USAPonzi-The Great American Fraud

                                                 Copyright Declaration       PEMMA-Planet Earth Man-Made Apocalypse    John W. White   March 29, 2013

Janet Yellen Does Not Understand U.S. Fiscal Policy(USAPonzi)
Is Janet Yellen Drinking The Washington Kool-aid? 

Nov 9, 2014
As posted on

Janet Yellen does not understand the impact that our current U.S. fiscal policy (USAPonzi) is having on the U.S. and global economy.  I have criticized all four of the recent Fed Chairperson by calling them Co-conspirators in USAPonzi for not exposing the use of Cash Accounting rather than the appropriate GAAP Accounting by the U.S. Government.  In her speech Nov 7, 2014 at the "Central Banking: The Way Forward?" Symposium in Paris, Janet Yellen stated that "Weak Fiscal Response has slowed the Global Recovery" both in the U.S. and in Europe.  In this speech she also noted that deficits in both the U.S. and Europe were under control at less than 4 per cent of GDP prior to the financial crisis created by the bursting of the Housing Bubble.

My issue with this statement by Janet Yellen is that the U.S. Government is dramatically understating our deficit by using Cash Accounting rather than the appropriate GAAP Accounting.  Apparently even Janet Yellen, the chairwoman of the U.S. Federal Reserve Bank, does not recognize that we are understating our deficit.  Table 1 below demonstrates that we have been introducing massive stimulus to the U.S. and global economy with our GAAP basis Deficit Spending.  Our GAAP basis Deficit has been in the range of 30-40% of GDP since FY2006 and as a result has created dramatic stimulus to the U.S. and global economy.  This can in no way be considered a "Weak Fiscal Response"!  In fact if the U.S. Government was operating with a "balanced and proper GAAP basis budget" our U.S. GDP would drop by 47% (see U.S. "Real" GDP FY2015).

Since FY1969 the U.S. Government, by using Cash Accounting, has been able to ignore the dramatically increasing Unfunded Liabilities ($80.8 Trillion) that are created by not taxing the U.S. citizens and businesses as required to properly fund the trust funds to pay our social benefit commitments.  GAAP (Generally Accepted Accounting Principles) Accounting assesses the measure of this undertaxing and quantifies the associated GAAP Deficit.  The following table compares the Cash Deficit as reported by the U.S. Government with the GAAP Deficit over the last few years.  Our current U.S. fiscal policy is introducing massive stimulus into the U.S. (and global) economy.

                                               Cash         Cash                  GAAP            GAAP
        Year        GDP              Deficit    Def%GDP             Deficit        Def%GDP
      FY2006     $13.2T          $0.248T        1.9%                   $4.6T            34.8% 
      FY2007     $13.9T          $0.163T        1.2%                   $4.2T            30.2%
      FY2008     $14.3T          $0.455T        3.2%                   $5.1T            35.7%     
      FY2009     $13.9T          $1.417T      10.2%                   $4.3T            30.9%
      FY2010     $14.5T          $1.294T        8.9%                   $5.3T            36.6%
      FY2011     $15.1T          $1.299T        8.6%                   $4.5T            29.8%           
      FY2012     $15.7T          $1.089T        6.9%                   $6.6T            42.0%
      FY2013     $16.2T          $0.681T        4.2%                   $6.2T            38.3% 
      FY2014e   $17.0T          $0.514T        3.0%                   $6.4T            37.6%               
      FY2015e   $18.0T          $0.817T        4.5%                   $6.9T            38.3%

            Table 1:   U.S. Government Cash Deficit vs. GAAP Deficit

The baseline data in Table 1 came from and was developed by the author of that website, John Williams, who sourced these GAAP and Cash Accounting numbers from the financial reports of the U.S. Government.   As best I can determined, the U.S. Government did not, at least formally, develop GAAP basis financial statements prior to FY2000.  The numbers that I show in Table 1 were sourced from No. 500 Special Commentary February 5, 2013 for the years prior to FY2013.  The GAAP Deficit for FY2013 came from Commentary No. 606 and the Cash Deficits and GAAP Deficits for FY2014 and FY2015 are projections that I have calculated with my USAPonzi Fiscal Model assuming a continuation of current fiscal policy.

Is Janet Yellen drinking the Washington Kool-aid?

Janet Yellen is a highly trained economist that should be able to see the fraud that is being committed by the U.S. Government by using corrupt and fraudulent accounting.  The U.S. Government has been lying to the U.S. citizens and to the world about our financial condition since FY1969 by using an improper accounting methodology.   As a result, our reported deficit is not our real deficit and our reported debt is not our real public financial obligation.   And now even our most influential U.S. monetary leader, Janet Yellen the Chairwoman of the Federal Reserve Bank, may not understand what us happening in our financial system and our economy because of this improper accounting.  She either does not understand what is happening or she is willing go along with the lying that is coming out of Washington.

How can Janet Yellen stand in front of the most learned financial leaders in the world at this Paris Symposium and say that our deficit was under control at less than 4% of GDP just prior to the global financial crisis when our real deficit was in the 30-35% range of GDP at that time?  How can we expect 435 Representatives, 100 Senators, and the President to understand our financial system when the Chairwoman of the Federal Reserve Bank can be fooled by a simple little accounting trick by LBJ that was pulled more than 46 years ago?   We have actually had a long time to figure this out but since it is appearing to make the rich and powerful more rich and more powerful the whole gang in Washington is prepared to go along with the lie and Janet Yellen just cemented her position by making this speech.   She either does not understand what is going on or she is prepared to pass on the lies that are being told by the U.S. Government.  Neither is an admirable position.

The Primary Cause of USAPonzi is Improper Accounting

(using the wrong measuring stick)

The use of an improper accounting methodology is the primary issue that has created the massive Ponzi scheme (USAPonzi) that is being operated by the U.S. Government.  Most people in the United States of America know that the U.S. Government is spending too much and promising to spend too much but very few know, or at least acknowledge that they know, the magnitude of this overspending and overcommitting.  THE REASON they don't know the magnitude of this overspending and overcommitting is because the U.S. Government is using the wrong "measuring stick".  The U.S. Government is using Cash Accounting rather than the appropriate GAAP (Generally Accepted Accounting Principles) Accounting sometimes referred to as "accrual accounting".

I say that improper accounting is the only primary cause of USAPonzi since we also have a secondary problem in that we also spend too much on a cash basis.  The overspending on a cash basis has caused $17.9 Trillion of Debt and the improper accounting has caused $80.8 Trillion of Unfunded Liabilities.  So improper accounting is only about 80% of our problem.

USAPonzi is Creating Counterfeit Money

By undertaxing the U.S. citizens and businesses by the GAAP basis Deficit, the U.S. Government is systematically transferring this GAAP Deficit money from the future taxpayers to the current U.S. citizens and businesses.  Since FY1969 USAPonzi has transferred $98.7 Trillion (our GAAP Obligation) to current and previous U.S. citizens and businesses, but because the future taxpayers cannot pay back this GAAP Obligation it is counterfeit money.  USAPonzi is creating counterfeit money at the rate of our GAAP Deficit and for a total of our GAAP Obligation.  The current U.S. citizens and businesses are appearing to get richer every year by the amount of our GAAP Deficit and the future taxpayers are seeing their GAAP Obligation increase by the GAAP deficit.  If the U.S. Government were to continue this fiscal policy, USAPonzi would create an infinite financial obligation for future taxpayers and an infinite but phony wealth for current and previous U.S. citizens and businesses.

Some adults somewhere have got to stop this madness.  It may have to be the IMF.  I do not see Congress stopping it.  I do not see the SEC stopping it.  I now do not see the Fed stopping it.  It may just have to run long enough for the financial markets to call "bullshit".

But for right now we are in a Ponzi Economy that is dramatically increasing the apparent value of stocks, real estate, art, jewels, classic cars, oil, gold, etc by creating counterfeit money.   All because the U.S. citizens and businesses do not pay enough taxes.  All because of USAPonzi.  And all because LBJ was a scoundrel that said we do not have to collect the money to pay the social benefit promises and congress was willing to go along with this ruse.  And we have just kept on doing it for now more than 46 years.

Corporate Scandals because of Cooking the Books!

The use of improper accounting has caused scandals in several major corporations in recent years: Enron, Worldcom, Tyco, and Healthsouth to name some of the more prominent scandals.  By leaving some financial obligations "off the books" or by using other improper accounting techniques, these corporations were able to make it look like they were very successful, profitable, and valuable and as a result they were able to fool investors, increase their stock prices, and make some people rich as a result.   This is called "cooking the books".   The U.S. Government has been "Cooking the Books!" since FY1969 (see Enron on Steroids!).

In an effort to avoid these types of corporate fraudulent activities, the U.S. Government put into law the Sarbanes-Oxley Act that mandates that publicly traded corporations adopt GAAP Accounting (Generally Accepted Accounting Principles).   Our justice system convicted and imprisoned several of the key executives that were instrumental in "cooking the books" of corporations by using corrupt and fraudulent accounting tactics for financial gain.  And now the U.S. Government is doing exactly the same thing just on a much much grander scale (by more than 1000X).

State and Local Government Accounting Practices

In recent years we have also seen many instances where state and local governments have encountered financial and budgetary problems because they did not properly fund the pension plans for government employees and as a result did not have the financial capability to pay these commitments when they came due.  The GASB (Government Accounting Standards Board) has recently put in place a set of financial rules and regulations that require that state and local governments more transparently assess and report their financial condition (see for more information on the Government Accounting Standards Board).  These rules were put in place to address the very problem that has caused USAPonzi; making future financial commitments without being willing to fund these commitments.

Unfortunately the GASB only has jurisdiction over the state and local governments and not over the Federal Government.

Letters to the Securities and Exchange Commission (SEC)

This year I have sent six "Whistleblower" letters to the Securities and Exchange Commission stressing the need for the U.S. Government to begin using proper accounting practices that would expose the financial issues that are being created by USAPonzi.  My April 14, 2014 letter is, in my view, the most enlightening letter stating the reasons why the U.S. Government should be using GAAP Accounting.

Unfortunately the Securities and Exchange Commission does not have jurisdiction over the Federal Government but to whom do you go to complain when the Government of The United States of America is using corrupt and fraudulent accounting practices.

Cash Accounting, GAAP Accounting, and Fiscal Gap Accounting

There is also a third accounting methodology called Fiscal Gap Accounting that is being promoted by some in Congress (see to provide an even more precise measure of our total fiscal commitments.   I have written a commentary Fiscal Gap Accounting that attempts to explain the fundamental differences between these three accounting "measuring sticks".

USAPonzi is Stimulating the U.S. (and global) Economy.

USAPonzi is causing the U.S. Government to dramatically undertax U.S. citizens and businesses creating GAAP basis Deficit Spending, as shown in Table 1 above, that provides significant stimulus to the U.S. Economy.  I estimate that 45% of FY2014 GDP was caused by USAPonzi (see U.S. "Real" GDP FY2014) and I estimate that 47% of FY2015 GDP will be caused by USAPonzi (see U.S. "Real" GDP FY2015).

The Consequences of Current U.S. Fiscal Policy-USAPonzi

By overspending, overcommitting, undertaxing, and using improper accounting the U.S. Government has:

     Artificially stimulated the U.S. and global Economy as show above.

     Created $17.9 Trillion of Debt and $80.8 Trillion of Unfunded liabilities.

     Created $98.7 Trillion of counterfeit money.

     Granted most of this counterfeit money to the rich.

     Left future taxpayers with a $98.7 Trillion GAAP Obligation (Debt + Unfunded Liabilities).

     Left the social benefits recipients with nothing in the social benefit trust funds. 

And USAPonzi continues to operate; creating $19.0 Billion of counterfeit money every day.

American Economic Exceptionalism Explained

The United States of America has a reputation as the shining example of capitalism, productivity, and economic achievement.  I contend that this apparent prosperity is an illusion created by the effects of USAPonzi with its massive GAAP basis Deficit Spending and the U.S. Government's propensity to spend whatever it wants to without consideration for how the taxpayers will pay for it.

We are headed toward a financial catastrophe of epic proportions when USAPonzi Implodes!

Next Page: Fixing Fiscal Policy