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

A new car for every U.S. Citizen!
May 1, 2015
Updated July 9, 2015 to correct Debt double count.  After further research of the usdebtclock GAAP Unfunded Liabilities, I have determined that this number includes the National Debt.  In my prior commentaries I had separated money spent (debt) from money promised to be spent (unfunded liabilities).  I will maintain that terminology on this website but recognize that the usdebtclock Unfunded Liabilities = Debt + Unfunded Future Liabilities.
As posted on www.usaponzi.com Updated July 9, 2015 to correct Debt double count.


The fiscal Policy of the U.S. Government is a massive Ponzi scheme that is passing out money, albeit
counterfeit money, to the U.S. citizens and businesses at an exponentially increasing rate.   To date the U.S. Government has given nomially $100 Trillion to U.S. citizens and businesses by undertaxing them on a GAAP basis thereby creating Debt of $18.2 Trillion and other Unfunded FutureLiabilities of $77.7-$84.2 Trillion as shown in Table 1 below.


This commentary will demonstrate how the current fiscal policy of the U.S. Government, with its GAAP basis Deficit Spending, is producing enough counterfeit money each year to allow every U.S. citizen to buy a new $35,000 car every other year.  But this does mean that we would have to share this counterfeit money equally.   Currently the counterfeit money the U.S Government is creating by undertaxing the U.S. citizens and businesses is largely going to the upper class citizens and businesses.   I estimate that Warren Buffett makes $10M a day from this fraud so Warren Buffett is currently getting the equivalent of 285 of these new cars every day.  


By not using GAAP Accounting in the budgeting and tax assessing process, the U.S. Government is not only creating Cash Debt it is creating massive Unfunded Future Liabilities which are being deferred to the future U.S. taxpayer who can never pay these massive Public Liabilities.  This means that every dollar of liabilities deferred to the future U.S. taxpayer is a counterfeit dollar and every dollar deferred is a counterfeit dollar gained as apparent Private Net Worth by the U.S. citizens and businesses that did not have to pay that tax.  This is what is causing the upper class citizens to appear to become super wealthy and the upper class businesses to appear to become super profitable. 


Table 1 shows how Private Net Worth and Public Liabilities compare according to my estimates from the USAPonzi Fiscal Model and the estimates posted on www.usdebtclock.org.

 
                                                                                             ($Trillion)
                                                                                               USAPonzi       usdebtclock
                                                        Cash Debt           $18.2               $18.2
                              Unfunded Future Liabilities           $84.2               $77.7
                Public Liabilities/Counterfeit Money        $102.4               $95.9
          Private Net Worth/Total National Assets        $115.6              $115.6
                                    "Net" Private Net Worth          $13.2                $19.7
          Counterfeit Money%Private Net Worth          88.6%               83.0%

                                        FY2015 Cash Deficit             $0.5                 $0.5
                                       FY2015 GAAP Deficit            $6.5                 $5.6

 
                                       Table 1: Private Net Worth vs. Public Liabilities
                                                                                                         Estimates as of May 1, 2015


Public Liabilities = Cash Debt + Unfunded Future Liabilities.


USAPonzi
Unfunded Future Liabilities and GAAP Deficit were derived from my USAPonzi Fiscal Model.


usdebtclock
Unfunded Future Liabilities and GAAP Deficit were sourced from the www.usdebtclock.org website.


Private Net Worth was sourced from the
www.usdebtclock.org website (Total National Assets) which in turn is sourced from the estimates of the Federal Reserve Bank.


"Net" Private Net Worth = Private Net Worth - Public Liabilities/Counterfeit Money


Public Liabilities (Debt + Unfunded Future Liabilities) have been created by "borrowing" from the future U.S. taxpayer who can never pay these liabilities therefore this is
counterfeit money.  Deferring these massive liabilities to the future U.S. taxpayer, who can never pay, is what makes our fiscal policy a Ponzi scheme.


The U.S. Government is creating Private Net Worth out of "thin air" by assuming Public Liabilities and therefore producing
counterfeit money.


The U.S. Government is telling us that our budget deficit in FY2015 is
0.5 Trillion on a Cash Basis when on a proper GAAP basis it is much higher in the range of $5.6-6.5 Trillion.


The U.S. Government reports our Cash Debt of
$18.2 Trillion but does not report our Unfunded Future Liabilities that are in the range of $77.7-$84.2 Trillion.  This means that while the U.S. Government is promising to pay social benefits it has no money in the social benefits trust fund to meet these promises.


USAPonzi
has created $95.9-$102.4 Trillion of Public Liabilities and a corresponding increase in artificial Private Net Worth.   If USAPonzi is allowed to continue with the current fiscal policy, it will produce an infinite amount of Pubic Liabilities, an infinite amount of counterfeit money, and an infinite amount of artificial Private Net Worth.


USAPonzi
is providing counterfeit money as input (social benefits, government pay, and unpaid taxes) to the U.S. and global economy which in turn creates counterfeit profits for companies, which creates counterfeit
 value for investors, which creates counterfeit wealth for U.S. citizens and businesses, which creates more counterfeit spendable wealth as more counterfeit input into the U.S. and global economy.  The more money we appear to make the more money we appear to make.  This is called an open loop system with positive feedback that will continue to expand exponentially since the U.S. citizens and businesses do not have to pay for the social benefit commitments or for the U.S. Government overspending.  This is caused by not balancing the GAAP basis budget.  But a major problem/distortion is that most of this artifical/counterfeit wealth is accruing to the upper class citizens and businesses which shows up as increasingly fancy cars, houses, apartments, yachts, planes, golf courses, resorts, jewelry, art, and islands.


USAPonz
i is skewing this counterfeit money right up the wealth ladder.  The wealthier you appear to be the wealthier you appear to get.  This is what is causing the wealth gap, the upper class U.S. citizens and businesses are being inappropriately over compensated because they are being massively undertaxed by an exponentially increasing amount.


Table 1 shows that 83-89% of our apparent Private Net Worth is created by our current fiscal policy and largely due to corrupt and fraudulent accounting. (Americans think we are richer and more prosperous)


Author's Note:
I learned about the perils of open loop control systems in the early 1960's when I was helping design a Terrain Following Radar system for the RF4C and the F111 fighter jets.  Positive feedback in this system quickly led to uncontrolled oscillation in the flight paths of the fighter jets causing them to crash.  Fortunately these crashes occurred in my computer models as we were tweaking the parameters that were generating the control inputs to the autopilot of the fighter jets.  I am pleased to say that these systems now work great in the field but only because they have the proper feedback.


GAAP Accounting must be the control system for our U.S. Government's financial planning.  It tells us how much social benefits and government expenditures the U.S. taxpayer can afford by assessing the longer term impact of our near term financial commitments.  We are currently jerking up too much on the virtual joystick of Government spending and committing and do not realize it because we do not have the proper feedback to tell the U.S. Government decision makers the longer term impact of their near term decisons.  The U.S. Government is currently flying blind when it comes to financial planning and budgeting.


Unfortunately, having already pulled up too quickly on the spending and committing joystick, pitching over and leveling off to an equitable and sustainable flight plan will be very tricky for the pilots in the U.S. Government but getting accurate information to these decision makers is absolutely essential for executing that manuver without dramatically overshooting and crashing the plane.


The United States of America appears to be a successful and prosperous country solely because the U.S. Government is creating counterfeit money, by GAAP basis undertaxing, to give to the U.S. citizens and businesses and is distributing it in a manner that not even close to equitable.  While essentially everyone in the country is getting some of this counterfeit money, that is why I say we are Cheating the Planet, the upper class citizens and businesses have become filthy rich with this corrupt and fraudulent fiscal policy (see How "The Rich" got rich!).


As this Table 1 shows, our GAAP Deficit in FY2015 will be in the range of $5.6-6.5 Trillion so the U.S. citizens and businesses will gain that many new counterfeit dollars this year without lifting a finger.   So the price of a penthouse apartment in New York City could go up by 5-6% or more this year because we will have $5.6-6.5 Trillion more counterfeit money sloshing around in the U.S. economy and it will need to be invested somewhere.


I am sure that a lot of this new counterfeit money will be invested in new iPhone6s since only 20% of the installed base has upgraded so far but we will have plenty of counterfeit money to pay for them.   Also we should be able to buy an Apple watch for everyone in the U.S. since $5.6 Trillion, our GAAP Deficit as estimated by www.usdebtclock.org, distributed equally among 315 million citizens is $17,777 a person and since it is "free money" we may as well get a watch for everybody.  Or we could save the counterfeit money that is received this year and buy a $35,000 car for everybody next year.   And since our GAAP Deficit tends to increase exponentially, we will be able to get a nicer car for every U.S. citizen every time we buy a new one.


USAPonzi is causing severe distortions in our economy and in our financial system (see The Distortions of USAPonzi).