The Biggest Ponzi Scheme on the Planet-The U.S. Government
"American Economic Exceptionalism Explained"                     USAPonzi                                      by John W. White   Mar 29, 2013

My Conclusions
Apr 26, 2013 Later updated Nov 22, 2013

The Federal Government is not taxing nearly enough to adequately fund our future entitlement commitments, is borrowing and immediately spending all the funds that are collected which are intended for our entitlement trust funds, is using Cash-based accounting when it should be using GAAP-basis accounting to report our financial condition, and therefore has been misleading the U.S. citizenry and the world for 45 years (since 1968) as to the sustainability of our current fiscal model.  This fiscal model is a massive Ponzi scheme (USAPonzi) and as a result we, as a country, have been living beyond our means for now nearly a half century.  The U.S. Bureau of Economic Analysis chart of U.S. Personal Income demonstrates how USAPonzi changed the trajectory of Personal Income (and therefore GDP) starting in the late 1960's.  

That is when we started "eating our seed corn"!!!  It was fiscal year 1969 when the Federal Government stopped putting the entitlement related tax revenues, that were in excess of current year outlays, into trust funds where these funds could earn interest to pay future entitlement benefits and instead began spending these "excess" funds for general operating expenses.  This marked the beginning of "The Biggest Ponzi Scheme on the Planet.".

This U.S. Personal Income chart also shows the little wiggle in the early 2000s that was caused by the bursting of the internet bubble, the more pronounced wiggle in the late 2000s that was caused by the bursting of the housing bubble, and I predict that the next wiggle will be a doozy caused by the bursting of the global government spending bubble and in particular the implosion of USAPonzi (see The Tale of Three Bubbles).

We are reaching the squeeze point in this Ponzi scheme wherein we will be required to accept national bankruptcy or dramatically (and exponentially) increase the rate at which we print money to continue this Ponzi scheme.  The current Quantitative Easing ($85 Billion per month as of November 2013) is just a minor warm up for the money printing that will be required to extend this Ponzi scheme.

As of April 26, 2013

                       Reported              "Real"

    Deficit *          $1.0T                  $5.3T    (see U.S. "Real" Deficit)
    Debt *       
   $16.8T                $72.2T    (see U.S. "Real" Deficit) 
    GDP **         $15.7T                $10.4T    (see U.S. "Real" GDP)

As of November 22, 2013

                      Reported              "Real"

    Deficit *          $0.7T                  $5.3T    (see U.S. "Real" Deficit)
    Debt *       
   $17.2T                $74.7T    (see U.S. "Real" Deficit) 
    GDP **         $16.0T                $10.7T    (see U.S. "Real" GDP)

Source: U.S. Debt Clock and Comeback America Initative

* The difference between the Government Reported and " Real" Deficit and Debt in the above table is because the Government is not accurately reporting these items in their Financial Statements (see Cooking the Books! or Cox and Archer).

** The difference between the Government Reported and "Real" GDP in the above table is due to my estimation of the impact that the $5.3T of "Real" deficit spending is having on our economy.

It will take 65 more Sequester sized actions to balance the "Real" GAAP-basis budget.
("Sequester-A Drop in the Bucket")

We would need to raise income taxes to a 48.5% flat tax on all taxpayers to balance the current GAAP-basis budget but even that would not be sufficient to begin lowering our $85 Trillion Federal Obligation (Living Beyond our Means).

The Total U.S. Financial Commitments-to-GDP ratio is 4.3X the level at the start of the Great Depression in 1929 (U.S. "Real" GDP).

The Federal Government is spending 3.1X its income annually (USA Ponzi or Laundering Money).

The U.S. Federal Government's Financial Obligation/citizen is 9.0X that of the city of Detroit.
(Detroit-A lesson in Bankruptcy)

The Interest Expense on our U.S. Federal Obligation ($3 Trillion for fiscal year 2013) exceeds our fiscal year 2012 Tax Receipts ($2.45 Trillion). (Laundering Money)

This should then be the point when you finally must admit that you have a budget problem; when the interest expense on your financial commitments exceeds your total income!!!!!!!!!! 

I predict that USAPonzi will implode and likely lead to a global depression.
    The Government will be forced to reform, i.e. default on, our entitlement commitments ($56.7T).
    We will see interest rates rise and bond prices fall.
    We will see defaults on a large percentage of the total outstanding ($59.7T) U.S. debt (all types).
    We will see significant contraction in economic activity, i.e. our GDP will fall by 1/3 to 1/2.
    We will see the Stock Market crash for the third time since the turn of the millennium.

In my view, the only way to avoid this outcome is Hyperinflation (massive money printing by the Federal Reserve) but I really think "the horse is out of the barn" and my predicted outcome will be the result.  The Federal Reserve is printing enough money now ($85B/month or $1T/year) to balance the current cash deficit but will eventually have to increase money printing to $5.3T/year ($442B/month) to finance the "Real" Deficit unless the U.S. Government takes serious action to correct the overspending problem.   In my opinion, the rate at which the Federal Financial Burden/Obligation (our "Real" national debt) is expanding will prevent induced inflation from containing the Debt/Burden spiral.  Hopefully sound money and austerity will prevail.

 Next Page: The Fed is NOT the Problem!