U.S. Government Resorts to Creative Accounting to Hide Debt

I have suddenly found a quote that I was looking for. It is an AP news item that reported that Senator Edward Kennedy, D-Mass. - one of the biggest jerks ever elected to Congress and the perennial shame of Massachusetts, which has to live with the disgrace of having elected such a commie rat - called the recent increase in the minimum wage one of "the proudest achievements of this new Congress."

The actual truth is that raising the minimum wage is the most shameful "achievement" of any Congress in the last forty years. The reason that I make this highly-inflammatory and rudely derogatory statement is threefold:

1. Congress's own continual, irresponsible expansion of government, by deficit-spending the excess money and credit (monetary inflation) created by the Federal Reserve, is what produced the inflation in prices that "necessitated" the increase in the minimum wage.
2. It is the culmination of 94 years of gathering the most profound, incontrovertible actual proof that the Federal Reserve cannot be trusted to maintain the value of the fiat dollar. The dollar's buying power has gone down and down and down the whole freaking time since the Fed was established in 1913, and the dollar now has a lousy 3% of its original purchasing power left. Yet, not one damned Congress has done one damned thing to require the Fed to do anything different in the whole 94 years. Finally…
3. Because I enjoy being contemptuous and sarcastically rude to people who are being trusted to know better and act better, but don't.

I can see you out there, yawning in boredom, as this is shaping up to be another Pointless Mogambo Rant (PMR). But you would be wrong! There IS a point! Buy gold, because the end is almost nigh, as evidenced by the anxiety produced by Dennis Cauchon's column in USA Today titled, "Rules 'Hiding' Trillions in Debt". The subhead was "Liability $516,348 per US household."

The short version is that it is the same old story about how if the federal government was required to use accrual accounting like corporations and most businesses are, then the whole economic jig would be up as the horrific dollars-and-cents truth was revealed, and there would be rioting in the streets if the newspapers, the schools and the population as a whole were not so damned stupid that they do not even dimly grasp the profound, bankrupting, horrifying inflationary significance of this.

Well, the new twist is that USA Today has updated the figures, and shows that the federal government would have recorded a US$1.3 trillion loss in 2006, "far more than the official $248 billion deficit."

It was explained that "The loss reflects a continued deterioration in the finances of Social Security and government retirement programs for civil servants and military personnel."

Surprisingly, we learn that "The loss - equal to $11,434 per household - is more than Americans paid in income taxes in 2006." Yow! What kind of crazy government IS this, anyway?

Well, they are resorting to obfuscation, "so promises for Social Security and Medicare don't show up when the government reports its financial condition. Unfunded promises made for Medicare, Social Security and federal retirement programs account for 85% of taxpayer liabilities. State and local government retirement plans account for much of the rest."

At that I immediately thought to myself, "What? How in the hell did state and local government retirement programs get included in the federal government's accounting? What in the hell is going on here?"

Naturally, I raised my hand and said, "Hey! Hey, you! It's almost lunchtime! Could you hurry it up a little? Like, get to the fabled 'bottom line' so we can get the hell out of here? And my five-day 'cooling off' period is over, so I want to go by the gun shop to pick up my new pistol. So if I have to come back here, I'll be packing heat again, but that means I will have to wear a coat to keep it concealed, see, and it's too damned hot to wear a damned coat! So let's get a move on!"

Well, there must have been something charming about me that they instinctively liked, because they immediately went on to graciously grant my exact wishes and said, "Bottom line: Taxpayers are now on the hook for a record $59.1 trillion in liabilities, a 2.3% increase from 2006. That amount is equal to $516,348 for every US household. By comparison, US households owe an average of $112,043 for mortgages, car loans, credit cards and all other debt combined."

And who is so corrupt and despicable as to be against revealing an on-rushing destruction and doom that is afforded by accrual accounting? You're going to love this! "The White House and the Congressional Budget Office oppose the change, arguing that the programs are not true liabilities because government can cancel or cut them." Hahaha! I told you that you would love it!

Well, I loved it, anyway, and I was so delighted with the ramifications that the next day I snuck into the employee's retirement fund and borrowed all the money, leaving my IOU. If the ungrateful employees ever demand that I make good on the IOU, I can now say that they are "not true liabilities" because I can "cancel or cut them" and therefore I don't owe them anything! I love this government accounting thing!

Antal Fekete of the Gold Standard University writes that gold is being secreted away, and that "The present episode of gold vanishing into private hoards is no less ominous than the previous one that was followed by the collapse of the Roman Empire, and the lights going out in the civilized world."

Hmmm! Very interesting! He goes on, "The last time in history when huge quantities of gold were going into hiding occurred during the twilight of the Roman Empire. It was an ominous portent of bad tidings", as "People were withdrawing gold coins from circulation. They declined to spend them hoping that saner and safer times would come."

Unfortunately, saner and safer times never came in their lifetimes, showing how bad a bust can be after such a long boom, and, "these ancient hoards were forgotten and remained buried in the ground throughout the Dark Ages. Present day archeologists still keep finding them fifteen hundred years later."

The timeless lesson is that, "The fortunes of empires tend to be predicated by the fortunes of their currencies." Do you see the decline in the U.S. dollar? What do you think will happen? Me too!

Until next week,

The Mogambo Guru
for The Daily Reckoning Australia

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