Posted tagged ‘Government debt’

Visual Explanation Of The Deficit And The Debt

November 1, 2013

The visual of this chart is outstanding, it jumped off the page when I saw it. The chart shows our Governments yearly revenue, yearly deficit, and total debt. This is from an article titled Great News! The Fiscal Crisis Is Over! by Jon Gabriel, at ricochet.com. I got there from this article at theburningplatform.com.

https://i2.wp.com/cdn1.ricochet.com/var/ezwebin_site/storage/images/media/images/debtchart/4700766-1-eng-US/debtchart_lightbox.png

Here is a quote from Mr. Gaberiel, “…imagine the green is your salary, the yellow is the amount you’re spending over your salary, and the red is your MasterCard statement.”

What is sobering about this chart is how a seemingly small yearly deficit compounds into a massive amount of debt over time. What is it going to look like in three more years if we continue our $1 trillion yearly deficit?

THE REAL DEBT TOTAL

Unfortunately the $17 trillion is really not the actual debt. If you factor in the unfunded liabilities for Social Security, Medicare, and Medicaid, which have been estimated to be between $55 to $222 trillion, look at chart here, the problem gets exponentially worse. What do you think Obamacare will add to this unsustainable mountain, or valley, of debt?

THE FED RIDES TO THE RESCUE?

Fortunately we have the Fed which can electronically print counterfeit money to pay our way out of this mess. Oh yeah, I forgot, the only way a Government can accumulate this amount of debt is because its Central Bank funds the expansion in the first place by buying Government bonds. Without the ability to electronically print counterfeit money, Governments can only grow to the size of what they can steal or mooch through taxing and borrowing. At a certain point, individuals won’t produce above a certain level if they can’t enjoy the fruits of their labor, and they won’t purchase bonds from a seller whose level of debt makes the transaction seem to risky. The Fed can’t print its way out of the economic reality of scarcity. Their denial of this reality is why they printed us into this mess in the first place.

Related ArticleLet The Counterfeiting Continue! The Fed Is Stuck In Their Feedback Loop, at austrianaddict.com.

Related ArticleThe Fed As Giant Counterfeiter, by Robert P. Murphy, at mises.org.

Which One Doesn’t Belong?

October 23, 2013
Which one doesn't belong?

Which one doesn’t belong? (Photo credit: VerismoVita)

This post from zerohedge.com titled, Spot The Odd One Out, needs little explanation. But you know I can’t let it go without putting my two cents in.

The charts in the post are easy to follow as they lead up to this last chart which shows the Feds balance sheet (in red), compared with the S&P 500 (in green) over the last year. Let’s talk about what the Feds balance sheet is and what it represents.

The Feds balance sheet shows the amount of assets, in dollars, purchased by the Fed. The bulk of these assets are government securities and mortgage-backed securities. Government securities are government bonds and t-bills. Purchasing government securities is the purchasing government debt or, put more clearly, financing the ability of the Government to grow beyond what it confiscates in taxes. This is how the Fed Finances the debt.

Purchasing mortgage-backed securities is the purchase of mortgages created and held by banks. This purchase exchanges the mortgage for counterfeit dollars. Because of our 10% fractional reserve banking system, banks can loan out 10 times what they hold in dollars, if they so choose. This means that the bank can loan 1 million counterfeit dollars for every $100 thousand held in reserve, This is how the Fed injects counterfeit money into the economy.

Here is a look into the Feds balance sheet, courtesy of The Wall Street Journal, wsj.com.

The balance sheet above shows that a little under $1 trillion dollars have been injected into the economy in the last year. This money is finding its way into the financial markets, and is pushing the stock market bubble higher. The other charts show the recent movement of many indicators in the opposite direction of the S&P 500. When the Fed hints of tapering their securities purchases, the stock market starts to sell of like a child throwing a tantrum when mom threatens to take away the oreo cookies. So in order to keep the stock market bubble pumped up, the Fed has to inject increasing amounts of counterfeit money. But just like the bursting of the Fed created tech and housing bubbles, in 00 and 08, this financial bubble will eventually burst although no one knows when the correction will happen.

Related ArticleLet The Counterfeiting Continue! The Fed Is Stuck In Their Feedback Loop, at austrianaddict.com.

Related ArticleA Tornado vs. The Fed, Which Id More Destructive? at austrianaddict.com.

Let’s Think About The Shutdown, The Debt Ceiling, And Obamacare.

October 15, 2013
Former logo

Former logo (Photo credit: Wikipedia)

The President and Congress are the actors and we are the audience as the shutdown, debt ceiling, and obamacare political theater is being played out in Washington D. C. We must always remember that everything a politician does and says has to be analyzed from the stand point of what each politician values most. For most politicians they value staying in, and gaining more power above everything. Some may have other motives, but, if we start with this basic understanding of what they are really trying to accomplish instead of believing what they say they are trying to do, our odds of seeing through the political B. S. go up exponentially. Let’s take a look the shutdown, the debt ceiling, and Obamacare from the perspective of their political self-interest.

THE SHUTDOWN

The U.S. hasn’t passed a budget since the President signed an omnibus spending bill in April of 2009. Since then we have been operating on continuing resolutions. When a budget is passed it recommends spending levels for mandatory and discretionary programs. In order for a discretionary program to be funded, an appropriations bill has to be passed, but a mandatory program, like social security, is funded without an appropriations bill. When an appropriations bill runs out and there has been no budget passed, a continuing resolution (CR) is passed which funds discretionary programs at current or expanded levels. If a CR isn’t passed, discretionary programs are cut to essential personal only. Mandatory programs are always funded. As boring as that was, we should have a basic understanding of how your tax dollars are appropriated. Now let’s look at this through the political theater prism.

Each actor is trying to convince you, the audience, that the other actor is responsible for the Government shutdown. They think winning this blame game helps them in their quest to stay in, and gain more power. The President is attempting to make the shut down have as negative  an effect on as many people as possible because he feels he can convince us, with the help of the main stream media, that republicans are responsible for all the negative effects that he chose to inflict on us. He probably never thought he would be in this position because he figured the republicans would surrender like they always do when they get attacked. The only reason they haven’t surrendered is because Senators Ted Cruz and Mike Lee have inspired small Government individuals to let their voices be heard. If public opinion wasn’t so strong this would have been over weeks ago.

Only about 20% of the Government is shut down, and if the shut down continues, people will begin to figure out we can get along just fine with smaller Government. Government is not the end all and be all that politicians try to convince us it is.

THE DEBT CEILING

Most of the R’s and D’s, in this recent debt ceiling debate, have been on the other side of the debate during previous debt ceiling debates. This point shows it’s all about politics. We are told by central planning progressives, that the U.S. will default when the debt ceiling is reached, this is a lie. The Government is legally bound, by section 4 of the fourteenth amendment of the constitution, to pay the interest on their debt. The Government takes in over $200 billion a month in taxes and pays close to $20 billion a month in interest on the debt. They will have more than enough to pay off the monthly interest on the debt. Politicians want the debt ceiling raised because they don’t want to make the hard decisions about what they will have to cut out of a $3.7 trillion budget, if they are forced to only spend the $2.5 trillion confiscated from taxpayers. This is the equivalent of  passing a balanced budget amendment without passing a balanced budget amendment. Our credit rating would be better because we wouldn’t be going deeper in debt, and the Fed wouldn’t have to electronically print the counterfeit money that is presently being used to purchase Government debt. These are all good things for the country as a whole, but not being able to spend would be the last thing a politician wants. Their power comes from their ability to make rules, and redistribute money. Less money leads to smaller Government and neither party wants less power.

OBAMACARE

Here is the simple truth about Obama care. It is the final step to a single payer government-run health care system. That is the progressives ultimate goal. These central planners want insurance premiums to rise. They also want employers to drop their insurance plans, dump their employees onto the Government exchanges, and pay the fine, or tax, or whatever it is. They want private health insurance to go by the wayside and be replaced by Government insurance, although Government insurance isn’t insurance in the true sense of the word. Government insurance is nothing more than a transfer payment from producers to nonproducers.

Single payer is something progressives have wanted for decades, so it’s more important to them than their political skins. They will do anything, lie, cheat, beg, borrow or steal, (oh yeah, they already have), to implement a single payer system.

CONCLUSION

When it comes to politicians, you have to know what they value most in order to understand what they’re doing. Politicians, 1)  value their power most and will do anything to keep it, 2) value their ideology or vision above everything, including keeping their position of power, or 3) honestly think they are doing what is right. Keep these in mind every time you here a politician open his mouth.

Related ArticleFiscal Cliff or Political Theater? by austrianaddict.com.

Related ArticleA Look Behind The Curtain At The Fiscal Cliff Theater, The Jokes On You, by austrianaddict.com.

Related ArticleHuman Action Reveals The Reality About Political Decisions, by austrianaddict.com.

Is The Economy Improving? It Depends On How You Define Improving.

August 20, 2013
Real GDP Contracts Most in 27 Years

Real GDP Contracts Most in 27 Years (Photo credit: inspecie.co.uk)

QUANTITATIVE VS. QUALITATIVE ANALYSIS

We keep hearing  from the administration, and the media, that the economy is slowly improving. They cite unemployment data and GDP data to back this assertion, hoping we won’t dig below the surface in search of the truth hidden in the numbers. How you arrive at the specific numbers, is more important than the numbers themselves. Here’s an example. The environmentalists try to prove global warming by using a vaguely defined  point in the past, and comparing it to this years, or this decades, temperature. If you let me pick the year to be used in the comparison, I could prove global cooling. All I’d have to do is pick a year that was hotter than this year. If you can pick the starting point in a  comparison, you can make the data say whatever you want it to say. This is just one sleight of hand trick that politicians, the elites, and the media use in an attempt to shape our opinion, and move it toward their desired outcome. You have to have a definable standard for a comparison to be made. If the standard can be manipulated, comparisons are meaningless. When they say the economy is improving, we have to ask, “compared to what”. Normally the economy is judged to be improving if (more…)

“The Carrot’s In Reach:” The Myth Of A Self-Sustaining Recovery. By Charles Hugh Smith

April 8, 2013
how to move your ass

how to move your ass (Photo credit: ntenny)

This article, “The Carrot’s In Reach:” The Myth of a Self-Sustaining Recovery, by Charles Hugh Smith at oftwominds.com, is a must read. He explains how Government spending is not investment but is consumption not backed up by production. How the Fed’s “legal”  counterfeiting of trillions of dollars is nothing more than a transfer of your production to the Government and the banks, in other words, it is theft by the two entities who receive the money first, which is the same result as “illegal” counterfeiting.

Here are a few quotes from the article.

“The reality is the mythical self-sustaining recovery is the carrot dangled
in front of a credulous public:
though we’re constantly reassured (more…)

Is The President, Pinocchio, The Boy Who Cried Wolf, Or Just A Politician?

February 27, 2013

Here is a video of the President using the police as props in order to give him more credibility as he tries to tell us about all the dire consequences if the sequester cuts go through. Watch the video, then we will look for the truth about sequestration.

1) The sequestration was the presidents idea. It led to a compromise with the republicans during the debt ceiling farce in the summer of 2011. 2) He wanted to push dealing with debt problems far enough down the road so it wouldn’t interfere with the 2012 elections. 3) The Government will actually spend more money this year than last year because it will be a cut in the rate of government growth, not a cut in the actual amount of dollars the Government will spend. (more…)

At What Point Will It Be Impossible To Fund The Federal Government’s Debt .

December 13, 2012
Payday Loans Neon Sign

Payday Loans Neon Sign (Photo credit: rinkjustice)

These three articles show the future of our Government debt bomb. “Presenting The Fund-Tastic Four”, at zerohedge.com, “Fed Seen As Pumping Up Assets to $4 Trillion In New Buying”, at Bloomberg Businessweek, and “Only In California: School Owes $1 Billion On A $100 Million ‘PayDay’ Loan”, also at zerohedge.com. Use these as a crystal ball to see the direction of the Government’s future ability to fund itself.

The funding of Government, the Governments attempts to stimulate the economy through spending, and the Federal Reserve’s attempt to steer the economy by counterfeiting and injecting the printed money into the economy through their “open market operations”, has brought us to a level of debt that (more…)