Jesse's on the Deficit

[don]

21 August 2011

The US Deficit In One Picture

I like this graphic for several reasons, but especially because it puts everything in proportion with regard to the US' current obligations.

One thing I would like to highlight is the large surplus funds in the Social Security Trust and others. These were 'invested' in a special type of intra-governmental Treasury note.

These funds are not 'gone' anymore than a Treasury bond is 'gone.' It is a sovereign debt holding. If the US defaults on its debt, then it defaults. But let's call it what it is.

The Trust Funds are not the money that the government 'owes to itself.' It is a Trust fund, that is, money held by the government in Trust for others. The Trustees invested it in a special category of Treasury bonds that do not trade on the open market.

So to somehow suggest that Social Security is bankrupt now because the government spent the funds on general obligations is to assert a violation of Trust, a fraud, and a selective default on the sovereign US debt.

And do not think that the world would view it any other way, despite the spin put on it by faux economists, useful idiots, and mainstream propagandists for the money men.

Where would you think they would put a Trust Fund of this size? In a passbook savings deposit account? Federal Reserve Notes? The stock market? It was given to the government to be invested in bonds that were judged to be the least risky form of storing that wealth.

No, the real problem is that the US has malinvested too much of its revenue in too many fruitless and unfunded projects like wars, overseas military bases, and other subsides to oil companies, banks, and multinational corporations. The partnership between the money men, their corporations, and the government has allowed corruption to grow and prosper.

The money men and their cronies directed the peace dividend into their own pockets. And now that hard times have come, they wish to not only keep their gains but multiply them, and visit hardships on the very people whom they have defrauded. Their greed and hypocrisy knows no bounds.

"Adversity creates men; prosperity makes monsters."

Victor Hugo

The US trade deficit and the stagnant real wage are major unaddressed problems, and has been so for the past twenty years. And those are the result of the distortions of fiat money regimes.

Reform and domestic growth is the answer to the US and UK problems, and not further looting and economic pillage of the laboring classes to provide largesse to the money men and paper manipulators.

http://jessescrossroadscafe.blogspot...e-picture.html

[rabot10]

Re: Jesse's on the Deficit

Are you on drugs?

[Starving Steve]

Re: Jesse's on the Deficit

That all looks like debt to me. Someone or some country or some federal trust fund holds the debt, but it is debt nevertheless. No country can create wealth on paper, anymore than I can write a cheque to someone with no money in the bank to redeem the cheque.

Imagine if I ran a business and issued cheques on thin air, on faith in my good name, to pay for purchases of goods for the business. I might then go another bank and deposit some new hot cheques in a chequing account. I might then issue new cheques on that other bank and deposit those new cheques into the chequing account of my original bank in order to provide funds for my earlier hot cheques...... How long would I be able to remain in business, on faith in my good name?

Sooner, not later, the police would come calling, and I would be charged with cheque kiting. (Watch the story to-night on the 10 o'clock news.)

The cheque kiting case comes before the courts, and I tell the court that I issued cheques on my family's retirement trust fund. And the prosecutor asks me, "Did you have cash deposits in your family's retirement trust fund to honour the cheques you have written on your business account?"

"No Sir," I might reply, "I wrote cheques on my business account to cover my family's retirement trust fund, which I hold under my good name." And the prosecutor might then ask, "But where were the good funds to cover any of these cheques?"

"Well," I might tell the court, "I have been issuing IOUs to other businesses, old friends of mine in business who trust me. And they have lent me cash."

And the prosecutor asks, "So what did you do with the cash?" And I reply to the court: " I had to pay for ventures in Afganistan and another venture into Iraq."

And the prosecutor asks, "But where is the cash now to pay for the pyramid of cheques you have outstanding? You are running your business on faith and debt."

But I might continue: "Your honour, I was expecting my business to grow, literally my debt would pay for growth in my business, consequent growth in business income, and my intention was to cover my outstanding debt with the new revenue from the business..... It seemed to me that my business would never shrink, especially if my business had an increase in debt to finance the growth in my business."

The judge or prosecutor might then ask: "Did you tell your creditors about your business plan?"

"Yes sir," I might reply. "And my creditors, including banks, would fall all over themselves to lend me money. My creditors even showed me how to retire old debt with new debt, forever. That meant I could grow my business forever."

The judge or prosecutor: "Where did you learn this kind of business plan, this economics of yours?"

And I would inform the court that I learned my economics and business skills at Princeton University.
"My professor was Mr. Bernanke."

[goodrich4bk]

Re: Jesse's on the Deficit

Your post makes no sense, Steve. A check is an immediate promise to pay, cashable the day of delivery. The debt in the chart is all evidenced by bills, notes and bonds, not checks. And the government that issues them does not need "money in the bank" any more than you or I need money in the bank when we charge with a credit card. All we need is money in the bank when the bill comes due. And to the government, that means tax revenue.

Now, if you're criticizing Republicans for writing checks for war and tax cuts for which they now refuse to raise taxes to pay, I'd say you've got the correct analysis. They wrote checks and are now refusing to deposit sufficient funds to cover them. Suddenly, deficits matter, even though this chart shows that the greater share of them were created under Republican administrations. Both parties are complicit, but the Republican machine -- dressed now in patriot's clothing --- is truly degenerate. If Rick Perry or any of the current sad sacks win, you can guarantee that more tax cuts on the wealthy and tax raises on the poor will follow. Just look at the WSJ editorial today opposing any extension of Obama's payroll tax cut, even though they admit that it can increase jobs short term. Instead, they argue that Congress should let the payroll tax cut expire and, instead, should reduce marginal rates. In other words, tax cuts for the top half who pay income taxes, tax increases for the bottom half that pay only 15% payroll taxes.