Government Statistics: Their Lips Are Moving

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Published : July 27th, 2007
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Category : History of Gold





It is hazardous to your financial health to not understand the mechanisms of fiat money as well as the central planners who operate these schemes. Fiat systems have always failed historically, and this one, centered on the U.S. dollar, is stretched beyond previous imagination. Most will be devastated when it inevitably crumbles.


But you do not have to be.


Last week we looked at some of the tricks the Feds use to prevent their subjects from seeing the reality of their ongoing monetary abuses. The website and newsletter at portray a much more reliable Consumer Price Index calculation than what typically comes your way.


This week we'll delve into other accounting trickeries and the absurdity of ongoing government promises. I'll also present a perfect but little considered solution for these abuses. Shockingly, it's two presently out-of-favor natural resources that can fortuitously turn the situation around!


Let's first look at many claims over the recent decades of "balanced budgets." Truth be known, there hasn't been one since before the years of the Johnson Administration and their lost war on poverty. It has only been through accounting gimmickry that any semblance of fiscal restraint has been paraded.


As mentioned last week, Social Security surpluses have long been pilfered, spent, and not accordingly accounted. The last 11 administrations, regardless of political party, have perpetuated this blatant fraud. This fact alone blows a hole wide open in the current administration's claim to the present projected deficit being "only" in the range of $300 billion.


If budgets were balanced or actually showed surpluses, it would show in the national debt figures. Take a peek below. See any balance or surpluses? Any trends?



In reality, you could have a year or so of balanced budgets and still see the total debt climb higher due to accumulating interest on the debt. Trust me, there have been no balanced budgets.


Nine trillion dollars of red ink is a lot of money for an economy with a total GDP of $13 trillion. Unfortunately, that's just for starters. There are other obligations U.S. pols have committed to that have even less chance of ever being paid. They are better hidden than even the official national debt figures.


Let's look at accounting methods and simplify them as much as possible.


The government has used a cash basis system for decades. This system tracks only annual cash revenues and expenses. It's an annual cash flow analysis only. The future is pretty much ignored. Under this type of accounting method, your family could borrow millions of dollars that you could never repay and still have your finances look good on paper in a particular year. Future liabilities are totally ignored. You can't borrow your way to wealth, and cooking the books won't get you there either.


A more realistic portrayal of overall financial health, either private or public, is called generally accepted accounting principles (GAAP). Even Enron and Arthur Anderson functioned under these more stringent guidelines. What would happen if the U.S. Treasury operated under this more honest and accurate method of accounting?


The government would have to include unfunded future liabilities in their calculations - Social Security, Medicare, Medicaid, etc. Here's what John Williams of Shadow Government Statistics says about that proposition: "The U.S. Government's negative net worth widened to $49.4 trillion in 2005. For the first time, total government liabilities have topped $50 trillion, and the number is continuing to grow. The United States is bankrupt, whether the Bush administration wants to admit it or not."


There are several important points here. Williams used the government's own reported figures and then applied the more realistic accounting method, GAAP, to them. We're also looking back at 2005 and nothing fiscally responsible has transpired since then. It's considerably worse now. The debt continues to compound and U.S. citizens are the only entities getting serviced.


Recent reports out of Bill Buckler's highly acclaimed Privateer fingers U.S. off-budget debts (future liabilities through promises to pay) now in the area of $70 trillion. Add that to the official debt and we quickly approach $80 trillion … especially if you don't finish reading this essay within the next few days.


Let's try to gain perspective on this. We'll present a household budget run on an annual $60,000 total income and project them to have similar debts and obligations as the US government. Again, the U.S. GDP is $13 trillion.


Our $60,000 household would presently owe $41,500 but have made future pledges of almost $323,000 for a total of $364,500. Five-percent annual interest on this debt alone is $18,225. Jane and Joe would have to pay this interest just to keep from sinking into a deeper hole.


After taxes and ordinary living expenses, exactly how much of this household's $60,000 do you think can be spared to square this enormous burden? Just maybe an individual family could crawl out of this pit, but it would be exceedingly difficult. It would also require extreme discipline and sacrifice. Please e-mail me at if you believe the Feds are so inclined.


Bottom line - this isn't going to end well. These are the numbers more typical of a third-world debtor nation than the issuer of the world's reserve currency. Currency inflation and monetary debasement will inevitably accelerate. No small feat there. Exchange and capital controls won't be far behind. Gold and silver serve as safe havens for times such as these, but they are not exactly what I was projecting as a final solution.


There are a couple of other distinctly traditional American resources that will hopefully soon end their centuries long bear market: tar and feathers. Get you some.




Invest Resourcefully,


Russel McDougal

Investor’s Daily Edge


All articles by Russel McDougal







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Dr. McDougal writes about natural resource investing for Investor's Daily Edge and has been an active investor for 25 years, holding everything from stocks, bonds and mutual funds, to options, futures, currencies, limited partnerships, private placements and rare coins.
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