Defying the Law of Gravity
Jun 7, 2014
Something seems to happen to people when they get elected to a position of power in the Government of the United States of America. They seem to think that they are exempt from following the very rules that they require the common man to follow to the letter of the law. They seem to think that they can "Defy the Law of Gravity" and get away with it.
Why do I make such an allegation? Well it gets right down to the very core of the U.S. (and Global) economic and financial system. What is Money? How is Money earned? How is Money spent? What is the value of Money? Who can create Money?
Rules of the Road
The U.S. Government sets accounting rules and standards that individuals and organizations must follow so that when a financial transaction is made, the seller, by looking at the buyer's history of compliance with these rules and standards, can determine with a high degree of confidence the ability of the buyer to make good on the payment. Individuals and organizations that violate these rules are severely penalized, ostracized, and the most egregious of the culprits are imprisioned.
These rules, when properly structured and consistently followed, provide a strong basis for instilling confidence in the U.S. (and global) economic and financial system. Individuals and organizations that fail to comply with these rules are quickly penalized even ostracized and not allowed to continue to participate in cerain aspects of the economy and financial system. If you make promises to pay but do not have the ability to make that payment you are penalized. If you print new money (counterfeiting) you are penalized. If you fail to disclose some of your financial obligations to the seller you are penalized. If you improperly represent the value of your assets you are penalized.
These rules need to be quite rigid, i.e. have clear meaning and boundaries, so that all parties have a clear understanding of both the rules and the penalties.
The U.S. Government does not follow its own Rules
It is clear to me that people that are elected to the United States Congress or as President of the United States of America feel that they no longer have to comply with these rules. They feel that they are somehow, due to their elevated elective status, exempted from following the fundamental practices for what it means to make financial commitments consistent with their own rules and standards.
They seem to feel that since they make the laws they have the right to bend and even break the law.
But who is there to enforce the law against the lawmakers.
If you can stretch the rules a little bit and can get away with it, why not stretch the rules a lot.
I have three major issues where I feel that the U.S. Government is not complying with their own rules:
1) Using Cash Accounting rather than the appropriate GAAP Accounting.
2) Continuously operating with deficit spending and pretending that this is okay. Of course because of issue 1) the real deficit spending is dramatically more egregious than what the Government reports.
3) Making social benefit promises to the U.S. Citizenry that are clearly not affordable. Lying to the U.S. Citizenry.
Unified Budget and Cash Accounting
Unfortunately, President Lyndon B. Johnson set an historic precedent in 1968 by changing the budgeting process for the U.S. Government with the "Unified Budget" but still reporting our financial status with Cash Accounting. This has dramatically changed the ground rules for our economy and our financial system. This change put the U.S. Dollar on a sliding scale of devaluation (5% per year, see Inflation-A Byproduct of USAPonzi) that, while glacial in pace, is basically indomitable in its persistence. It was only three years after the "Unified Budget" was adopted (1971) when President Richard M. Nixon, and I think largely because of the change to the "Unified Budget", was forced to eliminate the convertibility of dollars to gold.
It is mystifying to me that hundreds of millions of people are willing to let the U.S. Government get away with these violations of the rule of law. It is mystifying to me that hundreds of millions of people are willing to invest trillions of dollars in an economic and financial system that is corrupt and fraudulent because of these violations.
Fix the Debt! Balance the Budget! Get to a Sustainable Fiscal Plan!
It is almost a universal cry from politicians that we must "Fix the Debt". It is almost a universal cry from politicians that we must "Balance the Budget". It is almost a universal cry from politicians that we must get to a "Sustainable Fiscal Plan". When pressed in public, I doubt that any politician would be against any of these campaign style mantras. But secretly, and by their actions, they have absolutely no interest in doing any of these things.
The reason is simple. They know that by implementing a budget process consistent with any one of these slogans, two things would happen; "It would destroy the economy" and "It would get them unelected". All of these slogans actually mean the same thing for the U.S. Government; Quit operating "The Biggest Ponzi Scheme on the Planet"!
The U.S. Government is openly and blatantly lying.
By making defined amount promises for some social benefits and "blank check" promises for many others, the U.S. Government has no rational method for accurately assessing their forward looking commitments. But the killer problem is that the current Cash Accounting methodology for assessing the amount of taxes that are required to meet the U.S. Governments spending needs, totally ignores these future benefits whatever the cost might be. Yet the U.S. Government continues to promise the U.S. Citizenry that they can make these payments even though the U.S. Government has made zero provisions in their budgeting process for how they will make those payments. That is the reason that USAPonzi exists. That is the reason that we have an estimated $78.5 Trillion of Unfunded Liabilities. That is the reason that the U.S. Government is openly and blatantly lying to the U.S. Citizenry.
Where is the U.S. Government going to come up with the $78.5 Trillion to pay these Unfunded Liabilities?
People are wringing their hands, and rightfully so, over how we are going to pay off the $17.4 Trillion Cash Debt but the Unfunded Liabilities make the GAAP Obligation problem more than 5X as ominous as the Cash Debt problem.
And as "Asset prices to Infinity" demonstrates, our GAAP Obligation is growing dramatically and exponentially.
Washington cannot continue to be in denial on this crisis and cannot continue to try to "Defy the Law of Gravity"!
Next Page: U.S. "Real" GDP June 2014