Category Archives: Financial

Former U.S. Comptroller: National Debt is $65 Trillion, Not $18 Trillion

trillionMichael Tennant – In June, the Congressional Budget Office (CBO) put the U.S. government’s debt at a staggering $18 trillion. But according to a former U.S. comptroller general, the actual debt is $65 trillion — more than triple the official figure — and it isn’t going to improve as long as politicians continue to put their personal and partisan interests ahead of the nation’s.

David Walker, who served as the head of the Government Accountability Office (GAO) from 1998 to 2008, told John Catsimatidis, host of “The Cats Roundtable” on New York radio station WNYM, that there’s much more to the debt than just what the government currently owes.

“If you end up adding to that $18.5 trillion the unfunded civilian and military pensions and retiree healthcare, the additional underfunding for Social Security, the additional underfunding for Medicare, various commitments and contingencies that the federal government has, the real number is about $65 trillion rather than $18 trillion, and it’s growing automatically absent reforms,” Walker said Sunday.

Even Walker’s calculations may understate the seriousness of the situation. Earlier this year Boston University economics professor Laurence Kotlikoff told the Senate Budget Committee that when all future financial obligations are taken into consideration, as of 2014 — when the CBO claimed the national debt was $13 trillion — Uncle Sam owed a whopping $210 trillion.

In truth, it is impossible to know just how deep the pool of red ink in Washington is. All projections of future debt are based on certain assumptions about economic growth, tax rates, interest rates, entitlements, discretionary spending, and so on. If any of these changes — and all of them probably will — the actual debt may end up being considerably larger or smaller than forecast. Nevertheless, even by the CBO’s reckoning, there is a serious problem.

Continue reading

Negative interest rates to hit the US

riskSimon Black – It started in 1921.

World War I was over. The Treaty of Versailles had been signed two years before.

And Germany, the biggest loser from the war, had been stuck with both the blame and the bill.

Germany’s war debt– which it owed not only for its own war-related expenses, but also for reparations to the victors– was devastating.

They didn’t have the money, so they started printing it.

Not surprisingly, the German mark began to sink. It started slowly at first, but by 1921 hyperinflation had taken hold until prices soared by thousands of percent.

One of my favorite stories from this period, was of the elderly man who went to the police to report a robbery. Thieves had stolen a wheelbarrow of money.

It was common at the time to use wheelbarrows to transport the huge sums of cash that were required to buy even the most simple things like bread and milk.

When the police asked him how much was in the wheelbarrow, the man corrected them saying that the thieves had only stolen the wheelbarrow, and had left the cash behind.

Undoubtedly the entire society was upturned by this hyperinflation. But as history shows, in any situation, there are always winners and losers.

Pensioners and people who responsibly saved their money were wiped out; whereas people who had borrowed to invest in real assets did extremely well.

Owners of residential real estate suffered under government imposed rent controls, whereas owners of farmland thrived. Continue reading

Real Danger Is Violence and War-Catherine Austin Fitts [Video]

fittsGreg Hunter – Financial expert Catherine Austin Fitts has long said before there is another big financial crash, there will be a big war.  Fitts explains, “If you look at how fragile the geopolitics are, the danger, as I have always said, is that we go to violence, and then things really come unhinged.  So, I’m worried about violence and war and kind of situation getting out of hand.  That’s when you get the really dangerous scenarios.”

What is the biggest financial problem the world faces?  Fitts, who is an expert in the federal budget and a former Assistant Housing Secretary, says, “The reality is the big mother lode on the whole planet, whether you are talking about derivatives, the bond market or the stock market, is the U.S. federal budget.  What is slowly begging to happen is the dawning realization that we are not only going to have to reengineer and cut the federal budget, but we are talking about reinventing the U.S. economy.  There are going to be extraordinary choices, and this is why nobody wanted to be the Speaker of the House.

Paul Ryan did not want to be the Speaker because Paul Ryan knows this is coming.  They will probably be able to delay it until after the election (2016), but then after the election, we’re going to have to sit down and say we can’t keep doing this.  Why is this relevant?  All the markets globally work off the federal budget.  It is extraordinary the amount of cash flows and credit that work off the federal budget.  The credit and cash flows coming out of that budget are enormous.  The reality is it is going to have to be reengineered.  That’s going to be a very shocking experience for many people.” Continue reading

Is This How the Next Global Financial Meltdown Will Unfold?

currencyCharles Hugh Smith – I have long maintained that the structural imbalances of debt and risk that triggered the Global Financial Meltdown of 2008-2009 have effectively been transferred to the foreign exchange (FX) markets.

This creates a problem for the central banks that have orchestrated the “recovery” by goosing asset bubbles in stocks, real estate and bonds: unlike these markets, the currency-FX market is too big for even the Federal Reserve to manipulate for long.

The FX market trades roughly the entire Fed balance sheet of $4.5 trillion every day or two.

Currencies are in the midst of multi-year revaluations that will destabilize the tottering towers of debt, leverage and risk that have propped up global growth since 2009.

Though the relative value of currencies is discovered in the global FX market, there are four fundamental factors that influence the value of any currency:

1. Capital flows into and out of the currency (and the nation issuing it).

2. Perceived risk, specifically, will this currency preserve my global purchasing power (i.e. capital) or erode it?

3. The yield or interest rate paid on bonds denominated in this currency.

4. The scarcity or over-abundance of the currency. Continue reading

Hang Onto Your Wallets: Negative Interest, the War on Cash, and the $10 Trillion Bail-in

moneyEllen Brown – In uncertain times, “cash is king,” but central bankers are systematically moving to eliminate that option. Is it really about stimulating the economy? Or is there some deeper, darker threat afoot?

Remember those old ads showing a senior couple lounging on a warm beach, captioned “Let your money work for you”? Or the scene in Mary Poppins where young Michael is being advised to put his tuppence in the bank, so that it can compound into “all manner of private enterprise,” including “bonds, chattels, dividends, shares, shipyards, amalgamations . . . .”?

That may still work if you’re a Wall Street banker, but if you’re an ordinary saver with your money in the bank, you may soon be paying the bank to hold your funds rather than the reverse.

Four European central banks – the European Central Bank, the Swiss National Bank, Sweden’s Riksbank, and Denmark’s Nationalbank – have now imposed negative interest rates on the reserves they hold for commercial banks; and discussion has turned to whether it’s time to pass those costs on to consumers. The Bank of Japan and the Federal Reserve are still at ZIRP (Zero Interest Rate Policy), but several Fed officials have also begun calling for NIRP (negative rates).

The stated justification for this move is to stimulate “demand” by forcing consumers to withdraw their money and go shopping with it. When an economy is struggling, it is standard practice for a central bank to cut interest rates, making saving less attractive. This is supposed to boost spending and kick-start an economic recovery.

That is the theory, but central banks have already pushed the prime rate to zero, and still their economies are languishing. To the uninitiated observer, that means the theory is wrong and needs to be scrapped. But not to our intrepid central bankers, who are now experimenting with pushing rates below zero.

Locking the Door to Bank Runs: The Cashless Society

The problem with imposing negative interest on savers, as explained in the UK Telegraph, is that “there’s a limit, what economists called the ‘zero lower bound’. Cut rates too deeply, and savers would end up facing negative returns. In that case, this could encourage people to take their savings out of the bank and hoard them in cash. This could slow, rather than boost, the economy.” Continue reading

Congress wants to seize your passport for unpaid taxes starting January 1st

trustSimon Black – Sometimes you just have to stand in awe at the level of corruption and incompetence in government.

Case in point, the new highway bill in the Land of the Free. And, trust me, you’ll love this.

The latest version of the highway bill is called the “Developing a Reliable and Innovative Vision for the Economy Act.”

And yes, they abbreviate it as the DRIVE Act.

I cannot even begin to imagine how large the team of monkeys is that works on these silly acronyms. And as is typical for legislation, the more high sounding the name of the law, the more destructive its consequences.

On the surface, the DRIVE Act aims to fund the federal transportation network and investments in highway infrastructure for the next several years, as well as recapitalize the Highway Trust Fund.

Federal trust funds are supposed to responsibly and conservatively manage money that has been set aside for a specific purpose to benefit taxpayers.

There are so many of these trust funds. There are the big ones like Social Security’s “Old Age Survivor’s Insurance” and “Disability Insurance” (which is literally days away from running out of money).

And there are many more you’ve probably never heard about, like the “Black Lung” trust fund and the “Leaking Underground Storage Tank” trust fund.

Most of these funds are insolvent, or at least pitifully undercapitalized, clearly proving the government to be one of the worst asset managers in history.

The Highway Trust Fund is no exception: it has completely run out of money, and at this point literally has a ZERO account balance. The DRIVE Act intends to fix that.

And even though it has nothing to do with funding highways, the bill also aims to re-authorize the Export-Import Bank.

The Ex-Im Bank was created during the Great Depression and is designed to facilitate trade. That’s code for ‘boost the profits of Boeing and General Electric.’

Even the government’s own Congressional Research Service found that “more than 60% of Ex-Im Bank’s loan guarantees, by dollar value, supported the sale of Boeing airplanes in foreign countries”.

Ex-Im is essentially a gift on a golden platter from the taxpayers of the United States to a handful of mega-companies.

The Bank’s charter lapsed earlier this year. But rather than let it die, they’re jumpstarting Ex-Im with even more taxpayer money.

Clearly the government needs cash. They need to fund Ex-Im, the Highway Trust Fund, and all the improvements for America’s dilapidated infrastructure.

And their solutions to address this cash crunch are nothing short of remarkable.

For example, they plan to steal $300 million from the Leaking Underground Storage Tank trust fund (LUST… yes, that’s really what they call it), and transfer that money to the Highway Fund.

The only problem is that LUST is insolvent. So they’re stealing from one insolvent trust to fund another insolvent trust. It’s genius!

One of my favorite sections in the bill is a directive to sell off 100+ million barrels of oil from the Strategic Petroleum Reserve.

Only a politician could think to sell off oil supplies at a time when oil price is at multi-year lows.

(It also really gives you a sense of how broke the government really is that they’re driven raise cash by selling off strategic assets.)

Another gem buried in the 864 pages of the bill is a provision that allows the government to revoke your passport if they believe that you owe more than $50,000 in federal tax.

There will be no judicial review, and no due process. You don’t get to go in front of a judge first to have a fair and impartial hearing over whether or not the government’s tax allegations are accurate.

The language in the law is very clear: they can simply revoke your passport if you owe them money in their sole discretion.

Once the law is passed, this would go into effect on January 1, 2016, and they claim it will generate $40 million per year in tax revenue.

There was one more provision that proposed raising revenue from the biggest banks in America by reducing the dividend they receive from the Federal Reserve.

Curiously, though, this specific provision was defeated yesterday after a heated committee meeting in Congress.

So while the banks’ profits are off-limits, and the government will spend billions of taxpayer dollars to boost profits at Boeing, American citizens are threatened with having their passports revoked in order to raise money.

It couldn’t be any more obvious how much the system is stacked against the little guy.

They treat you like a dairy cow that exists only to be milked dry… like a medieval serf tied to the land and forced to serve his overlords.

It’s revolting. But it doesn’t have to be this way.

You can take sensible, rational steps to divorce yourself from this madness, or at least have a Plan B to protect yourself from it.

If the government is threatening to take away your passport, for example, there are countless ways you can obtain another one from a country that will roll out the red carpet for you.

If you’re sick and tired of having your income confiscated so that you can bail out big companies, there are completely legal steps you can take to reduce what you owe.

It’s hard to imagine you’ll be worse off being more free and having more control over your life and finances.

Simon Black is a Guest Contributor for Shift Frequency. He is is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

SF Source Sovereign Man  Nov 2015