Friday, September 20, 2013

Tracking down the Bullsh*t in the Obama Admin

During the Obama administration the public debt has been increasing dramatically while deficit spending is dropping.  How can that happen?

It didn't make sense, what the fu*k was going on?

Then it hit me, the Fed stimulus.  Buying bonds to maintain low interest rates.  The Obama administration used the same accounting "magic" that Congress is using on the Social Security fund.

What the Obama admin and the Social Security fund are doing is pretty simple fakery and it doesn't rise to the level of actual fraud unless the money can't be paid back.

The idea is simple, turn cash into an asset so you can still spend the cash and maintain the illusion of financial stability.  The first step is to write an IOU or a check and then call it a bond.

A bond is a promise to pay money with interest on either a regular schedule or all at once.  Checks and IOUs, promissory notes, bonds, are all promises to pay money.

When a company has a promise to pay money on their balance sheet it is called an asset. The U.S. Government writes a check called a bond. The government then buys that bond from itself. Here is where it sounds tricky, but, this is all actually legal.

Lets say the government collects 800 million in taxes and they need to spend 1 trillion dollars to keep the government together. They write a bond for 500 million dollars. They buy that bond from themselves. Now the government has 300 million in one bank account, 500 million in another bank account and a 500 million dollar asset. The government has turned 800 million dollars into 1.3 trillion dollars.

Now they can borrow another 200 million dollars. The government has an entire 1.5 trillion dollars. They have borrowed 700 million dollars so the public debt increases 700 million dollars. The deficit is a little trickier.

The government spends 1 trillion dollars, but, because they have an asset on the books, the 500 million dollar bond, it looks like they spent only 500 million dollars so now they have a 300 million dollar surplus.

If any private organization did this they would be convicted of fraud and the corporate management would be sent to prison.

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