The U.S. Government enacted the Sarbanes-Oxley Act in an attempt to prevent this type of fraudulent accounting by public companies. Now the U.S. Government is not playing by its own rules by continuing to use improper accounting. This fraud was started 46 years ago and the original culprits are no longer on the scene but that is not an excuse for continuing to perpetrate this fraud. The U.S. Government is not following its own financial reporting rules by continuing to use Cash Accounting rather than the appropriate GAAP Accounting.
The U.S. Government is corrupt and fraudulent!
By using Cash Accounting the U.S. Government is only assessing and reporting the tax revenue to meet current period expenditures. This means that the U.S. Government is not collecting the tax revenue that is required to fund the social benefit trust fund and therefore the U.S. Government is covertly creating Unfunded Liabilities. By not funding the social benefit commitments, the U.S. citizens and U.S. businesses are undertaxed and therefore appear to be more wealthy. By spending too much, by employing too many, by paying compensation that is too high, by commiting to pay too much in social benefits; the U.S. Government, according to GAAP accounting, has created Unfunded Liabilities of $81.3 Trillion in addition to the Cash Debt of $18.0 Trillion for a total GAAP Obligation of $99.3 Trillion.
By not funding the social benefit trust fund this means the U.S. citizens and U.S. businesses are undertaxed by this $99.3 Trillion, increasing the apparent net worth of U.S. citizens and U.S. businesses by $99.3 Trillion. But this unpaid tax money is counterfeit since this money is only of value if the future taxpayer can pay the Debt and Unfunded Liabilities created by this GAAP basis Deficit Spending. But this GAAP Obligation ($99.3 Trillion as of Dec 1, 2014) is increasing exponentially by the GAAP Deficit of $6.5 Trillion (FY2015 estimate) per year which is also increasing exponentially therefore the future taxpayer has no hope of ever paying this obligation.
As long as we continue with this current fiscal policy (USAPonzi) our public liabilities will increase exponentially and our private assets will also increase by a similar amount. The U.S. Government is creating counterfeit money (see The $100 Trillion Counterfeit Money Machine) at the rate of our GAAP basis Deficit Spending which is making the rich U.S. citizens and rich U.S. businesses appear to get richer every day and the U.S. Government goes into debt at the same rate. Until we adopt GAAP Accounting and a balanced GAAP basis budget we will continue toward infinite public debt and infinite private wealth. As some point the world will call bullshit...
This is why I say in my six letters to the Securities and Exchange Commission that anyone in the U.S. Government that votes for or supports any budget that is based on Cash Accounting should be indicted on fraud and corruption charges (see SEC Letter April 14, 2014).
This fraud has created a Ponzi scheme (USAPonzi) that makes the U.S. economy (and the global economy) appear to be much more productive and prosperous than it would be with proper and honest accounting. This fraud has made the rich U.S. citizens and the rich U.S. businesses appear to be much richer than they would be with proper and honest accounting (about 7-8X richer see U.S. Total Asset Bubble). This fraud has allowed the U.S. Government to spend more than it should, to employ more direct and indirect employees than it should, and to pay themselves and their employees more than they should. This fraud has caused the social benefit recipients to be headed toward financial devastation because the U.S. Government made the decision to not fund the social benefit trust fund so LBJ could "balance the budget" in FY1969.
The U.S. Government started USAPonzi and the associated fraud and corruption in FY1969 when LBJ wanted to fool the country by claiming to balance the budget by "borrowing" the money from the social benefit trust funds to pay for the Vietnam War with what he called the "Unified Budget". The 90th Congress agreed to go along with this fraud which included not funding the social benefit trust fund. By not funding the social benefit trust fund, the prosperous U.S. citizens and U.S. businesses do not have to pay the taxes to fund the social benefit trust fund and the underprivileged don't have the money in the social benefit trust fund that is required to pay their social benefit promises. The U.S. Government carries this unfunding to the extreme by borrowing every penny of the social benefit tax revenues that would normally be retained in the social benefit trust fund to pay for more current year expenses.
The U.S. Government is knowingly and willfully taking the money that should be funding the social benefit promises to one class of U.S. citizens, the social benefit recipients, and transferring these funds to two other classes of U.S. citizens, the prosperous U.S. citizens and U.S. businesses in the form of unpaid taxes and to the current direct and indirect employees of the U.S. Government in the form of current period compensation. This has left the social benefit promises to the social benefit recipients to be paid for by an unreliable payer, that being the future taxpayer. This is fraud.
As a result, the rich citizens and rich businesses appear to get very very rich, the people employed by the Government have good high paying jobs, and the underprivileged get ripped off because the Government is not funding their promised social benefits. We are talking about massive amounts of money. GAAP accounting reports that as of Dec 1, 2014 USAPonzi has gifted $99.3 Trillion (of counterfeit money) to the U.S. citizens and U.S. businesses, by undertaxing them, while the U.S. Government has incurred a GAAP Obligation of an equal amount (Debt of $18.0 Trillion and Unfunded Liabilities of $81.3 Trillion). The direct and indirect employees of the U.S. Government have been paid more than the taxpayer can afford creating debt and the social benefit recipients have been short changed by $86.4 Trillion creating debt and Unfunded Liabilities.
GAAP Accounting and a balanced GAAP basis budget, will give us a sustainable fiscal policy and make it fair for the social benefit recipients, i.e. they would get what they are promised. With the current fiscal policy (USAPonzi) the social benefit promises are unpayable since the trust fund is unfunded and the social benefit recipients are headed toward financial devastation while the rich, the powerful, and the government employees are living the good life.
The rich U.S. citizens and rich U.S. businesses will quickly say that they don't want to and can't pay as much tax as GAAP Accounting dictates. But that is precisely why we must use GAAP Accounting in order to assess just how much we can commit, spend, and tax and still have a sustainable fiscal model. Our Cash Accounting system gives us no clue as to what is really affordable we just know that we are spending more cash than we are taking in right now.
The U.S. Government, by using Cash Accounting, is dramatically favoring the rich, the prosperous, and the direct and indirect employees to the detriment of the underprivileged and the common citizen by not living up to the social benefit commitments it has made to the poor, the disabled, the unemployed, and the elderly.
Further these accelerated payments to the rich, to the prosperous, to the direct and indirect employees of the U.S Government, and the promises of payments to the social benefit recipients, shaky as they may be, have caused a massive stimulus to the U.S. and Global economy that I estimate to be on the order of 2X (see U.S. "Real" GDP FY2015). This is what is causing USAPonzi. This is what has caused the U.S. Government to be The $100 Trillion Counterfeit Money Machine!
GAAP Accounting and a balanced GAAP basis budget will restore order, fairness, and sustainability to the U.S. economy and financial system. Unfortunately it will also expose the fact that for the last 46 years we have been living dramatically beyond our means.
That is why I say that it is unfair to take from the poor to give to the rich. That is why we have such inequity in compensation between the 1%ers and the 99%ers. But when the rich and powerful control the purse stings, they can favor themselves and they have done so by about $100 Trillion.
Every day the rich and the powerful get another chunk of money as measured by our GAAP basis Deficit Spending which is on the order of $6.5 Trillion a year or about $17.8 Billion a day. That's why the stock market is setting new records on a regular basis. This fraud just keeps on taking from the poor and giving to the rich.
Warren Buffett knew full well about this fraud in 1975 (see Buffett on Pensions) and it has made him appear to be the smartest investor the world has ever known. And he is a genius, but The Buffett genius has been magnified by USAPonzi. Warren Buffett has known for at least 39 years exactly what the U.S. Government was doing but did not expose this fraud because he was getting massively wealthy on the fraudulent practices of the U.S. Government. My estimate, as of May 2014, is that Warren Buffet has personally made $55.9 Billion of his $65.2 Biillion net worth because of this fraud. He apparently is okay with this because he is not directly reponsible for the fraud it is the U.S. Government that is the culprit. But now nearly 150 million U.S. citizens (the social benefit recipients) are headed toward financial disaster so that Warren Buffett can appear to be really rich.
But Warren Buffett is not alone in this role of silent co-conspirator to USAPonzi. The rich and the powerful everywhere are gaining by this fraudulent policy of the U.S. Government so they are all willing to keep quiet and appear to get richer. But it is a Ponzi scheme so it will all crash back to earth when USAPonzi implodes.
Even the Chairmen of the Federal Reserve Bank are willing to keep quiet so that they too can take advantage of the financial gain from USAPonzi and the $100 Trillion of counterfeit money that USAPonzi has spun off over the last 46 years. They can retire and write books and give speechs for $50K to $250K a pop and get rich off of this same fraud while the poor, the disabled, the unemployed, and the elderly are getting ripped off by the U.S. Government not funding their social benefit commitments. (see Fed Chairmen Co-conspirators in USAPonzi).
Janet Yellen even had the unmitigated gall to chastise the Europeans for not doing enough fiscal stimulus to boost the EU economy. I guess she likes the U.S. fiscal model of $6.5 Trillion of GAAP basis Deficit Spending to give our economy a "gentle nudge." Or maybe she really doesn't understand how this Government fraud is working. (see Yellen Does Not Understand Fiscal Policy). She either does not understand what is happening or she is willing to "carry the water" for the fraudulent activity of the U.S. Government.
The U.S. Government is corrupt and fraudulent. The U.S. Government is using corrupt and fraudulent accounting so that the rich and powerful can be more rich and more powerful while suppressing the 99%ers and totally ripping off the underprivileged. This is precisely why the people on Wall Street are jumping for joy as the stock market goes up while the people on main street are scratching their heads wondering why Wall Street is so happy.
And the folks on Wall Street are saying that the people on main street need to get their money into the stock market so they can get rich like the Wall Streeters. First of all, most of the people on main street don't have money to put into the Wall Street casino and secondly the stock market is a Ponzi scheme because the U.S. Government is corrupt and fraudulent. The U.S. Government is giving and promising to give U.S. citizens and businesses money (counterfeit money) that the Government does not have so the citizens and businesses can buy things they cannot afford and then next year the U.S. Government repeats the process with even more counterfeit money.
I was amazed to hear the other day that the Japanese National Pension Fund was going to increase their investment allocation in equities from 25% to 50%. They too are going to get burned because USAPonzi is dramatically influencing the global economy. And on top of USAPonzi the Japanese Government is running their own Ponzi scheme since their tax revenue peaked in 1989 and with declining revenue they have been increasing their spending for the last 25 years so they now have a Debt-to- GDP ratio of nominally 240%. This $100 Trillion of counterfeit money can buy a lot of stuff from all over the world and the U.S. Government is creating more counterfeit money every year, $6.5 Trillion and growing exponentially. As they say on TV, "There is No Alternative" to equities if you want to make money but USAPonzi is the reason that equities appear to be the only game in town and now even the Japanese are being fooled by what the U.S. Government is doing. I think the Chinese have figured it (USAPonzi) out and they are working on an alternative to protect their currency but they too are greatly dependent on USAPonzi to keep their economy afloat. We buy a lot of stuff from China with our counterfeit money and when this supply of new counterfeit dollars gets cut off they will stop growing by the current 7-8%(???) per year. If our economy drops by nearly half, (see U.S. "Real" GDP FY2015) as I predict, we will be buying a lot less stuff from China, Japan, Europe, etc.
We have been burned twice with the bursting of the Internet Bubble and the Housing Bubble but the really big one is just around the corner when USAPonzi implodes. That will happen when people finally come to realize that our U.S. Total Assets (the net worth of all U.S. citizens and businesses) of $113.4 Trillion (www.usdebtclock.org) includes $100 Trillion of counterfeit money created out of "thin air" by the U.S. Government's corrupt and fraudulent accounting.
The U.S. Government is corrupt and fraudulent because it is using Cash Accounting rather than the proper GAAP Acounting system. That is why I say that we have a bunch of Liars and Cheaters in Washington. They are lying when they tell the social benefits recipients that they are going to get the current social benefit promises. They are cheating by taking the social benefit trust fund money and spending it to pay themselves and their rich friends. LBJ took the social benefit trust fund money to pay for the Vietnam War and Washington has continued to do this for 46 years. They did it because they did not think that the general population would notice that the social benefit promises were being left to a phantom and unreliable payer (the future taxpayer); they just took the money and ran with it.
But that is the way any good self respecting Ponzi scheme works; pay the early investors with the late investors money. We are currently taking about $6.5 Trillion a year of counterfeit money from the future taxpayer, as determined by our GAAP basis Deficit Spending, and the GAAP basis Deficit is increasing exponentially.
This is why the stock market continues to go up. This is why we can pay outrageous salaries to sports and entertainment stars. $325 Million for a baseball player? Give me a break! You have got to be crazy to do that and the Florida Marlins are crazy. When USAPonzi implodes they are going to be left with no way to pay Stanton's salary!. This is why we have so many millionaires and billionaires. This is why 1.75 billion people can have smartphones. This is why Apple could become the first Trillion dollar company. This is why the high end housing market seems to be doing better than the mid to low end. This is why the price of condos and apartments in New York and San Francisco continue to go up. This is why we have been able to build so many luxurious sports venues (stadiums, golf courses, etc.). This is why the price of art is escalating. This is why the price of classic cars is escalating.
$100 Trillion of counterfeit money can buy a lot of stuff.
All made possible by a corrupt and fraudulent U.S. Government that is taking from the poor and giving to the rich (including themselves).
Next Page: Fixing Fiscal Policy