In the previous installments of this series, we discussed the hidden and often unspoken crisis brewing within the employment market, as well as in personal debt. The primary consequence being a collapse in overall consumer demand, something which we are at this very moment witnessing in the macro-picture of the fiscal situation around the world. Lack of real production and lack of sustainable employment options result in a lack of savings, an over-dependency on debt and welfare, the destruction of grass-roots entrepreneurship, a conflated and disingenuous representation of gross domestic product, and ultimately an economic system devoid of structural integrity — a hollow shell of a system, vulnerable to even the slightest shocks.
This lack of structural integrity and stability is hidden from the general public quite deliberately by way of central bank money creation that enables government debt spending, which is counted toward GDP despite the fact that it is NOT true production (debt creation is a negation of true production and historically results in a degradation of the overall economy as well as monetary buying power, rather than progress). Government debt spending also disguises the real state of poverty within a system through welfare and entitlements. The U.S. poverty level is at record highs, hitting previous records set 50 years ago during Lyndon Johnson’s administration. The record-breaking rise in poverty has also occurred despite 50 years of the so called “war on poverty,” a shift toward American socialism that was a continuation of the policies launched by Franklin D. Roosevelt’s 'New Deal'.
The shift toward a welfare state is the exact reason why, despite record poverty and a 23 percent true unemployment rate (as discussed here), we do not yet see the kind of soup lines and rampant indigence witnessed during the Great Depression. Today, EBT cards and other welfare programs hide modern soup lines in plain sight. It should be noted that the record 20 percent of U.S. households now on food stamps are still technically contributing to GDP. That’s because government statistics make no distinction between normal grocery consumption and consumption created artificially through debt-generated welfare.
This third installment of our economic series will be the most difficult. We will examine the issue of government debt, including how true debt is disguised from the public and how this debt is a warning of a coming implosion in our overall structure. National debt is perhaps one of the most manipulated fields of economics, and the layers surrounding what our country truly owes to foreign creditors and central banks are many. I believe this confusing array of disinformation is designed to discourage average Americans from pursuing the facts. Here are the facts all the same, for those who have the patience...
First, it is important to debunk the mainstream lies surrounding what constitutes national debt.
“Official” national debt as of 2015 is currently reported at more than $18 trillion. That means that under Barack Obama and with the aid of the private Federal Reserve, U.S. debt has nearly doubled since 2008 — quite an accomplishment in only seven years’ time. But this is not the whole picture.
Official GDP numbers published for mainstream consumption do NOT include annual liabilities generated by programs such as Social Security and Medicare. These liabilities are veiled through the efforts of the Congressional Budget Office (CBO), which reports on what it calls “debts” rather than on the true fiscal gap. Through the efforts of economists like Laurence Kotlikoff of Boston University, Alan J. Auerbach and Jagadeesh Gokhale, understanding of the fiscal gap (the difference between our government’s projected financial obligations and the present value of all projected future tax and other receipts) is slowly growing within more mainstream circles.
The debt created through the fiscal gap increases, for example, because of the Social Security program - since government taxes the population for Social Security but uses that tax money to fund other programs or to pay off other outstanding debts. In other words, the government collects "taxes" with the promise of paying them back in the future through Social Security, but it spends that money instead of saving it for the use it was supposedly intended.
The costs of such unfunded liabilities within programs like Social Security and Medicare accumulate as the government continues to kick the can down the road instead of changing policy to cover costs. This accumulation is reflected in the Alternative Financial Scenario analysis, which the CBO used to publish every year but for some reason stopped publishing in 2013. Here is a presentation on the AFS by the St. Louis branch of the Federal Reserve. Take note that the crowd laughs at the prospect of the government continuing to “can kick” economic policy changes in order to avoid handling current debt obligations, yet that is exactly what has happened over the past several years.
Using the AFS report, Kotlikoff and other more honest economists estimate real U.S. national debt to stand at about $205 trillion.
When the exposure of these numbers began to take hold in the mainstream, media pundits and establishment propagandists set in motion a campaign to spin public perception, claiming that the vast majority of this debt was actually “projected debt” to be paid over the course of 70 years or more and, thus, not important in terms of today’s debt concerns. While some estimates of national debt include future projections of unfunded liabilities in certain sectors this far ahead, the spin masters' fundamental argument is in fact a disingenuous redirection of the facts.
According to the calculations of economists like Chris Cox and Bill Archer, unfunded liabilities are adding about $8 trillion in total debt annually. That is $8 trillion dollars per year not accounted for in official national debt stats. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion of this amount.
Kotlikoff’s analysis shows that this annual hidden debt accumulation has resulted in a current total of $205 trillion. This amount is not the unfunded liabilities added up in all future years. This is the present value of the unfunded liabilities, discounted to today.
How is the U.S. currently covering such massive obligations on top of the already counted existing budget costs? It’s not.
Taxes collected yearly in the range of $3.7 trillion are nowhere near enough to cover the amount, and no amount of future taxes would make a dent either. This is why the Grace Commission, established during the Ronald Reagan presidency, found that not a single penny of your taxes collected by the Internal Revenue Service is going toward the funding of actual government programs. In fact, all new taxes are being used to pay off the ever increasing interest on current debts.
For those who argue that an increase in taxation is the cure, more than 102 million people are unemployed within the U.S. today. According to the Bureau of Labor Statistics and the Current Population Survey (CPS), 148 million are employed; about 20% of these are considered part-time workers (about 30 million people). Around 16 million full time workers are employed by state and local government (meaning they are a drain on the system whether they know it or not). Only 43 percent of all U.S. households are considered “middle class,” the section of the public where most taxes are derived. In the best-case scenario, we have about 120 million people paying a majority of taxes toward U.S. debt obligations, while nearly as many are adding to those debt obligations through welfare programs or have the potential to add to those obligations in the near future if they do not find work due to the high unemployment rate that no one at the BLS wants to acknowledge.
Looking at reality, one finds a swiftly shrinking middle class paying for an ever larger welfare class. Do the math, and an honest person will admit that no matter how much taxes increase, they will still never make up for the lack of adequate taxpayers.
Another dishonest argument given to dismiss concerns of national debt is the lie that Domestic Net Worth in the U.S. far outweighs our debts owed, and this somehow negates the issue. Domestic Net Worth is calculated using Gross Domestic Assets, public and private. It's interesting, however, that Domestic Net Worth counts 'Debt Capital' as an asset, just as GDP counts debt creation as production. Debt Capital is the “capital” businesses and governments raise by taking out loans. This capital (debt) is then counted as an asset toward Domestic Net Worth.
Yes, that’s right, private and national debts are “assets.” And mainstream economists argue that these debts (errr… assets) offset our existing debts. This is the unicorn, Neverland, Care Bear magic of establishment economics, folks. It’s truly a magnificent thing to behold.
Ironically, debt capital, like the official national debt, does not include unfunded liabilities. If it did, mainstream talking heads could claim an even vaster supply of “assets” (debts) that offset our liabilities.
This situation is clearly unsustainable. The only people who seem to argue that it is sustainable are disinformation agents with something to gain (government favors and pay) and government cronies with something to lose (public trust and their positions of petty authority).
With overall Treasury investments static for some foreign central banks and dwindling in others, the only other options are to print indefinitely and at ever greater levels, or to default. For decades, the Federal Reserve has been printing in order to keep the game afloat, and the American public has little to no idea how much fiat and debt the private institution has conjured in the process. Certainly, the amount of debt we see just in annual unfunded liabilities helps to explain why the dollar has lost 97 percent of its purchasing power since the Fed was established. Covering that much debt in the short term requires a constant flow of fiat, digital and paper. Not only does REAL debt threaten our credit standing as a nation, it also threatens the value and full faith in the dollar.
The small glimpse into Fed operations we received during the limited TARP audit was enough to warrant serious concern, as a full audit would likely result in the exposure of total debt fraud, the immediate abandonment of U.S. Treasury investment, and the destruction of the dollar. Of course, all of that will eventually happen anyway...
I will discuss why this will take place sooner rather than later through the issues of Treasury bonds and the dollar in the fourth installment of this series. In the fifth installment, I will examine the many reasons why a deliberate program of destructive debt bubbles and currency devaluations actually benefits certain international financiers and elites with aspirations of complete globalization. And in the sixth and final installment, I will delve into practical solutions - and practical solutions only. In the meantime, I would like everyone to consider this:
No society or culture has ever successfully survived by disengaging itself from its own financial responsibilities and dumping them on future generations without falling from historical grace. Not one. Does anyone with any sense really believe that the U.S. is somehow immune to this reality?
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written by Rifleman , March 18, 2015
If you could go even deeper and expand on why individuals have allowed government to become this corrupt with monetary (and fiscal) policy.
Government is suppose to be for the people. Therefore, people are suppose to tell government what to do.
If government is not listening or doing what the people want, then the problem is with the people (the individual).
written by Brandon Smith , March 18, 2015
@Rifleman
It's not exactly that simple. Tyrants tend to lie and terrorize in order to gain power. If the people were entirely aware of the facts, without propagandists muddying the waters, then yes, they would likely take action. Problem is, the masses are hypnotized everyday with disinformation.
The solution, in part, is to spread the correct information in a way that breaks through the conditioning and bias. This is VERY difficult.
The next part of the solution is to take action with as many awake people as possible in a manner that is the most effective according to your numbers. Sometimes this means protests, sometimes political organization, sometimes revolution.
There are no easy answers. Everyone is culpable in some respects. If a person lives in a bad neighborhood, and he leaves his doors unlocked, and his house gets robbed, then he is partly to blame. However, ultimately, it is the robber that committed the crime, not the homeowner.
written by blueb , March 18, 2015
Excellent article Brandon.
People will wake up... but the Titanic can't be saved.
written by justanobserver , March 18, 2015
Brandon,
In reference to Social Security, the administrators report issued yearly has indicated the need for either an increase in social security taxes, a cut in benefits or both since at least the report issued in 2010.
Since 2010, Social Security has had to redeem its intra-governmental Treasury bonds (which are not Treasury bonds in the traditional sense, they are 10 year IOU's between Social Security and the Treasury) which were paying between 4 and 5% interest in exchange for bonds paying 1 to 2%.
The failure to increase taxes/cut benefits as well as the decrease in interest income earned puts Social Security at a much earlier date for the legally required cut in benefits (as that is what the law requires) than mainstream media and the AARP continually tell the American people.
If Clowngress decides to fix the shortfall in the disability insurance component of Social Security (which goes belly up sometime in 2016 due to the several million more people claiming disability) by using the main Social Security trust funds (which they are discussing now) the date that, by law, Social Security must cut benefits moves a lot closer to early next decade than anyone will accept when they hear it.
If we make it that far...
written by Vincent A , March 18, 2015
Brandon First off your articles are amazing and very informative and important to those of us are awake and paying attention. I was hoping you could maybe give your opinion on what things will look like when all hell breaks loose? Do you think its going to be a complete breakdown in society? Or maybe some people continuing to make a living and have the things we currently have like power, food etc? Maybe a complete police state where every aspect of our lives are controlled? Or do you see a nuclear war where everyone looses?
I make a decent living working for myself, my wife and I live a very modest lifestyle, with very little debt and no extravagant things. My biggest concern about what is going on is because we have a 1 year old son.
Last year we moved from NJ up to a farm in a New England town with a very light population.
Any info on how you see things playing out is greatly appreciated.
Thank you for everything.
written by Brandon Smith , March 18, 2015
@Vincent
I really can't predict how bad it will get, simply because the elites have every option to make a collapse as painful as they wish. They could initiate an economic war and turn the U.S. into a third world state that still has a semi functioning system (but likely a totalitarian government), or they could initiate a shooting war and create a "Mad Max" scenario.
I personally think that the elites would avoid all out nuclear war simply because they prefer to keep the Earth relatively pristine for themselves. If you think about it, pandemic is a much better option for them than nuclear war, because infrastructure remains intact. Economic collapse by itself would do much of their work for them, merely through starvation in a couple months time.
Of course, nothing is certain, not even for them. The liberty movement is a wild card they can't control. They'll try to co-opt us (they've already been attempting this). Then they'll try to get rid of us. I don't think either path will be successful for them.
I think moving away from the city was a very smart move. The only way to improve your odds at this point though is to build community. Preppers alone are prepping for nothing, in my opinion. Without community and tactical training, we are nothing more than juicy targets.
OPSEC alone is not enough, either. Someone will eventually stumble across you, and they may not be the nicest folks. With a community defending each other, not many people would present a threat to you or your son.
written by agent , March 18, 2015
Brandon:
Thanks for providing such an important article.
My only correction would be that taxes do pay some governmental expenses other than interest on the debt.
Interest on the debt is a small portion of our budget.
But the unfunded liabilities plus the interest on our debt consumes at least 80% of our tax revenue.
It is very important we understand that the government counts debt as part of our GDP.
From an accounting standpoint, the debt owed to Social Security of around $4 trillion is a wash.
It is an asset to the Social Security trust fund and a liability to the Treasury.
Unfortunately, the owner of the asset and the liability is the U.S. Government.
The asset has been used to pay for other government expenses, as you wrote, rather than saved to pay for Social Security. The liability is real and is owed, so, from an accounting standpoint it should not be a wash, for the asset has been spent, but the liability remains.
Don Levit
written by Brandon Smith , March 18, 2015
@agent
If you use the official debt calculation, then yes, you are correct. However, according to the Grace Commission findings, all taxes go towards debt interest. This includes interest on debts not advertised in national debt reports (social security debts generated over years of siphoning from the fund to pay for other expenditures, for instance).
As Archer and Cox show, annual debt generation through Medicare and Social Security is around $7 trillion. The official numbers are inaccurate, making some debts hidden. Once those debts are accounted for, the picture changes drastically.
written by Macatozi , March 18, 2015
As always a good article. Could you clarify for me a point you made about capital dept as net worth; you stated "This capital (debt) is then counted as an asset toward Domestic Net Worth." I would agree that it should be counted as net worth as long as the note or debt is counted as a liability. For example, if a business borrows to finance a capital investment such as a warehouse, that warehouse or the cash received to purchase the warehouse before the purchase is made is considered net worth on a balance sheet, the obligation or principle balance on the loan is then considered a liability against the net worth. Are you suggesting the USG is counting capital debt as an asset and not the loan balance as a liability? Thanks for your work.
written by Brandon Smith , March 18, 2015
@Mactozi
There are some mainstream economists (as linked to in the article above) who argue that Domestic Net Worth far outweighs Domestic net debt. The problem is, Domestic Net Worth calculations include "Debt Capital", which consists of the exact loans and debts the mainstream pundits are trying to dismiss.
Perhaps I am misunderstanding your position, but debt is NOT an asset that negates itself. Debt does not cancel itself out. There is no planet where such mathematics are workable. If I use $10,000 on my credit card to purchase goods and services, that does not add $10,000 to my net worth. If I have a student loan of over $30,000 that I have yet to pay off, credit ratings companies do not count that $30,000 as an asset. Yet, if I am a government or country, my net worth suddenly includes most if not all debts I have incurred over the years, because "debt capital" is automatically included in Domestic Net Worth? This would be the equivalent of me claiming that my assets outweigh my student loans because my student loans count as assets.
written by Lars Olfen , March 18, 2015
"we do not yet see the kind of soup lines and rampant indigence witnessed during the Great Depression. Today, EBT cards and other welfare programs hide modern soup lines in plain sight."
AMEN
WalMart, the Snack Food Industry of America, Pepsico, CocaCola and the rest lobby the bureaucracy for increased acceptance of foodstamps (EBT) for all manner of "food".
This transfer of wealth is the only thing keeping WalMart afloat as they struggle with perpetual inventory issues, in store product availability issues, employee morale, management indifference and more.
WalMart is unsustainable on Chinese trash and trinkets.
Notice "we accept EBT" at more and more liquor and convenience stores.
written by Di Di , March 19, 2015
Cause of death?
Trampled by sheep... chasing trinkets and trash :(
written by Alexander Nguyen , March 19, 2015
damn, this article is exceptional. I wish more mainstream journalists were this honest in their assessment of the economy. I love this country but fear what the future has in store for us. The public has no clue on what is going on with our government.
written by Lars Olfen , March 19, 2015
Alexander Nguyen,
If traditional US media portrayed the reality of the situation vs. the agitprop pap there would be a "sheep trampling" of historic proportions as Di Di states. The trampling would be ongoing, not just at "holidays".
written by justanobserver , March 19, 2015
Lars Olfen,
Sheep trampling?
Can we equip the sheep with cleets for rock climbing so that the elites get the point?
written by Peter Alexander , March 19, 2015
Brothers and Sisters of Liberty ~
Fear not; however, prepare for the worst, because that is where our no called leaders are taking us. They will divide us and cause in fighting and civil unrest, then swoop in and repress all decent and the real tryrant will show himself.
Do not be surprised that any moment of any day, week, month or year, the feces hits the oscillator.
God bless Brandon for honest, insightful information. Yes, we must each prepare to survive without access to food, water, medicine, work and pay, hospitals, etc. We must each immediately implement our family survival plan.
Store enough food and water or purification of water in the area weapons, ammunition, medical supplies, medications, sweet treats if you like, activities (cards, board games), althought most of our time will be basis =survival in WROl situation.
Yes, community is critical. Connect now, build relationships with the good folks around us and establish rule of law communities that can have non-aggression copacts and defend the entire area.
Teams of well training and skilled tactical folks capable of search and destroy, parameter protection, guard, and resupplying communities with the food, water and other item needed over the long haul.
Be Not Afraid. We must restore and practice and share and live our faith, for God is our salvation, our protection , pour guide and His Grace will win our victory.
We have to be obedient to God's Commandments and reestablish a nation of laws.
There are many among us who are greedy and profiting from these times, as always. Select rightious people to associate with and set high standards for inclusion in communities.
We will survive. It may take a long hard struggle; however, we are on the side of Good and we will defeat the evil people around ud. The spiritual battle is God's; however, we have much to do as obedient survants of outr LORD.
As for me and my house, we will serve the LORD. God bless you. Long live the Restored Constitutional Republic. Peace, Peter ~
written by Implied Violins , March 19, 2015
I have a coworker who has a brother that works with the Department of Justice. His brother says they are really worried about the Oath Keepers and are keeping an eye on them, because 'they are HUGE!!'
Best thing I heard all week.
Another great article. When the series is complete I'll be sharing this with coworkers, some of whom you are winning over.
written by year2015 , March 19, 2015
Brandon,
Excellent article but should you not include the astronomical derivatives debt the u.s. banking system has accumulated?
written by Brandon Smith , March 19, 2015
@Year
My focus in this article was geared towards government debt only, but maybe I can cover private banking debt in the next installment.
written by Lars Olfen , March 19, 2015
Just an Observer,
I should think spiked crampons for trampling, no?
written by year2015 , March 20, 2015
Brandon,
Looking forward to any future articles you care to pen regarding the, in my opinion, catastrophic situation that is facing america. I justrecently found your website and have started reading your articles. I havecome to appreciate a stright shooter greatly as they seemto be a rare commodity these days. Again, thanks for writing these articles to inform people, at least those who want to be informed and haveeyes to see and ears to hear.
written by justanobserver , March 20, 2015
Lars Olfen,
You're right.
The cleets would be better for running win sprints across fields of elites!
written by Bobgrapes25 , March 21, 2015
Brandon:
Excellent article with biting insight! Many of us only want to know when a collapse will happen. Some predict this year. Others say soon. What do you think will trigger it? The world moving away from the dollar? Hyperinflation?
written by Dr Darryl Jewett , March 21, 2015
Thank you, Brandon, for taking time to present the results of your thorough research. It'd be disrespectful of me if I concluded the obvious which is that anyone with a fifth-grade education should already understand most of that which you've presented in your article. Unfortunately, that many don't reflects the deplorable state of our education system. Anyway, can you provide links to other articles in this series (or any other articles you think are helpful to understanding the dilemma our country is in)? For convenience of readers and so I can direct others to them. Thanks in advance.
written by Lars Olfen , March 22, 2015
Dr Jewett
"It'd be disrespectful of me if I concluded the obvious which is that anyone with a fifth-grade education should already understand most of that which you've presented in your article. Unfortunately, that many don't reflects the deplorable state of our education system. "
Think about that for a minute.
Yes, the education system has been reduced to the least common denominator of stupidity. Yes, through gradualism our liberties have been eroded since confiscatory taxation and the banking cartel were legalized.
HOWEVER, if we concede "that many don't" understand most of what is going on in the United States haven't we let the elites win? Is this not what they want us to think?
I submit that the People are far more awake than they're given credit for being. That fact alone poses an organizational threat to the status quo. It is what they WANT us to believe...and we do. Otherwise we'd far more effectively organize and resist the tyrannical onslaught.
written by Mr. D , March 22, 2015
Well written article. People need to understand the reason for the ever worsening financial situation in "1st World" Countries. It is difficult to find a country that is not having financial issues.
To keep it simple, "Resources". Yes folks, it comes down to resources. Call it what you will, commodities, resources, etc.
The Earth is projected to run out of many non-renewable resources by 2050.
What you see going on in the World today is Global posturing for the remainder of those resources, it really is that simple.
Can you all imagine living on a overpopulated, starving, polluted rock? Oh wait........
written by Trygve , March 24, 2015
Brandon,
Since at least 1913, the bankers have been selecting corrupt leaders in place who buy from corporations and charge it to us taxpayers (without giving us a vote). Isn't the spiral of debt we have experienced since then is equal and opposite to the spiral of wealth they have experienced (minus inefficiencies)?
Who do we owe $205 trillion to? Thirteen families? Who does the rest of the world owe twice their GDP to? Those same thirteen families? We all know that debt was accumulated illegally. Why can't we just default?
At some point, the engineered collapse of the dollar will take place - no doubt! I also believe that the elite banking families will continue to use divide and couquer to have us all inflict tremendous pain on one another. That way, when they introduce their new currency (with plenty to go around for everyone willing to take the mark), people will fall in line to accept the free food etc.
There must be a way to get humanity to reject money. All of us 99% are the producers of food. We need to figure out how to distribute the food without money. The banking families cannot stop us from being good to each other if none of the 99% will follow orders!
I don't want to give you advice because you are very smart and see the truth more clearly than anyone I have ever met. Have you read UBUNTU Contributionism: A Blueprint for Human Prosperity by Michael Tellinger? In it, he describes how to create prosperity without money. If this takes hold around the world, the thirteen families won't have a chance!
There are a few key pieces to making this work. I believe most all earthlings agree that we have a problem. I also believe that most all earthlings want to help. The biggest problem is that we have all been brainwashed into thinking we need money and that society won't work without it. In his book, Michael destroys every argument supporting this theory.
Oath Keepers is part of the answer. I wish we had a good chapter here in Minneapolis/St. Paul. I also wish Oath Keepers would try to promote prosperity without money. That IS the answer to this whole thing.
Money is the root of all evil - not the love of money.
Thanks Brandon - keep up the good work!
