The cumulative effect of this GAAP basis Deficit Spending is $98.7 Trillion of counterfeit money that now appears as phantom wealth on the balance sheets of U.S. citizens and businesses and as a public liability on the balance sheet of the U.S. Government. The "high net worth" of U.S. citizens and businesses that is created by USAPonzi is explained in more detail in High Net Worth-A Byproduct of USAPonzi.
The current period effect of this GAAP basis Deficit Spending is artificial stimulus to the U.S. and global economy. As U.S. "Real" GDP FY2015 explains, 47% of the U.S. GDP in FY2015 is created by this Deficit Spending. The U.S. Government is stimulating the global economy by spending more cash than it receives, by undertaxing the U.S. citizens and businesses so they have more money to spend and invest, and by promising to pay future social benefits to qualifying citizens which causes them to spend more money today.
We, as a country, are able to buy a lot of products and services that we really cannot afford because the U.S. Government is not collecting enough taxes to cover current period spending (creating $17.9 Trillion of Debt) and is not collecting enough taxes to sustain the life style that the U.S. Government is promising to U.S. residents with our social benefit commitments (creating $80.8 Trillion of Unfunded Liabilities) (see Living Beyond our Means). This undertaxing by the U.S. Government means that there is no money set aside to pay for the social benefit promises but according to GAAP Accounting we should have $85.9 Trillion in trust funds to meet the current social benefit promises. We have been spending every penny of our "national retirement nest egg" for the last 46 years.
By undertaxing the U.S. citizens and businesses by $98.7 Trillion over the last 46 years, the U.S. Government has created $98.7 Trillion of counterfeit money that can be invested or spent to buy products and services. Some people spend their counterfeit money to buy things they could not otherwise afford while others invest their counterfeit money in the stock of the businesses that are getting the artificial stimulus of the purchases made with counterfeit money. Every year USAPonzi creates more counterfeit money (GAAP basis Deficit Spending is increasing exponentially) so the spenders can buy even more products and services and the investors have even more money to invest in the businesses that are getting the artifical stimulus of purchases made with counterfeit money.
This is a virtuous cycle for the current citizens and businesses but a vicious cycle for the future citizens and businesses. The current citizens and businesses get more and more counterfeit money to buy stuff and to make them appear to be richer. The future citizens and businesses have an ever increasing bill to pay (our GAAP obligation now $98.7 Trillion) and the future citizens that are expecting to get social benefits will not get their benefits because the U.S. Government has already spent their trust fund money.
The U.S. Government is providing massive stimulus to the U.S. and global economy with the current fiscal policy and as the following Charts show, we are on a fiscal path that will continue to increase this stimulus until the Government dramatically changes fiscal policy or until USAPonzi implodes.
Chart 1: U.S. GAAP Deficit and GDP
Actuals through FY2013 then USAPonzi Projections
See USAPonzi Fiscal Model
Chart 1 above; shows how much the U.S. Government is undertaxing U.S. citizens and businesses on a GAAP basis, $6.4 Trillion in FY2014 and $6.9 Trillion in FY2015 etc. and this GAAP Deficit is increasing exponentially. Our GAAP Obligation ($98.7 Trillion as of Nov 1, 2014), which is the cumulative effect of our GAAP Deficit and is the amount owed by future taxpayers, is increasing by this GAAP Deficit each year and since the current U.S. citizens and businesses do not have to pay these taxes, U.S. citizens and businesses appear to become richer each year by this amount.
Chart 2: U.S. GAAP Deficit as a percent of GDP
Chart 2 above; shows our GAAP Deficit as a percent of GDP, which as this chart indicates is on an upward trend and in fact the USAPonzi Long Term Projection demonstrates that if we continue with current fiscal policy (USAPonzi), our GAAP Deficit will EXCEED GDP by FY2052.
USAPonzi is causing massive GAAP basis Deficit Spending that is introducing counterfeit money into the U.S. and global economy ($6.94 Trillion in FY2015) which provides dramatic, but phantom, purchasing power for buying products and services from U.S. and global businesses.
Many businesses have seen boom times because of the current fiscal policy. Apple is to me the most prominent beneficiary. A huge percentage of the cell phones in service today exist only because of the stimulus spending of the U.S. Government. These cell phones and their monthly connection fees are in many instances being paid for with counterfeit money created by USAPonzi. The ADs placed with Google, Facebook, and Twitter would not be worth the money to the advertisers if the U.S. Government was not creating counterfeit money to buy the advertiser's products. The Sports and Entertainment businesses would not be nearly as lucrative without the counterfeit money that the U.S. Government is creating to buy the tickets and the media coverage. Casinos would not be nearly as profitable without the counterfeit money that the U.S. Government is creating; etc., etc., etc.
Another company that is benefiting greatly from the impact of USAPonzi is Tesla not because of its profits but because of its expected future profits. Tesla is a lot like Apple in that is creating a fabulous product with super high tech features that make it a status symbol to own. But Tesla has another thing going for it and that is its price point which is high enough to make it a "status purchase" but not a major decision for the 1%ers. The 1%ers benefit the most from USAPonzi (see Favoring the Rich and Cheating the Common Man) since their net worth is magnified by 7-8X due to the undertaxing of USAPonzi (see U.S. Total Assets Bubble) so many of the 1%ers can buy a $75,000 Tesla like it is a bag of popcorn.
USAPonzi is causing dramatic distortion to our economy, to our financial system, and to the value of money. It is a bonanza for the rich (because they get undertaxed the most) while the underprivileged are being cheated because the U.S. Government is promising social benefits but not allocating the money to pay these benefits and is also not telling the recipients that they are not going to get what has been promised. We have 150 million citizens (at least) that are expecting to receive social benefits that the U.S. Government has no capability or intention of paying at the currently promised rate.
But let me get off of my soap box and get back to subject of this commentary.
Apple and Tesla are two dramatic examples of companies that have elevated market valuations because of the counterfeit money created by USAPonzi.
A company that I think is headed toward a massive crash is Amazon. Amazon is spending counterfeit money to create a distribution system and the associated physical facilities to sell and deliver products and services to buyers that use counterfeit money to buy these products and services. And yet Amazon cannot make money even when the U.S. Government is creating over $6 Trillion of counterfeit money every year. I predict that there will be a lot of vacant Amazon warehouses sitting around in just a few short years when the U.S. Government is forced stop creating this counterfeit money and the buyers have to materially cut back on their spending.
An industry that I think is headed toward a massive crash is the Airline Industry. The Airlines are spending counterfeit money to buy airplanes and build airports, with local government support, to sell airplane tickets to flyers that use counterfeit money to buy their tickets. And yet the airline industry has had difficulty making money since the invention of the airplane even though the U.S. Government is now creating over $6 Trillion of counterfeit money every year. I predict that there will be lot of vacant airport gates and a lot of airplanes sitting around in airplane graveyards in just a few short years when the U.S. Government is forced to stop creating this counterfeit money.
American Airlines is making a big deal about buying a new airplane every week (with borrowed money) but many of these airplanes will likely end up sitting idle when they find out that passengers do not have the money to buy their tickets when the Government stops creating this counterfeit money.
I predict that the Amazon and Airline scenarios that I describe above will be repeated time and time again in different companies and industries and all because LBJ put in motion an accounting system that has fooled the planet for now 46 plus years.
This GAAP basis Deficit Spending, created by USAPonzi, is exponentially increasing the financial obligation of future taxpayers who have no possibility of paying this obligation ($98.7 Trillion as of Nov 1, 2014) so when the financial world finally recognizes and acknowledges that the U.S. Government is creating counterfeit money this Ponzi scheme will come to an abrupt end.
We are headed toward a financial catastrophe of epic proportions when USAPonzi Implodes!!!
Next Page: Wealth Gap-A Byproduct of USAPonzi