Chapter 33 Sitting on a Global Financial System Time Bomb
November 22, 2015
The Global Financial System is headed toward Meltdown!
Triggered by the Implosion of USAPonzi! and
The Bankruptcy of the U.S. Government!
We are sitting on a global financial system time bomb! Our global financial system is dramatically over leveraged with personal, business, financial, and government debt. This will surely lead to a global financial system meltdown. But I contend that the most significant issue setting up this coming meltdown is the fact that the U.S. Government is not telling the financial truth! While there are several issues with the U.S. Government's fiscal policy, the most glaring and impactive untruth is that the U.S. Government is promising to pay unaffordable social benefits to the U.S. citizenry but is not funding these promises. This is a $81.1 Trillion untruth since that is the current amount of our Unfunded Future Liabilities. This is also the primary issue that has caused the U.S. fiscal policy to be a Ponzi scheme (USAPonzi).
The U.S. Government stopped telling the financial truth in January of 1968. That was when Lyndon Baines Johnson convinced the 90th Congress that he could balance the Federal Budget by "borrowing" the money from the social benefit trust funds to pay for the Vietnam War and adopting the Unified Budget. It was at that moment that the U.S. Government stopped funding the social benefit trust funds and accepted a very casual, informal, and yes even corrupt and fraudulent approach to planning, assessing, and reporting the U.S. Government's financial condition.
Once the U.S. Government had established this corrupt and fraudulent approach for handling our Government finances; the business community, the investment community, the banking system, and Wall Street began to modify their behavior to take financial advantage of this flawed fiscal policy and flawed accounting system.
Until we reestablish truth and integrity in the fiscal policy of the U.S. Government we have no hope of correcting the fraud, corruption, and distortion that this flawed U.S. Government fiscal policy has fostered throughout the U.S. and global economy. This, in my view, is the root cause of much of the distortion that we have in our global financial system and our economy and it is what has led us to the point that we are now "facing a global financial system meltdown" (see The Distortions of USAPonzi).
The U.S. Government has incurred $99.8 Trillion of US Unfunded Liabilities (GAAP) as posted on usdebtclock.org Nov 22, 2015, due to USAPonzi, which can never be paid by the future U.S. taxpayer. The U.S. Government will be forced to default on some, even most, of these financial commitments and when that happens it will cause a massive ripple effect throughout the global financial system. The U.S. Government will, in effect, be forced to admit that it is bankrupt.
We are facing a global financial and economic system meltdown because of the global debt leverage that has built up over the last few decades but the centerpiece of that leverage is the unsupportable financial commitments that the U.S. Government has been able to make because it is using a corrupt and fraudulent accounting system. The U.S. Government financial commitments are growing unrestrained and at an exponentially increasing rate and as a result U.S. Total Financial Leverage now stands at an unprecedented level (see U.S. Total Financial Leverage 4.2X 1929).
The U.S. Government must adopt an accounting system that accurately assesses the viability and sustainability of the financial commitments it is making. The U.S. Government abandoned rational accounting when it adopted the Unified Budget. LBJ was a scoundrel but the 90th Congress went along with his scheme and we have continued to use the same flawed, corrupt, and fraudulent fiscal policy for the last 47 years.
The U.S. Government must do two things to correct this problem: 1) adopt GAAP (Generally Accepted Accounting Principles) Accounting, and 2) commit to a balanced GAAP basis budget.
This will be very painful. This will reduce our standard of living. This will reduce our economic activity. This will reduce our apparent wealth. This will require us to work harder and longer. This will reduce the wealth gap between the upper class and the Common Man. This will reduce the prosperity gap between the U.S. and the rest of the planet. This will level the playing field within the U.S. This will level the playing field with the rest of the planet. And it will be sustainable.
Today we are living in a fantasy world, because of USAPonzi, that makes the U.S. appear to be much more exceptional than the rest of the planet. Yes I think we have an exceptional country but our exceptionality is dramatically overstated by the Ponzi scheme economy that the U.S. Government has created with this flawed fiscal policy.
Why the U.S. Fiscal Policy is Flawed!
1) The U.S. Government is spending more than it collects in tax revenue. This has created $18.7 Trillion of Debt.
2) The U.S. Government is paying U.S. Government workers (the ruling class) and Government related businesses much more than the U.S. taxpayer can afford. This has created a large portion of the $18.7 Trillion of Debt.
3) By overpaying the ruling class, the U.S. Government is creating pay inequity between the Government workers and the Common Man.
4) The U.S. Government is promising to pay much much more in pensions, veterans benefits, and social benefits than the U.S. taxpayer can afford.
5) The U.S. Government is not funding the social benefit promises, and is underfunding the pension plans and veterans benefits. This has created $81.1 Trillion of Unfunded Future Liabilities.
6) The U.S. Government is dramatically and fraudulently undertaxing the upper class because it is spending more than it is taking in from tax revenues, it is not funding the social benefit promises, and it is not adequately funding the pension plans and veterans benefits. This undertaxing has given the upper class $99.8 Trillion which of course appears to make the upper class very very wealthy. This $99.8 Trillion of undertaxing is the sum of our Debt and our Unfunded Future Liabilities and is reported on usdebtclock.org Nov 22, 2015 as US Unfunded Liabilities (GAAP).
7) By dramatically and fraudulently undertaxing the upper class, the U.S. Government has created a massive "wealth gap" between the upper class and the Common Man.
8) This fiscal policy is not sustainable because the U.S. Government continues to incur both a Cash Deficit ($0.433 Trillion in FY2016) and a GAAP Deficit ($5.9 Trillion in FY2016) and has made no provision for how it will pay down the Debt ($18.7 Trillion) or for how it will pay the Unfunded Future Liabilities ($81.1 Trillion) for veterans benefits, pensions, and social benefits.
9) The U.S. Government is using fraudulent accounting and making unaffordable, false, and unfunded social benefit promises to the U.S. citizenry, so that it can overpay itself, its employees and its related businesses and make the U.S. upper class appear to be super wealthy.
To correct these fiscal policy Issues, the U.S. Government must adopt GAAP Accounting and commit to a balanced GAAP basis budget in order to establish an equitable and sustainable fiscal policy for the Government of the United States of America.
This fiscal policy is a Ponzi scheme that I have named USAPonzi and is
"The Biggest Ponzi Scheme on the Planet"
Because of this corrupt and fraudulent fiscal policy, I predict that we are headed toward a global financial system meltdown because the U.S. Government will be forced to declare bankruptcy.
Financial data sourced from usdebtclock.org Nov 22, 2015.
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