The Meaning of Counterfeit Money
March 8, 2016
As Posted on www.usaponzi.com
On this website and in my book, "USAPonzi", I repeatedly use the term counterfeit money. In this commentary I will try to better explain this terminology.
The U.S. Government is spending and committing to spend much more that the U.S. taxpayers can afford and by using Cash Accounting rather than the Proper GAAP Accounting is not reporting the true magnitude the budget deficit that this fiscal policy is causing. The U.S. Government reports our FY2016 budget deficit as a $0.485 Trillion Cash deficit when our real deficit is $5.82 Trillion on a GAAP basis. This reporting difference is due to the fact that with Cash Accounting the U.S. Government is ignoring the cost of funding the social benefit promises that the government has made.
By not having to pay the taxes to finance to U.S. Government unaffordable spending the U.S. citizens and businesses are getting a huge tax break and therefore are appearing to be very very rich. Most of this undertaxing benefit accrues to the upper class U.S. citizens and businesses. This GAAP basis deficit spending is therefore producing counterfeit money that is being introduced into the global financial system. If the U.S. Government is going to meet its financial commitments then the U.S. upper class will need to pay $101.4 Trillion in taxes. If the U.S. upper class does not pay these taxes the U.S. Government will have to dramatically lower their social benefit promises and dramatically reduce other U.S. Government spending. Either way the counterfeit money gained by this GAAP basis deficit spending will evaporate and the apparent net worth of the U.S. upper class will plummet.
Because the U.S. Government is not taxing the current U.S. taxpayers enough to pay for all of the current expenditures or to adequately fund these future commitments, the current U.S. taxpayers, as a group, are getting to keep that amount of money ($5.82 Trillion our GAAP deficit in FY2016) and the future U.S. taxpayers are expected to pay it some time in the future. We have been deferring these liabilities to the future U.S. taxpayers for 47 years to now a total of $101.4 Trillion as of March 8, 2016.
However, the future U.S. taxpayers of course can never pay these public liabilites of $101.4 Trillion that are growing by $5.82 Trillion this fiscal year and $16.0 Billion every day. Therefore the money that was gained by undertaxing the current U.S. taxpayers, i.e. borrowed from the future U.S. taxpayers, is money that only appears to be increased wealth. I call it counterfeit money. It is money that citizens and businesses appear to have gained but it has no lasting value because the entity from which it was borrowed, the future U.S. taxpayers, is incapable of paying that commitment. The U.S. Government is pretending that the future U.S. taxpayers will find a fountain of money that will pay an infinite amount of taxes in the future.
The U.S. Government is creating this counterfeit money out of "thin air" by pretending to borrow it from the future U.S. taxpayers who can never pay these ever increasing public liabilities. The nice thing about imaginary-counterfeit money is that you can create as much of it as you want because it does not cost you much to produce it as long as it is done digitally.
The reason the ruling class and upper class like this fiscal policy so much is because the ruling class can pay the social benefit, pension, and veterans benefit recipients a relatively fixed amount with this counterfeit money, the ruling class can continue to increase the pay for the ruling class with this counterfeit money, and the upper class gets to keep the exponentially increasing residual amount of counterfeit money that this Ponzi scheme is producing. The global upper class is appearing to get super rich from this U.S. Government fraud but mostly with counterfeit money that the U.S. Government has phantomly borrowed from the future U.S. taxpayers.
The U.S. and global upper class is appearing to get rich from counterfeit money. We are buying things we cannot afford with counterfeit money. We are building more and more real banks into which we can deposit more and more counterfeit money. We are buying/building houses, cars, airplanes, boats, smartphones, TVs, office buildings, skyscrapers, sports arenas, universities, etc. etc. with the counterfeit money produced by USAPonzi that now stands at $101.4 Trillion.
Even though Janet Yellen does not see any bubbles forming in the stock market or in real estate, the U.S. Government has been creating a massive bubble of counterfeit money with GAAP basis deficit spending for now 47 years. When the fundamental bubble is creating counterfeit money, it creates bubbles in essentially all other asset classes: stocks, bonds, banks, gold, oil, houses, automobiles, airplanes, smartphones, TVs, restaurants, malls, sports arenas, skyscrapers, etc. etc. We can buy things that we cannot afford with the counterfeit money that the U.S. Government is pretending to borrow from the future U.S. taxpayers. So far the U.S. Government has borrowed $101.4 Trillion of this counterfeit money.
GAAP accounting , when appropriately applied, can keep track of how much counterfeit money the global financial system is accruing.
According to usdebtclock.org the U.S. citizens and businesses have private net worth (Total National Assets) of $116.4 Trillion and and the U.S. Government has public liabilities (US Unfunded Liabilities (GAAP)) of now $101.4 Trillion of counterfeit money that has been produced by the GAAP basis deficit spending of USAPonzi. Therefore 87% of our private net worth is counterfeit money ($101.4T/$116.4T = 0.87) that has been created out of "thin air" by USAPonzi. The future U.S. taxpayers are expected to pay for all of the stuff that we have bought to date with the counterfeit money that we have spent.
The USAPonzi fiscal policy is creating massive counterfeit wealth by assuming massive and unpayable public liabilities.
U.S. Government fiscal and accounting fraud is alive and going strong in Washington D.C.
The financial data presented in this commentary was sourced from www.usdebtclock.org as of March 8, 2016.