“Citizens! The integrity of the government has been violated. A financial trust has control of your money, and with it is robbing you of your property. Vampires feed upon your commercial blood….Oppression now seeks to enslave this fair land. Its name is greed…This is a struggle for humanity – for our homes and firesides, for the purity and integrity of our government.” ~ From Mr. Coin, a fictional character of William H. Harvey, Chicago, 1894, describing the depression of that era
“I have always said if you torture statistics long enough they will eventually confess.” ~ Former U.S. Sen. Alan Simpson, co-chairman of President Barack Obama’s fiscal commission
Never were words of greater truth spoken than those above. When will the people of America recognize that our country has been looted, not bailed-out or stimulated? The staggering funding requirements of all our government’s bail-out/stimulus programs of the last six years have been provided by borrowed money. So, the aggregate of these bail-outs is debt that is supposed to be repaid, not just surplus funds taken from the Treasury, all of which is gone anyway! Never lose sight of the fact that these bail-outs didn’t bail-out Main Street…they just bailed out investment and commercial bankers and foreign creditors.
About four years ago we first heard about the U.S. Treasury Department’s $700 billion dollar bailout of failing financial institutions, failing major industry players and foreign creditors, too! On February 16th last, from Bloomberg News, we heard that the U.S.debt ceiling is expected to be reached and surpassed sometime before the end of this year, according to a new warning from Treasury Secretary Geithner. That means the national debt will have ballooned to $16,400,000,000,000 (that’s $16.4 Trillion) or 16,400 x $1 billion. And, this number doesn’t even include the cost of the Afghan war which economists now believe will have cost us yet another $3 Trillion dollars. It’s likely that shortly after the next President takes office, the U.S. national debt will be close to $17 trillion. The privately-owned U.S. Federal Reserve Bank will simply print most of this money and then loan it to the U.S. Treasury Department as a debt we taxpayers will have to repay including interest. Any difference will come from the last cash the Treasury Department has and from the FDIC. However, you can’t pump $17 trillion in funny money into the economy and not expect consequences. Economics is a zero-sum game…you tamper with one thing, you create an equal and opposite reaction somewhere else! Let’s see if we can put these numbers the government keeps so loosely throwing around into some sensible context.
So, now that you know the U.S. Federal Government’s total perpetual bail-out/stimulus package will soon approach $17 Trillion, ask yourself if you really have any idea how much a trillion is, much less 17 trillion? Here are some facts to put the answer into context:
The first known humanoid, the creature which evolved into the Homo Sapien, has been dated at about 100,000 years of age. Neanderthals disappeared from Earth about 35,000 years ago. Humans first commingled into villages, the beginning of modern civilization, about 10,000 years ago. A trillion seconds ago was about 31,688 years ago. 17 trillion seconds ago was about 534,680 B.C…predating Homo Sapiens more than 400,000 years. Can you get your head around those numbers? I quite often hear left-leaning activists say that if all the wealthy would just pay their fair share of federal taxes, we could pay off the national debt. The person who says this neither understands mathematics, economics, the global or U.S. economies or simple deductive logic. A 100% tax rate, forever, on all the wealthy people in the world couldn’t pay off a fraction of that debt. What’s more, the U.S. Congress and U.S. President, the U.S. Treasurer and the Federal Reserve Bank, plus the International Monetary Fund, the World Bank, and all the world’s major economists all know this. Only you, the common voter, aren’t told of our plight. But if the U.S Government, Congress, the President, and the Fed all know this, then why do they keep promising more spending programs and more wars while they create more and more money that generates less and less wealth? Because they have no intention of paying back our national creditors in today’s dollars…they will repay them in devalued dollars which will leave the purchasing power of your net worth, dear reader, to be a tiny fraction of what it is now while your cost of living will skyrocket completely out of reach. Remember, the nominal value (what’s on your bank and brokerage statements) of the dollars you own don’t really mean much of anything…only the purchasing power of your dollars counts for anything. Here’s my point: The other day I saw a picture of a demonstration in Zimbabwe. One of the demonstrators was holding a clever sign which read “Billionaire willing to work for food.” Too many Americans mistakenly think of their wealth in terms of the number of dollars they have rather than in terms of what they can buy with their dollars.
But, let’s continue the exemplification. Let’s say it’s the year 1, the beginning of the first millennium. You have a trillion dollars to spend–at the rate of one million dollars a day. At just before three years, you’ve reached a billion dollars. So you keep spending. Now you are in the year 2,000. Would you believe you’d still have 737 years to go before you exhaust your trillion dollar pile? To spend $17 trillion would take you approximately 12,530 years. Meanwhile, it would also take that long to repay the debt our country will incur to pay back what our government will have to borrow to finance the aggregate amount of these aforementioned bail-outs and stimuli.
Pressing on, if you were getting paid at a $1/second rate for every second of the year, you would take in $31,536,000 for the entire year. At that rate, to earn a trillion dollars, you would have to work more than 31,709 years or you’d have to work about 539,052 years to earn $17 trillion! Lots of luck! If the wealthy were to pay out everything they make in taxes, I don’t think they would have much success in getting us out of this monstrous debt. Do you? Nevertheless, I write this not as a defense of the wealthy but as a condemnation of the U.S Congress, the U.S. President (whomever he or she may be) and the privately-owned central bank of the U.S. otherwise known as the United States Federal Reserve Bank.
So, shall we continue just a little further? A tightly-packed stack of new $100 bills totaling $1 million would be about 4 feet high. A billion dollars, 4,000 feet high or equivalent to about three Sears Towers stacked on top of one another. That means a stack of $100 bills totaling $1 trillion would be 789 miles high or 144 Mt. Everest’s stacked on top of one another or 2,448 Mt. Everest’s stacked on top of one another to equal $17 trillion. That’s 13,412 miles straight up.
On November 21, 2008 the world came within a hair’s breadth of the most colossal financial collapse in history according to bankers on the inside of events. The trigger was a bank, which only two years prior to that date was America’s largest, known as Citigroup. Not only is our economy spinning out of control, so is our ability to control events and even our country’s future. The bank derivatives counterparty risk situation is so intertwined, with six US major banks holding the vast bulk of worldwide financial derivatives exposure, that the failure of a single major US financial institution could result in losses in the OTC (Unregulated Over-the-Counter as opposed to Exchange-Traded) derivatives market of $300-$400 billion, a recent International Monetary Fund working paper finds. What’s more, such a failure would likely cause cascading failures of other institutions. Total global financial system losses could exceed another $1.5 trillion according to an IMF study.
The Levy Economics Institute says, “It is probable that many and perhaps most financial institutions are insolvent today — with a black hole of negative net worth that would swallow Paulson’s entire 2008 $700 billion in one gulp. The dilemma Paulson and Geithner have created with their inept handling of the on-going crisis is simple: If the US Government paid the true value for these nearly worthless assets, the banks would have to write down huge losses,” and, as Levy economists put it, “…announce to the world that they are insolvent.” If Geithner raised the toxic (mortgage) waste purchase price high enough to protect the banks from credit derivative losses, $700 billion “would have bought only a tiny fraction of the ‘troubled’ assets.’ ” That is what the quasi-nationalization of Citigroup was about. These unfathomable bank “gambling” losses are what the bail-out/stimulus programs are really about…not helping out Main Street.
If the Treasury borrows money to finance a program, that money is added to the federal debt and must eventually be paid off, with interest, says Diane Lim Rogers, chief economist with the Concord Coalition, a nonpartisan group that aims to eliminate federal deficits. The problem is, “if you print money all the time, the money becomes worthless,” Rogers says. That includes your personal net worth. This always leads to higher inflation and higher interest rates. The value of the dollar also falls because foreign investors become less willing to invest in the United States. Rogers says her biggest fear is not hyperinflation, but the social unrest it could unleash. “I’m more worried about a lot of federal dollars being committed and not having much to show for it. My worst fear is we are leaving our children with a huge debt burden and not much left to pay it back [with].”
OK, we’ve had enough fun with the illustration of the size of the debt numbers we face. Now, let’s get really serious! Here’s a fairly reliable way of figuring out what the per person share of the U.S. National Debt is. Ask yourself if you and each of your family members could come up with the final per capita liability?
Before I give you the formula, though, maybe this would be a good time to let you know that the soon-to-be $17 trillion published national debt that Congress will argue over is meaningless…it’s just a political kinard.
This is the formula: take $55, or so, trillion of reported total debt (from the Fed’s Z-1  report which includes, in addition to the National Debt Ceiling so oft debated in Congress, trillions of owed and outstanding debt NOT carried on the Government’s balance sheet, otherwise known as “off-balance sheet” financing…) Now, let’s add to the above internally published Fed Report national liability amount yet another $100, or so, trillion of unfunded liabilities (commitments to incur future debt as with Social Security, Medicare, Medicaid, more wars etc.), and toss in a modest portion of the derivatives that are effectively “debt” (any thoughts on that one?), and divide by 300 million Americans and what do we get?…We get more than half a million per capita. Anyone have some other suggestions for the formula to determine what the actual debt is for all, and, more importantly, on a per capita basis?
So, the never-ending hyper-inflationary bail-outs, stimulus packages, and wars will take our standard of living down to third-world status beginning next year and leave the U.S. with debts it can never repay. If its creditors aren’t repaid, then funding for government provided services will be largely cut off. This is not speculation any longer. It’s the only outcome left to us since America has been looted of all the funds that it needed to finance its future growth. Think about this as you cast your votes on November 6, 2012. And, keep thinking about those promises the candidates have made to you.
After the November 6, 2012 Election, the new American mantra will be:
Chic poverty…coming soon to neighborhoods near you! (as said in the Daily Reckoning).