In the previous Economic Update we looked at how money that
is based on credit is being systemically destroyed by the international bankers
having shut off the “credit availability” valve. We saw how the nation’s
overall money supply is shrinking – as we get immersed into a deflationary
spiral.
What has been the Federal government’s response to this crisis?
It has been an attempt to offset the amount of the international bank caused
credit destruction by embarking on a program of massive credit creation – new
debt. The following graph shows how much effort has been expended by the
Federal government towards their goal. Notice what has happened since Q3 of
2008 when this whole debacle really took off:
This is a picture of
attempted government survival. What would have happened to our economy if the
Federal government did not undertake such huge debt creation? We would be in a
clear-cut major depression. Citizens would be storming the government halls
seeking relief. Government officials would find their political survival at
stake.
Here’s the million dollar question. Ready? Can the Federal
government keep creating new debt at such a reckless pace to continue offsetting
the credit destruction that’s occurring in our economy? Some people would say:
“Sure, the government can just print more money!” It’s not that
easy.
The Federal government has three primary ways that it can attain
funds to spend, and none of them involve printing money – since the Federal
government has absolutely no present authority to do so (unless you want to do
something strange like adhere to our U.S. Constitution).
The first way
that the government gets money is through tax receipts. This has posed a
“little bit of a problem” with all of the hard times people and businesses are
finding themselves in. Here’s the chart:
As you can
see, tax receipts are not a very reliable source of income for the Federal
government right now. They sure won’t help to pay for much of the debt creation
they’ve undertaken.
A second way that the Federal government gets money
is through selling US Treasury securities. These are IOU’s that the Federal
Reserve auctions to investors on behalf of the US government. The government
promises to pay the bearer of a security the face (par) value plus some amount
of interest after a specified period of time. In effect, the US government is
promising our future labor to whoever holds the securities. We become debt
slaves to a larger degree.
The issuance of US Treasury securities is
going well, but the government is beginning to be in a somewhat problematic
position. Not only do they need to sell new debt, but they also have to resell
the old debt that’s maturing so that they can afford to pay the bearers back.
Needless to say, selling US Treasury securities is not the panacea for taking on
large amounts of new debt.
The third way that the Federal government
obtains money is to physically steal it. Yes, you read that right – steal
it.
Most are familiar with various taxes we pay such as Social Security
and Medicare. These funds are sent to Washington, D.C. and are placed in
government “trust” funds. Very few people understand how “trust” funds
operate. I always put the word “trust” in quotations since it is such a
misnomer.
I’ll use the Social Security “trust” fund as an example. Each
year, taxpayers pay in their Social Security taxes of about 15% (7.5% which most
employees never see since it is paid by the company and considered part of
employee “overhead”).
All of the money ends up in a big Social Security
“trust” fund pile in Washington. The government then pays out any benefits to
those authorized to receive them. The amount of money left over in the “trust”
fund is then stolen, and used to pay for other government largesse. The stolen
money is replaced with a special form of US Treasury Security (IOU) that is
guaranteed to be paid back by the future labor of the masses.
Please
understand what I just wrote. All “trust” fund money from all “trust” funds
disappears by the end of each fiscal year. It is either used to pay recipients
of the particular “trust” fund, or it is stolen for other government spending.
This means that all of the money that we have contributed to the various “trust”
funds over the years is already gone. It doesn’t exist. We are simply relying
on the ability of our Federal government to tax future generations to pay for
our eventual “trust” fund benefits. It’s perpetual debt slavery, and it’s done
with the threat of a gun and/or the bars of a cell.
Here’s the problem
with “trust” funds. Thanks to the international bankers shutting off the
“credit availability” valve we have a situation where a lot less people are
working. This means fewer people are now paying taxes and contributing to the
“trust” funds. As a result, every single “trust” fund now has to pay out more
to its recipients than it receives in taxes – include Social Security. The
“trust” funds are dry. Empty. Kaput.
Do you see the problem?
Our
Federal government is hoping beyond hope that the international bankers will
turn the credit valve back on soon. In the meantime, they’re desperately hoping
that they can create enough new debt to counteract the credit destruction that’s
taking place. If the government fails in doing so at any time then we will have
a nation that slides into a very uncomfortable economic climate that has the
potential for geographical areas of anarchy. The Federal government would also
need to begin disassembling their power structure – since there would no longer
be the funds to pay for it. Rather than doing so, they may resort to a new
method of creating debt – a full-out invasion of Iran.
In conclusion, the
Federal government is beyond desperate for money – and their usual avenues of
getting it are not bearing fruit.
This brings us to the Health Care
bill. Most people are busy debating the merits of the bill concerning how it
will affect our health care cost and treatment options. In reality, none of
that is the purpose of the bill.
The Health Care bill is being forced
through in order to create a new government “trust” fund that can be stolen
from. Taxes would begin this year, while initial implementation of the proposed
bill would not begin until 2013 at the earliest – and a sizeable chunk of it not
until 2018.
This means that all taxes paid in up until 2013 would have no
payouts required. All of the money would be stolen to create new government
debt – in an effort to hold off the bank caused credit
destruction.
People need to be on the phone continuously with their
elected representatives in the US House and Senate. If this Health Care bill
passes then our sliver of an opportunity to regain liberty and freedom may have
passed as well.
“Government is
instituted for the common good; for the protection, safety, prosperity, and
happiness of the people; and not for profit, honor, or private interest of any
one man, family, or class of men; therefore, the people alone have an
incontestable, unalienable, and indefeasible right to institute government; and
to reform, alter, or totally change the same, when their protection, safety,
prosperity, and happiness require it.” John Adams,
Thoughts on Government, 1776
“If men through
fear, fraud or mistake, should in terms renounce and give up any essential
natural right, the eternal law of reason and the great end of society, would
absolutely vacate such renunciation; the right to freedom being the gift of God
Almighty, it is not in the power of Man to alienate this gift, and voluntarily
become a slave.” John Adams,
Rights of the Colonists, 1772
“But a Constitution of Government once changed from
Freedom, can never be restored. Liberty once lost is lost forever.” John
Adams, letter to Abigail Adams, 1775
Warmly,
Brad If you are not currently on
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