Thursday , 28 March 2024

5 Lies About America’s $18 Trillion Debt Refuted

The U.S. government just hit $18 trillion in debt this past Friday10623945-the-word-debt-in-the-american-flag-colors-americans-in-debt afternoon having taken only 403 days to accumulate its most recent trillion compared to 205 years to accumulate its first trillion in debt (1981) and then less than five years to accumulate its second trillion. There has been a great deal of misinformation and propaganda – outright lies – about this debt article examines 5 of the biggest such lies.

The above introductory comments are edited excerpts from an article* by Simon Black (sovereignman.com) entitled Five complete lies about America’s new $18 trillion debt level.

Black goes on to say in further edited excerpts:

[Below are 5 such lies about America’s new $18 trillion debt and my response to each:

1) “They can get it under control.”

What a massive lie. Politicians have been saying for decades that they’re going to cut spending and get the debt under control.

FACT: The last time the U.S. debt actually decreased from one fiscal year to the next was back in 1957 during the EISENHOWER administration.

FACT: For the last several years, the U.S. government has been spending roughly 90% of its ENTIRE tax revenue just to pay for mandatory entitlement programs and interest on the debt.

This leaves almost nothing for practically everything else we think of as government.

2) “The debt doesn’t matter because we owe it to ourselves.”

This is probably the biggest lie of all. Two of the Social Security trust funds alone (OASI and DI) own $2.72 trillion of U.S. debt.

The federal government owes this money to current and future beneficiaries of those trust funds, i.e. every single U.S. citizen alive!

I fail to see the silver lining here. How is it somehow ‘better’ if the government defaults on its citizens as opposed to, say, banks?

3) “They can always ‘selectively default’ on the debt”

Another lie. People think that the U.S. government can pick and choose who it pays.

They could make a big stink about China, for example, and then choose to default on the $2 trillion in debt that’s owed to the Chinese. Nice try, but this would rock global financial markets and destroy whatever tiny shred of credibility the US still has.

Others have suggested that the government could selectively default on the Federal Reserve (which owns $2.46 trillion of US debt). While that is possible but, given that the Fed (the issuer of the U.S. dollar) would become immediately insolvent, the resulting currency crisis would be completely disastrous.

4) “It’s the NET debt that’s important”

Analysts often pay attention to a country’s “net debt” instead of its gross debt. If you have a million bucks in debt, and a million bucks in cash, then your ‘net debt’ is zero. It washes out. Problem is, the U.S. government doesn’t have any cash. The Treasury Department opened its business day on Friday morning with just $71.9 billion in cash, or just 0.39% of its total debt level. Apple has more money than that.

5) “They can fix it by raising taxes”

No they can’t. Just look at the numbers. Since the end of World War II, U.S. government tax revenue has consistently been roughly 17% of GDP. They can raise tax rates, but it doesn’t move the needle in terms of revenue as a percentage of GDP. In other words, the government’s ‘slice of the pie’ is pretty consistent.

You’d think with this obvious data that, rather than try to increase tax rates (ineffective), they’d do everything they can to help make a bigger pie or, better yet, just leave everyone the hell alone so we’re free to [m]ake as much as we can but no, they have to regulate every aspect of people’s existence:

  • how you are allowed to educate your children,
  • what you can/cannot put in your body
  • how much interest you are entitled to receive on your savings.

All of this costs time, money, and efficiency. So do never-ending wars….Great powers often feel that their wealth and success entitles them to spend recklessly and wage endless, arrogant wars: the Romans, the Ottoman Empire, the British [and for the past number of years the USA.]…History shows that every leading superpower from the past almost invariably fell to the same fate.

History may not repeat but it certainly rhymes and the lesson here is very clear:

  • debt weakens a nation,
  • debt weakens a society…

and the people in charge of the system have backed themselves into a corner where there is no way out other than to default

  • either on their creditors (creating a global financial crisis),
  • the central bank (creating a currency crisis),
  • or on the citizens themselves (creating an epic social crisis)…
Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.

*http://www.sovereignman.com/trends/five-complete-lies-about-americas-new-18-trillion-debt-level-15661/ (© 2014 Blacksmith PTE LTD – All rights reserved)

If you liked this article then “Follow the munKNEE” & get each new post via

Related Articles:

1. There’s debt, Then There’s Debt, Then There’s U.S. DEBT

The next time someone says, “The US is the richest country on Earth” correct them and state that “The U.S. is the most bankrupt and indebted country in the history of the world” because that’s reality. Let me explain. Read More »

2. What Could – What Will – Pop This “Money Bubble”?

There is too much debt. Debt works the same way for a country as it works for an individual or a family, which is to say if you borrow too much, then your life basically craters. Everything gets harder to do, and you end up doing things in order to deal with your past mistakes that you would never do normally. You start trying absolutely crazy things, and that’s where the world’s governments are right now. We are doing all these things that are essentially con games and getting away with it so far, because a printing press is a great tool for fooling people. I don’t see how we can get away with it too much longer. Read More »

3. Monetary System Collapse Guaranteed – Here’s Why & How to Invest & Insure Your Wealth Accordingly

Our monetary system is guaranteed to collapse. The central banks prints money like there is no tomorrow. The governments spends like a drunken sailor and yet inflation is benign and interest rates sit at generational lows. Banks are gaining in profitability while their bad debts are being erased by rising asset prices. What’s not to like? Plenty! This article goes into the details of the money creation process to understand how and why this is happening, what the future implications will be and how to best invest to protect oneself from these eventualities. Read More »

4. U.S. Dollar Collapse Will Be Cataclysmic Endgame of Current Fiscal Policy

Government fiscal policy – profligate spending, leading to debt crisis, leading to currency crisis, leading to…the fall of the U.S. dollar – is the major cataclysmic endgame that is going to befall the U.S. Read More »

5. Which of These 6 Actions Will U.S. Gov’t Take to Resolve Country’s Debt Problems?

The U.S. is in a financial debt spiral. What’s the Administration to do? This article analyzes 6 alternative courses of action available, presents the consensus view of each, comes to a conclusion as to what will unfold and suggests what the implications are for one’s investment portfolio. Let’s take a look. Read More »

6. $17+ Trillion U.S. National Debt Adversely Affects Every American – Here’s Why & How

For the first time in U.S. history, the national debt has risen past $17 trillion. That number is a bit hard to comprehend and means little to Americans when not applied to their everyday lives. So just how does the national debt affect consumers, and why should the average American care about how much this country owes? Here’s why and how. Read More »

7. Debt Default or Hyperinflation? Which Will It Be?

The Fed, together with other central banks from around the world, have created the perfect crescendo of worldwide credit bubbles and asset bubbles leading to the excesses and decadence which are the normal finale to a secular trend. They have totally destroyed all major world currencies and left the world with debts that cannot and will not be repaid with normal money. As such, there are only two alternative outcomes, debt default or hyperinflation. Both will have disastrous consequences for the world economy. Read More »

 

2 comments

  1. Your article is very useful and have good knowledge, thanks for the post.

  2. If the US is in so much debt why is the dollar ratio above 88?

    Why do they constantly smash down the price of precious metals? Surely it would be better to allow the price to rise so people would have more money to spend.

    I had a thought that it is possible that other countries have managed to debase their currencies against the dollar. Why isn’t it working for America?