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

Cheating the Common Man!
Feb 24, 2015
As Posted on
www.usaponzi.com


The U.S. Government is lying to and cheating the middle and lower class U.S. citizens, the Common Man!


Because the U.S. Government (the ruling class) is
lying to and cheating the Common Man the people in the ruling class are living comfortable and even opulent lifestyles and the people in the upper class are living opulent and super opulent lifestyles and have become wealthy and super wealthy with counterfeit money.


The U.S. Government is
lying to the Common Man by telling them that the U.S. Government will pay them social benefits that the U.S. taxpayer cannot afford.  The U.S. Government is cheating the Common Man by making the decision in FY1969 that it would not collect the tax revenue necessary to pay for these promised but unaffordable social benefits.  The U.S. Government is cheating the Common Man by paying themselves, their direct and indirect employees, and U.S. Government related businesses much more than the U.S. taxpayer can afford.  The U.S. Government attempts to conceal this lying and cheating by using a corrupt and fraudulent accounting system that does not expose the magnitude of the U.S. Government's financial obligations.


Because the U.S. Government is using an inappropriate accounting system, it is not clear to the Common Man just what social benefits he/she can count on.  As a result, many people are relying on promises that the U.S. Government cannot keep; like Social Security and healthcare.  Because the U.S. Government has made the decision to not fund any future period social benefits, nearly half of the U.S. population is headed toward financial devastation.


David Walker, the former Comptroller of the United States from 1998 until 2008, has been warning politicians, the media, and the American public for over a decade that we are off course and headed for disaster. In August 2007, before the financial system meltdown of 2008, Mr. Walker declared:


The US government is on a “burning platform” of unsustainable policies and practices with fiscal deficits, chronic healthcare underfunding, immigration and overseas military commitments threatening a crisis if action is not taken soon.


The U.S. Government has not taken a single constructive action to address this threatening crisis.   Neither the ruling class nor the upper class want to expose this fraud and corruption because they are each living wonderful lifestyles and some of them are getting filthy rich with counterfeit money by lying to and cheating the middle class and the lower class.  Exposing this fraud will ruin their 46 year long party.


The ruling class is not willing to take any move toward resolving this stalemate because it will shrink the Government, cut economic activity nominally in half, cut government pay, reduce social benefit payments, increase taxes on U.S. citizens and businesses, and reduce the apparent net worth of the upper class by 90%.   None of these is desirable but we must face the fact that we have all been living beyond our means since FY1969 when LBJ launched USAPonzi and take the tough actions that financial reality dictates.


The United States is facing precisely the same kind of fiscal crisis as Greece but on a much much larger scale.  Also the U.S. Government does not have a big brother/parent like Greece has with the European Union to demand that we take corrective action.  There is even irony in that relationship since the U.S. Government requires that states be fiscally responsible.  With these comments I am assuming that the EU will stick to their guns and hold Greece to a policy of fiscal responsibility.  The whole world seems to have become confused with the difference between austerity and reality.   Austerity is when you have a choice.  Reality is when you do not have a choice.


Greece-The Canary in the Coal Mine was written in Nov of 2011 so the numbers are dated but the message may still be helpful in explaining why this is case and why the USA is the "Eagle in the Pits".


The U.S. Government is using an accounting system, Cash Accounting, that reports the difference between the current year expenditures and current year tax revenues as our deficit.  This is more precisely referred to as our Cash Deficit.  But by promising to pay future social benefits, the U.S. Government should also be collecting enough additional tax revenue to adequately fund the social benefit trust fund so the U.S. Government can continue to fulfill these future social benefit promises.  The accounting methodology that performs this assessment is called GAAP Accounting (Generally Accepted Accounting Principles).


Our GAAP Deficit is therefore our Cash Deficit plus any current year shortfall (surplus) we might have in properly funding the social benefit trust fund.  The cumulative effect of our Cash Deficit is our Cash Debt.  The cumulative effect of the annual shortfall in the funding of our social benefit trust fund is called our Unfunded Liabilities.  The sum of our Cash Debt and our Unfunded Liabilities is called our GAAP Obligation.  Our GAAP Obligation is therefore our "virtual debt" meaning that it is our real Cash Debt plus the debt that we will incur in the future as these now Unfunded Liabilities transition to the actual payment of social benefits.  The cumulative effect of our GAAP Deficit is our GAAP Obligation. 


Because of this use of an improper accounting system, the U.S. Government reports a Cash Deficit of $0.5 Trillion when our "real" deficit is a GAAP Deficit of $6.5 Trillion for FY2015 and reports a Cash Debt of $18.1 Trillion when our "real" financial obligation, our "virtual debt", is a GAAP Obligation of $100.4 Trillion.


According to proper GAAP accounting, the U.S. Government should have
$87.4 Trillion (our Unfunded Liabilities) in the social benefit trust fund to pay the currently promised social benefits.  By not funding the social benefit trust fund there is not one penny available pay these future commitments.  The U.S. Government can only pay these social benefits with current period tax revenues or by borrowing the money.  The U.S. Government is lying by $87.4 TrillionThat is not a small lie; that is a "BIG LIE".


The U.S. Government is also overpaying itself, its direct and indirect employees, and its support businesses by another
$13.0 Trillion which is now our debt held by the public.


The U.S. Government has therefore undertaxed the U.S. citizens and businesses by
$100.4 Trillion over the last 46 years ($87.4T + $13.0T = $100.4 Trillion).  The only people that have the kind of money to pay these taxes are the upper class citizens and businesses.  With the current Fiscal Policy, the U.S. Government is making these upper class citizens and businesses even richer by undertaxing them by $100.4 Trillion. The U.S. Government is creating counterfeit money and apparent private wealth by assuming these massive and unpayable public liabilities as quantified by our GAAP Obligation.


This is how Warren Buffett got so rich!  Warren Buffett's net worth is estimated to be $63.3 Billion and $57 Billion of that came from the U.S. Government's corrupt and fraudulent Fiscal Policy.  He did not have to pay his portion of the taxes to cover the Government's GAAP basis Deficit Spending (see Buffett makes $10M a day from Government Corruption)


This is how Jerry Jones, Dallas Cowboys' owner, got so rich!  Jerry Jones' net worth is estimated to be
$3 Billion and $2.7 Billion of that came from the U.S. Government's corrupt and fraudulent Fiscal Policy.  He did not have to pay his portion of the taxes to cover the Government's GAAP basis Deficit Spending.


But the same can be said about nearly everyone in the upper class, as most of them are getting rich or super rich and living opulent or super opulent lifestyles because of the U.S. Government's corrupt and fraudulent Fiscal Policy.


This is how most businesses continue to show strong profit performance even though the Common Man is not seeing material wage increases.  This is how most businesses have accumulated a lot of cash on their balance sheets.  This is how many businesses can now afford to pay dividends.  This is how many businesses can buy back their own stock.  These prosperous businesses are more profitable, collecting cash on their balance sheets, paying dividends, and buying back stock because they do not have to pay the taxes to cover the Government's GAAP basis Deficit Spending.


This is why the stock market has been the best place to make money over the last 46 years.
This is why the Stock Market continues to set new record highs.  Warren Buffett knew about this corrupt and fraudulent accounting in 1975.  Maybe even earlier.  With the current fiscal policy, the stock market will go to infinity.


Price to Earnings ratios are totally meaningless in today's stock market because the U.S. Government is handing out $6.5 Trillion a year ($17.8 Billion a day) to U.S. citizens and businesses.  Companies that can
not make great and ever increasing profits with that kind of tail wind have a serious problem with their business models.


If U.S. citizens do not have to pay for all the Government spending and promises to spend, they can appear to be much richer.  If U.S. businesses do not have to pay for all the Government spending and promises to spend, they can appear to be much more profitable.  When they can avoid paying $100.4 Trillion in taxes it helps them both a whole hell of a lot.


By undertaxing the upper class citizens and businesses the U.S. Government has been incurring massive GAAP basis deficit spending which stimulates the U.S. economy and in fact the global economy.  I estimate that this stimulus is causing the U.S. GDP to appear to be nearly twice what it would be with a GAAP basis balanced budget.


This Fiscal Policy has created a massive ($100 Trillion) Ponzi scheme which I have named USAPonzi.


U
SAPonzi, so far, has created $100 Trillion of counterfeit money by passing these liabilities forward to the future U.S. taxpayer.  The money that was given to the upper class citizens and businesses by undertaxing them will not be worth anything if the future taxpayer cannot pay the social benefits and pay off the debt that the U.S. Government has deferred to the future taxpayer.  Our GAAP Obligation is quite obviously unpayable since we are already running a significant Cash Deficit plus we have fewer and fewer people doing productive work and more and more people counting on getting these unaffordable and unfunded social benefits from the U.S. Government.  The U.S. economy and in fact the global economy is living on the open ended credit card of the future U.S. taxpayer that has a current balance due of
$100.4 Trillion.


USAPonzi stimulates not only the U.S. economy but also the global economy by creating massive buying power for the U.S. Consumer.  USAPonzi creates this buying power by paying social benefits that far exceed what the U.S. taxpayer can afford, by paying the ruling class and Government related businesses more that the U.S. taxpayer can afford, and by undertaxing the U.S. citizens and businesses by not funding the future social benefit promises.


The following chart shows how our Debt, our Unfunded Liabilities, and our GAAP Obligation (our public liabilities) have increased over the last 30 years.  The chart also compares this GAAP Obligation (counterfeit money) with how our U.S. Total Assets (our private assets) have increased over that same time period.  U.S. Total Assets is the sum of all of the assets for all U.S. Households, Corporations, and Small Businesses.  This chart demonstrates how by incurring public liabilities the U.S. Government has been able to artificially produce private net worth.  USAPonzi, with its GAAP basis Deficit Spending, is systematically transfering counterfeit money from the future U.S. taxpayer to current U.S. citizens and businesses.


              Debt     Unfunded       GAAP        U.S. Total        Private Assets
                           Liabilities     Obligation      Assets       minus Public Liabilities 

1985        1.8            1.3              3.1              22.3                    19.2
1990        3.2            3.1              6.3              30.6                    24.3
1995        5.0            7.9            12.9              38.9                    26.0
2000        5.7           20.2           25.9              59.9                    34.0
2005        7.9           45.4           53.3              86.5                    33.2
2010      13.6           62.7           76.3              86.4                    10.1
2015      18.1           82.3         100.4            111.2                    10.8 


Chart 1: Public Liabilities vs. Private Assets ($Trillion)


Public Liabilities = GAAP Obligation = Debt + Unfunded Liabilities
Private Assets = U.S. Total Assets = Household + Corporate + Small Business
The last column is nominally our net Net Worth = Private Assets - Public Liabilities 


Debt data was sourced from U.S. Government databases.
Unfunded Liabilities data for 2000-2010 was sourced from www.shadowstats.com.
Unfunded Liabilities as of Feb 1, 2015 was calculated from my USAPonzi Fiscal Model
The U.S. Government does not routinely report our Unfunded Liabilities.
U.S. Total Assets data was sourced from Federal Reserve databases.
(see 
U.S. Total Asset Bubble for related information and charts)


As Chart 1 demonstrates, the U.S. Government is having to assume massive public liabilities ($100.4 Trillion) to prop up the U.S. economy and to yield $111.2 Trillion of private assets.


Who wiil pay these public liabilities?


By undertaxing the U.S. citizens and businesses the U.S. Government has created $100.4 Trillion of counterfeit money and has created $100.4 Trillion of public liabilities.


Remember this relationship:


GAAP Obligation = Debt + Unfunded Liabilities = Counterfeit Money


USAPonzi
 
has created hundreds of phantom Billionaires and millions of phantom Millionaires with this $100.4 Trillion of counterfeit money.


USAPonzi
 
has dramatically widened the "wealth gap" with this $100.4 Trillion of counterfeit money.  When the U.S. Government takes $87.4 Trillion of social benefit trust fund money that is meant to pay benefits to the Common Man, the poor, and the underprivileged and gives it to the upper class by undertaxing them, that is sure going to "WIDEN THE WEALTH GAP"!!!!


It sure pays to be rich in the Unitied States of America!!!!


USAPonzi
 
is paying professional athletes and entertainers exorbitant salaries and endorsements with this counterfeit money.  Multimillion-dollar compensation will be a thing of the past for most of these folks when USAPonzi implodes.  Many people are amazed that movie, music, baseball, basketball, football, golf, tennis, NASCAR, and other stars are able to earn such remarkably high compensation.  USAPonzi is the major contributor to this dramatic escalation of compensation for professional athletes and entertainers over the last 3 decades as the counterfeit money created by the U.S. Government's Fiscal Policy has exploded (See Chart 1 above).  Again, I say that this GAAP Obligation produces counterfeit money since the payment of these deferred liabilities has been passed forward to the future U.S. taxpayer who will never be able to pay these massive liabilities.  This is what makes a Ponzi scheme a Ponzi scheme.


USAPonzi
stimulates not only the U.S. economy but also the global economy by creating massive buying power for the U.S. Consumer.


USAPonzi
has therefore contributed significantly to economies throughout the Planet (see We Need More and Bigger Docks).


USAPonzi
has helped in building major and still largely vacant cities in China with this counterfeit money.


USAPonzi
has helped in building skyscraper cities in the Middle East with this counterfeit money.


USAPonzi
has built many houses, yachts, resorts, colleges, stadiums, casinos, airplanes, cars, and smart phones that we could not afford without this  counterfeit money.


The only way we could populate the world with 1.75 billion smart phones is with this
counterfeit money (See Ho
w LBJ Financed the Smart Phone Phenomenon!).


The only way that Apple could become a $
750 Billion corporation is because of this $100 Trillion of counterfeit moneyUSAPonzi provides the money to buy smart phones and the money to buy Apple stock.  The future U.S. taxpayer is expected to eventually pay for both of these purchases.


And Janet Yellen still does not see an asset bubble forming!
   While the U.S. Government is the perpetrator and operator of USAPonzi, by not exposing this Ponzi scheme the Fed Chairmen are Co-Conspirators in USAPonzi.


USAPonzi
has made it possible for the USA to appear to be energy independent since with enough counterfeit money we can pay whatever price is required to buy oil.  I predict that the price of oil will drop rather precipitously when USAPonzi implodes and this counterfeit money evaporates.


The U.S. Government is printing $17.8 Billion more counterfeit money every day, at the rate of our GAAP basis deficit spending, and with the current fiscal policy will print an infinite amount of counterfeit money.  As a corollary, the current fiscal policy will create infinite apparent net worth for the upper class U.S. citizens and businesses.  Who in the ruling class or the upper class would want to try to stop this gravy train?


The U.S. Government has created this
$100 Trillion of counterfeit money out of "thin air" with the corrupt and fraudulent accounting and fiscal policy that produced USAPonzi.


This is why I say that the
Ruling & Upper Classes Lie to and Cheat the Middle & Lower Classes.


The Solution

This situation can only be resolved by the U.S. Government adopting GAAP Accounting and committing to a nominally balanced GAAP basis budget.  This will ensure an equitable and sustainable Fiscal Policy.


The Bottom Line

The current fiscal policy of the U.S. Government has


overpaid the Government workers and their supporting businesses by $18.1 Trillion,


undertaxed the upper class U.S. citizens and businesses by $100.4 Trillion,


underfunded the social benefit promises to the U.S. citizens by $82.3 Trillion,


and has borrowed and spent the $5.1 Trillion that has been paid into the social benefit trust fund.


The ruling class gets overpaid, the upper class gets filthy rich, and the middle and lower classes get cheated and are headed toward a financial disaster.


USAPonzi: A Counterfeit Money Machine

This is why I say that USAPonzi is A Counterfeit Money MachineUSAPonzi is creating counterfeit money at the rate of our GAAP basis Deficit Spending and stuffing it into the pockets of the upper class U.S. citizens and businesses.  The U.S. Government is overpaying itself and is making absolutely no provisions for how it will continue to pay social benefits to the Common Man.


USAPonzi is a classic Ponzi scheme that is paying the early participants as promised, is providing the operators (the ruling class and the upper class) with very favorable to super opulent lifestyles, but has the late participants headed toward financial devastation.


USAPonzi
= 2000 X Madoff Ponzi


$100 Trillion = 2000 X $50 Billion


Each senior member of the U.S. Government is operating his/her own personal Madoff-sized Ponzi scheme.


USAPonzi
is "The Biggest Ponzi Scheme on the Planet"


Next eBook Commentary: Cheating the Planet