James Hamilton, an economics professor at the University of California, San Diego, just published his best estimate of the federal government’s “off-balance-sheet” liabilities, in which he concludes that the real national debt, popularly estimated to be $16.9 trillion, is in fact more than four times larger: $70.086 trillion. This is because of decisions to leave out certain unfunded liabilities when the national debt is counted. He explains:
This paper examines the growth of federal liabilities that are not included in the officially reported numbers. These take the form of implicit or explicit government guarantees and commitments … housing, other loan guarantees, deposit insurance, actions taken by the Federal Reserve, and government trust funds….
The biggest items in this category come from Social Security and Medicare which, if current policy is maintained, will require enormous sacrifices from future taxpayers….
When Rep. Jim Cooper (D-Tenn.) read the report, he said, “The federal government is the last accounting-free zone in America!” Two former congressmen, Christopher Cox and Bill Archer, were equally appalled: “The U.S. Treasury ‘balance sheet’ does … not include the unfunded liabilities of Medicare, Social Security and other outsized and very real obligations.”
There are two reasons that these huge liabilities are routinely ignored: how the accounting is done, and whether Social Security and Medicare are actually government guarantees or not. Sheila Weinberg, director of the Institute for Truth in Accounting (ITF), says the federal government’s accounting system isn’t allowed to be used by private companies because it is “so unreliable and possibly misleading” — cash accounting instead of accrual. The government includes Medicare and Social Security liabilities only as they come due, rather than using accrual accounting that counts the entire debt burden when the program is launched. So it neatly ignores future liabilities and makes the national debt appear to be much smaller.
The other reason is that the government itself doesn’t consider Social Security or Medicare as guaranteed by the government. According to Hal Steinberg, a member of the Federal Accounting Standards Advisory Board (FASAB), which makes such determinations, Medicare and Social Security, along with veterans’ benefits and government employee benefits, are not binding contractual commitments after all:
“There is no exchange transaction here. When the FASAB board was looking at the best way to report this, the feeling was not to put this on the balance sheet as a liability [because] it really wasn’t a liability.”
In other words, these are promises that the government made but which the government can break at any time. And because there is no actual contract to break there is no accounting liability.
The Detroit bankruptcy is looking suspiciously like the bail-in template originated by the G20’s Financial Stability Board in 2011, which exploded on the scene in Cyprus in 2013 and is now becoming the model globally. In Cyprus, the depositors were “bailed in” (stripped of a major portion of their deposits) to re-capitalize the banks. In Detroit, it is the municipal workers who are being bailed in, stripped of a major portion of their pensions to save the banks.
Bank of America Corp. and UBS AG have been given priority over other bankruptcy claimants, meaning chiefly the pensioners, for payments due on interest rate swaps they entered into with the city. Interest rate swaps – the exchange of interest rate payments between counterparties – are sold by Wall Street banks as a form of insurance, something municipal governments “should” do to protect their loans from an unanticipated increase in rates. Unlike ordinary insurance, however, swaps are actually just bets; and if the municipality loses the bet, it can owe the house, and owe big. The swap casino is almost entirely unregulated, and it is a rigged game that the house virtually always wins. Interest rate swaps are based on the LIBOR rate, which has now been proven to be manipulated by the rate-setting banks; and they were a major contributor to Detroit’s bankruptcy.
Derivative claims are considered “secured” because the players must post collateral to play. They get not just priority but “super-priority” in bankruptcy, meaning they go first before all others, a deal pushed through by Wall Street in the Bankruptcy Reform Act of 2005. Meanwhile, the municipal workers, whose pensions are theoretically protected under the Michigan Constitution, are classified as “unsecured” claimants who will get the scraps after the secured creditors put in their claims. The banking casino, it seems, trumps even the state constitution. The banks win and the workers lose once again.
Systemically Dangerous Institutions Are Moved to the Head of the Line
The argument for the super-priority of derivative claims is that nonpayment on these bets represents a “systemic risk” to the financial scheme. Derivative bets are cross-collateralized and are so inextricably entwined in a $600-plus trillion house of cards that the whole financial scheme could go down if the betting scheme were to collapse. Instead of banning or regulating this very risky casino, Congress has been persuaded by the masterminds of Wall Street that it needs to be preserved at all costs.
The same tortured logic has been used to justify the fact that the federal government deigned to bail out Wall Street but not Detroit. Supposedly, the mega-banks pose a systemic risk and Detroit doesn’t. On July 29th, former Obama administration economist Jared Bernstein pursued this line of reasoning on his blog, writing:
[T]he correct motivation for federal bailouts — meaning some combination of managing a bankruptcy, paying off creditors (though often with a haircut), or providing liquidity in cases where that’s the issue as opposed to insolvency – is systemic risk. The failure of large, major banks, two out of the big three auto companies, the secondary market for housing – all of these pose unacceptably large risks to global financial markets, and thus the global economy, to a major industry, including its upstream and downstream suppliers, and to the national housing sector.
Because a) there’s not much of a case that Detroit is systemically connected in those ways, and b) Chapter 9 of the bankruptcy code appears to provide an adequate way for it to deal with its insolvency, I don’t think anything like a large scale bailout is forthcoming. …
George Bush Sr. – son of a banker to the Nazis, grandson of an arms dealer, member of Skull and Bones, former head of the CIA, director of Iran-Contra – became president of the US in 1988.
When you present his resume accurately, as I just did, the problem’s pretty obvious.
Fast forward to the present:
Travelers – even pedestrians in NYC – are subject to full body searches, the NSA records and stores every e-mail and phone call, banks and other corporations have been given a blank check to rip off citizens without mercy.
So what kind of a country is the US?
This quote might shed some light on the situation.
“Fascism should more properly be called corporatism because it is the merger of state and corporate power.” – Benito Mussolini.
What does all this matter to people who are making financial decisions?
Well, for starters, it helps to know the nature of the country you’re investing in.
Also, crime – including well organized government crime – is an industry and just like any other industry it impacts the economy as a whole.
These 53 minutes – recorded in 1988 – long before the current pattern was apparent to the average person, do more to paint an accurate picture of how the US is actually governed than anything else I’ve seen. – See more at: http://www.realecontv.com/
Recently the Center for Disease Control and Prevention deleted from its website pages revealing that the government-sanctioned polio vaccine that was administered to some 98 million Americans from 1955 to 1963 had been contaminated with a primate form of cancer virus….
Though the tainted vaccine containing monkey cancer virus was discovered in 1960, “existing polio vaccine stocks were not recalled and were used until 1963,” said the deleted site. That means the agency was, for a period of years, conspicuously dispersing vaccines containing a possible link to cancer to hundreds of millions of people in the U.S., UK, Australia and the former Soviet Union.
The website SV40Foundation.org has more details on just how the vaccine was used following discovery of the cancer link….
The medical establishment really really wants to be able to inject people with unknown substances. These are the same “authorities” that made tobacco, hydrogenated fats, high fructose corn syrup, circumcision, baby formula, premature cord clamping, lobotomy, electroshock and countless other immiserating substances and practices into cultural norms. Is it deliberate? Given the historical connections between the eugenicist robber baron foundations and american medicine, I think the answer is “probably,” but either way, the toxicity of american medicine is manifest.
Researchers say it’s still rare, but fraud in scientific research is climbing at an alarming rate nonetheless. What’s more, according to a new study which has documented the trend, researchers can’t say why it’s happening.
An examination of retractions in medical and biological peer-reviewed publications and journals found the percentage of studies withdrawn due to fraud or suspected fraud has increased dramatically since the mid-1970s, The Associated Press reported recently, citing data from the study.
In 1976, there were fewer than 10 fraud retractions for every one million studies published; by 2007, fraud retractions had grown to 96 per one million, the study found.
Becoming rampant?? There are entire medical specialties (such as psychiatry) that are founded on fraud. Circumcision is fraud. Assurances about the safety of vaccination are fraud. Absence of teaching about the importance of proper nutrition in medical schools is self-serving fraud, as is forced back-birthing.
American medicine has gotten a free pass for long enough, methinks.