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Thread: Here’s Another Reason Why The Government’s Budget Deficit Figures Are Phony Baloney

  1. #1

    Here’s Another Reason Why The Government’s Budget Deficit Figures Are Phony Baloney

    By Hunter Lewis

    Friday, January 25th, 2013





    There is so much in the government’s official deficit figures that is phony it is hard to say what is real.


    But we should add at least $89 billion to the official deficit figure. To see why, we need a bit of background.


    The US government deficit is supposed to be running at around $1.2 trillion. But the government gets there by using accounting methods that would put private business executives in jail for fraud. The real deficit by different estimates should be multiples higher. This is already widely known.


    It is also increasingly understood that the Fed is covering the deficit by creating new money out of thin air and using it to buy the government’s bonds. What is not generally understood is that the Fed then posts “income” from the newly purchased bonds, uses some of it to cover its own expenses, which are not subject to Congressional oversight, and then remits the rest to the Treasury. The Treasury in turn can use this phony income to reduce the deficit.


    Consider what has happened here. The government sells a bond to itself by selling it to the Fed. The Fed then “charges” the government interest. The interest is actually paid by borrowing more from the Fed, but nevertheless is booked as real Treasury income and used to “reduce” the deficit.


    The Bloomberg article below mentions in passing that the Fed sent $88.9 billion of this phony income to the Treasury in 2012. That is another $89 billion that should really be added to the deficit.


    To put this $89 billion in perspective, it is much larger than the $62 billion per year in expected tax revenue from the new taxes on the rich ( those making over $400,000 a year) that were enacted in January with the “fiscal cliff” legislation.



    http://www.bloomberg.com/news/2013-0...rd-assets.html
    http://bastiat.mises.org/2013/01/her...phony-baloney/
    "The Patriarch"



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  3. #2
    Phony baloney indeed. See how I can lift myself up in the air by my own shoe laces? It's so easy, here I'll show you:

    Just imagine if the trillions of dollars passed out by the fedgov could all be taxed. If the IRS could only take their pound of flesh from those bank bailouts too.

    If all fedgov employees (including military and all gov contractors/suppliers) all have their fiat inflation paid wages taxed, won't those taxes support many (if not all) of the federal social handout and medical programs that pay out to the other ~60% of the population (non-government citizens)?

    Local gov employees and contractors (schools, police, fire, etc. that are funded through direct local taxes such as real estate, state sales tax, etc.) also have their wages federally taxed. Let's be thankful that a lot of those same taxes get paid by those fedgov employees (and contractors) too. The rest of us do have to eat the resulting price inflation and pay those same local taxes, and if we happen to still have job income, we can opt to pay the fedgov via the IRS too... 'cause it's best to stay out from jail, in general.

    The fedgov paid wages still totals up to a large protion of the taxes the IRS collects... and to think it comes from magic fiat money created out of thin air!

    It's so splendiferous, non-government workers and the unemployed should be demanding more government in order to spread this magic!

    This just leaves the local taxes and inflation that need to be adjusted a bit, slightly fine-tuned, just a tweak so that the whole self-sustaining blob floats up into the air all by it's own accord!

    It's a sight to behold!
    Last edited by FindLiberty; 01-28-2013 at 01:13 PM.

  4. #3
    The Fed generates income from many different holdings- including US Treasuries. They also receive interest payments on other assets like Mortgage Backed Securities and fees for services they provide as well as any loans they make. AIG was a big source of profit for them last year (looking for numbers).

    I can try to quick calculate how much the Fed might have gotten from their US Treaury holdings.

    According to their latest balance sheet, the Fed owns about $1.7 trillion in US Treasuries. http://www.federalreserve.gov/releases/h41/current/
    The US debt currently is at $16.4 trillion according to the US Debt Clock. http://www.usdebtclock.org/

    This means that the Fed owns roughly ten percent of the US debt. If we assume that interest on the debt is distributed equally among holders of US debt, the Fed would be getting about ten percent of that. In the 2013 budget request, interest on the debt was $246 billion. http://en.wikipedia.org/wiki/2013_Un...federal_budget If the Fed got ten percent of that, that comes to $24 billion (not $89 billion) so if you want to add interest payments to the Fed to the Budget Deficit, that would mean you need to add in $25 billion to the $1.3 trillion deficit- not really anything significant.

    But one should note that ALL interest on the debt (whether it goes to the Fed or other US Treasury holders) IS counted towards the deficit so it is already counted. And remember that the $89 billlion is money the Fed is GIVING to the US Treasury which REDUCES what would be lost if the same securites were held by somebody other than the Fed. China has about $1.2 trillion and none of that interest gets back to the US Treasury. http://www.treasury.gov/resource-cen...uments/mfh.txt
    Last edited by Zippyjuan; 01-28-2013 at 01:33 PM.

  5. #4
    Three or four times a week , everyone should bring that debt clock up and watch it for a few minutes .See what you think ...



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