no mistake, devaluing a dollar is exactly the same.

It is exactly as arbitrary, capricious and destructive as it would be for me to devalue the foot as described above.

Let me wrap this first installment up by touching quickly on those three adjectives:

Arbitrary: I’ll cover the history in greater detail in a subsequent column, but in the 1960’s the dollar was tied to gold by law at $35/oz.  The decision to enter the Vietnam War was – from an economic standpoint – entirely arbitrary.  We simply did not have enough gold to back the expansion of the money supply to fight the war.  The decision to build the “Great Society” was just as arbitrary.  We simply did not have enough gold to back the expansion of the money supply to support deficit spending.  The press called this “guns and butter” back then.

Capricious: There really can be no other explanation for why someone would ‘devalue’ a foot if they could: They would do it simply because they can.  If my house were owned by a publicly traded company as part of a portfolio of homes for rent, and I were management of that company, I would have a legal responsibility to return value to my shareholders – meaning increase my profits.  If I could devalue a foot (and by doing so, slowly increase your rent), some might argue I would have to devalue the foot to continue increasing profits for my shareholders.

Destructive: If you’ve stayed with me to this point, you do not need me to explain how destructive it would be for your rent to go from $1,697 one month to $6,788 the next.  It is an example (admittedly a bit overstated) of a more fundamental point I’ll try to convince you of throughout this series: The ability of the government to arbitrarily and capriciously devalue the dollar basically sets the U.S. Constitution and the free market against themselves.  Having done this for over 40 years, we are now at a place where the banking system is legally obligated to lie to us and the political sector is politically obligated to keep making promises which cannot possibly be kept.  We will likely find out soon how destructive this path will be.

Please stay tuned.  In my next column I will discuss how the nation’s money supply – when it was legally tied to gold – stood as a representation of the wealth of the nation’s people – that would be you and me as neighbors.  It isn’t any more.  The dollar represents someone else’s wealth.  Stay with me and I’ll explain.

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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: http://www.communityconservatives.com/ Facebook: https://www.facebook.com/john.horst.7758 Twitter: https://twitter.com/CommunityCon Google+: https://plus.google.com/u/0/+JohnHorst CommunityConservative/posts The Secret to Winning the Hearts and Minds of the Next Conservative is available for purchase at Amazon and Barnes and Noble.