Money And Change

The US Government Lost $1.2 Trillion In 2017
ZeroHedge.com      Wed, 02/28/2018 - 01:50

Authored by Simon Black via SovereignMan.com,

Earlier this month, the United States government released its annual financial report for the year 2017.

This is something the government does every year, similar to how large companies like Apple, or Warren Buffett’s Berkshire Hathaway, publish their own annual reports. Unlike Berkshire and Apple, though, whose financial reports typically show strong, positive results, the US government’s financial statements are a complete horror show.

Right at the beginning of the report, the government explains that it’s “net loss” for the year was an unbelievable $1.2 TRILLION.

Read that number again.

$1.2 trillion. That’s simply staggering.

It’s larger than the size of the entire Australian economy… and constitutes a loss of more than $2.2 million per minute.

This is not a conspiracy theory or irrational fantasy. This is the Treasury Secretary of the United States of America publicly announcing that the federal government lost $1.2 trillion on page ‘i’ of its annual financial report.

What’s even more alarming is that 2017 was a great year.

There was no war. No recession. No epic financial crisis.

In his introductory letter, in fact, the Treasury Secretary proudly stated that “[t]he country enjoyed a pick-up in [economic] growth in 2017. Unemployment is at its lowest level since February 2001, consumer and business confidence are at two-decade highs, and inflation is low and stable.”
In short, everything was awesome in 2017.

Even the government’s overall revenue was a record high $3.3 trillion for the year.

Yet despite all that good news… despite all those positive developments and record revenue… they STILL managed to lose $1.2 trillion.

If the government loses $1.2 trillion in a GOOD year, how much do you think they’ll lose in a BAD year? How much will they lose when they actually do have a recession to fight? Or another war. Or a major banking crisis?

Further in the report, the government reviews its own assets and liabilities… effectively calculating its “net worth”.

It’s just like how an individual might calculate his/her own net worth– you add up the value of your assets, like your home, car, and bank account balances. Then subtract liabilities like mortgage and credit card debt.

The end result is your net worth. And hopefully it’s positive.

The government’s is hopelessly negative: MINUS $20.4 trillion. (See page 55 of the report.)
And that’s worse than its result from the previous year’s MINUS $19.3 trillion– meaning that the government’s net worth decreased by about 6% year over year. To be clear, a net worth of negative $20.4 trillion means that the government added up the values of ALL of its assets. Every tank. Every aircraft carrier. Every acre of land. Every penny in the bank. And then subtracted its enormous liabilities, like the national debt. The difference is negative $20.4 trillion, i.e. the government has far MORE liabilities than it has assets.

If the government were a business, it would have gone bankrupt long, long ago.

On top of that, though, the government separately calculated its long-term liabilities from Social Security and Medicare.

As we frequently discuss, both Social Security and Medicare are running out of money.

And according to the government’s own calculations (on page 58), the “total present value of future expenditures in excess of future revenue” for Social Security and Medicare is MINUS $49 TRILLION.

Essentially this means that the two largest and most important pension and healthcare programs in the United States are insolvent by nearly $50 trillion.

Altogether, the government is in the red by almost $70 trillion.

It may take several years to feel the full impact. But it would be utterly foolish to believe that this time is different.

Paul Craig Robert Asks "Do Financial Markets Still Exist?"
 
ZeroHedge.com      Thu, 02/15/2018 - 00:30
Authored by Paul Craig Roberts,

For many decades the Federal Reserve has rigged the bond market by its purchases. And for about a century, central banks have set interest rates (mainly to stabilize their currency’s exchange rate) with collateral effects on securities prices. It appears that in May 2010, August 2015, January/February 2016, and currently in February 2018 the Fed is rigging the stock market by purchasing S&P equity index futures in order to arrest stock market declines driven by fundamentals, and to push prices back up in keeping with a decade of money creation.

No one should find this a surprising suggestion.  The Bank of Japan has a long tradition of propping up the Japanese equity market with large purchases of equities. The European Central Bank purchases corporate as well as government bonds.  In 1989 Fed governor Robert Heller said that as the Fed already rigs the bond market with purchases, the Fed can also rig the stock market to stop price declines. That is the reason the Plunge Protection Team (PPT) was created in 1987.
Looking at the chart of futures activity on the E-mini S&P 500, we see an uptick in activity on February 2 when the market dropped, with higher increases in future activity last Monday and Tuesday placing Tuesday’s futures activity at about four times the daily average of the previous month.  Futures activity last Wednesday and Thursday remained above the average daily activity of the previous month, and Friday’s activity was about three times the previous month’s daily average. The result of this futures activity was to send the market up, because the futures activity was purchases, not sales.

Who would be purchasing S&P equity futures when the market is collapsing from under them?
The most likely answer we can come up with is that the Fed is acting for the PPT. The Fed can actually stop a market decline without purchasing a single futures contract. All that has to happen is that a trader recognized as operating for the Fed or PPT enters a futures bid just below the current price. The traders see the bid as the Fed establishing a floor below which it will not let the market fall.  Expecting continuing declines to make the bid effective, they front-run the bid, and the hedge funds algorithms pick it up, and up goes the market.

Is there another explanation for the shift in the market from decline to rise?  Are retail investors purchasing dips?  Not according to this report in Bloomberg that last week a record $23.6 billion was removed from the world’s largest ETF, the SPDR S& 500 index fund. Here we see retail investors abandoning the market.

If central banks can produce zero interest rates simultaneously with a massive increase in indebtedness, why can’t they keep equity prices far above the values supported by fundamentals?
As central banks have learned that they can rig financial asset prices to the delight of everyone in the market, in what sense does capitalism, free markets, and price discovery exist? Have we entered a new kind of economic system?

Williams: "It's The Long-Term Insolvency Of The US Government That Markets Don't Like"
Wed, 02/14/2018 - 23:00

Authored by Mac Slavo via SHTFplan.com,

Economist John Williams sat down with USA Watchdog‘s Greg Hunter to discuss the dire state of the dollar and United States economy.  The monetary path the US is on is out of control, and the unwillingness of government officials to reduce the deficit and stop spending money will cause major problems in the very near future.

Years of socialist policies and reckless spending will eventually end in a complete collapse. Williams is not the only economist to sound the alarm either. As the tax cuts are always positive (people keeping more of their money is always good for the economy) the unwillingness to decrease the size and scope of the government with an expanded deficit will be the downfall of a once great nation.

The interview with Williams begins with him declaring the drop in the stock market to be the fault of the federal reserve. “Did the Fed trigger this most recent round of selling?” asks Hunter.
“It looks like it. If you recall, the story was, bond yields are rising. Rising bond yields means someone’s selling bonds. The Fed wasn’t actually selling bonds, they just were not rolling over the bonds that they normally would…I think you’re gonna see the dollar selling off very rapidly and gold rallying as a flight to safe haven.”

Then the discussion of the tax cuts comes up, as Hunter asks Williams to deliver his take on the lower taxes.

“The tax cuts are generally positive. Anytime you cut taxes that is generally a plus for the economy. The problem is the average guy is still not making ends meet. Anything that increases the disposable income is a plus. This does not necessarily go to the guys at the lower end of the income scale, at the moment, but generally there should be a little economic pick up here from it. The problem is what happens to the budget deficit. We just went through a round of the government shutdown and a package that supposedly lays things out for the next two years, but it widens the deficit.

The deficit is beyond control…We have $100 trillion in unfunded liabilities. That means you need $100 trillion in hand right now to cover the federal obligations going forward...
Printing money to meet obligations is what happened in the Weimar Republic in Germany. This happened in Zimbabwe. This kind of thing eventually gives you a hyperinflation. . . . Ongoing budget deficit and debasing of the dollar will give you global selling pressures in the currency markets. . . . We haven’t seen much selling in the dollar, but that is going to change. You are going to see flight from the dollar and flight from the markets as well.”Hunter then said that the government must make massive and deep cuts to salvage the economy, but no one in Washington wants to make the difficult decision.

“It’s the long-term insolvency of the US government that the markets don’t like.”

Then Hunter asked if Williams thinks there’s a “pretty severe hit” to the economy coming because of the expanding deficit, which will expand the national debt by $10 trillion. Because there are no plans to cut the deficit, Williams simply responds, “right.