On the day before Thanksgiving when people were traveling home for the holiday, the Daily Treasury Statement revealed that the U.S. Treasury has issued $1,040,965,000,000 in new debt since fiscal 2015 started 8 weeks ago. Why the added debt which raised the federal government’s total indebtedness to $18T+? To raise the money to pay off Treasury securities that were maturing as well as to cover the federal government’s new deficit spending.
Putting this added debt into proper perspective, the U.S. Treasury took in a record ~$341.6B in revenues for the period between October 1 and November 25. To make the point, CNS News put together a good infographic:
That’s peanuts—11.3%—compared to the $942.1B+ in old debt that matured during the period plus the cost of financing the federal government’s new deficit spending. So, what did the wizards of smart at U.S. Treasury do as a public service for the nation’s taxpayers? They simply “rolled over” the old debt into new debt and issued enough additional new debt to cover the increased deficit spending.
If any citizen attempted to perpetrate a similar scheme, they’d be brought into court and thrown into jail jsut like Bernard Madoff because it’s nothing other than a Ponzi scheme. It’s nothing other than "investment fraud"—the investors in this instance being the taxpayers—that involves paying existing investors from funds contributed by new investors. The trouble with a Ponzi scheme—and with the U.S. Treasury’s scheme—is that there are no legitimate earnings to meet the financial obligations. Without a consistent and sufficient inflow of cash from new investors (i.e., taxpayers), the scheme will inevitably collapse, as each of Madoff’s investors learned.
Knowing all of this, Secretary of the Treasury Jack Lew didn’t even blush or wink during his testimony before Congress on October 13. He said:
Every week we roll over approximately $100 billion in U.S. bills.
If U.S. bondholders decided that they wanted to be repaid rather
than continuing to roll over their investments, we could unexpectedly
dissipate our entire cash balance.
He also said this:
There is no plan other than raising the debt limit that permits us to
meet all of our obligations.
And then this:
Let me remind everyone, principal on the debt is not something we pay
pay out of our cash flow of revenues. Principal on the debt is something
that is a function of the markets rolling over.
Of course, the federal government can’t declare bankruptcy and will continue printing $$$s “until the cows come home.” The trouble is that those $$$s will increasingly be worth less in the marketplace and in the eyes of those who would otherwise invest in U.S. Treasury bills, they will become worthless.
Listen to the Secretary of the Treasury. He’s being fully transparent and also knows fully what’s going on. Don’t accuse him of duplicity when it comes to this matter.
Caveat emptor for any taxpaying citizen between the ages of 20 and 35: Study the collapse of the German economy in the Weimar Republic.
Let the discussion begin…
To read Secretary Lew’s testimony, click on the following link:
To read about the collapse of the German economy in the Weimar Republic, click on the following link: