Saturday, August 29, 2020

Is the actual government debt over $100 trillion dollars?

The official national debt, both debt held by the public and intragovernmental holdings, is about $26.6 trillion.  But what if the actual debt was over $100 trillion?  This post briefly explores this conspiracy theory.

Where would the money have gone?  Much of the government budget is classified, either by the military or by intelligence agencies, like the CIA.  Each branch of the military and each intelligence agency likely has its own slush fund with hundreds of billions or even trillions of dollars in it.  Each government entity just spends whatever it wants and uses the money from the Treasury to replenish its slush fund.  An entity with a guaranteed source of income also will have the ability to borrow money and just use the Treasury money to pay interest on the loans.  

Read:  Another Conspiracy Theory
Pentagon Accounting Fail

The shoddy Pentagon accounting is done on purpose in a bad attempt to disguise and obfuscate all of this secret money.  Because this issue keeps popping up and embarrassing the Pentagon, they passed a new accounting rule that lets them keep these issues a secret.  It is called FASAB 56.

The other side of the coin is where did the money come from?  Treasury annually issues trillions in new debt.  In 2019, Treasury issued $91 trillion in new debt, and redeemed $90 trillion.  They amount that is issued is far in excess of that required to reissue debt that has expired.  To just reissue expiring debt would take about $16 trillion per year. (See the chart called "Debt and Debt Turnover by Term-length" at solari.com).  

There must be a secret series of bills and notes.  So as a hypothetical example, if the Army needs to pay a contractor $100 million for work done, it would instead issue a 90-day DOD warrant (or whatever the name for this IOU is called).  This wouldn't come out of the Army budget because it isn't cash. The contractor would take the warrant and sell it to the bank (let's call it "JP Morgan Chase Bank" just for fun) at a slight discount and get its money.  The bank would hold it for 90 days and then swap it to a Primary Dealer for a legit 90-day T-bill.  The Primary Dealer would then exchange it with Treasury for a 90-day Series D (I just made that up, with D standing for Defense) note.  At the primary dealer level, the Series D notes and the Series P notes (I just made that up, with P standing for public) are essentially interchangeable.  

The Treasury only reports the Series P notes as being part of the debt, but not the Series D notes.  The P notes are legit and come from the budget authorized by Congress.  The D notes are essentially fake, and come from spending not authorized by Congress, but the primary dealers act as secret central banks and essentially issue counterfeit notes (which just to be clear are not U.S. dollar bills) which can be swapped out with the "real" notes on demand.  We are talking about massive fraud here on a scale that dwarfs the legitimate economy ($100 trillion+ v $26.6 trillion officially).  And everybody "in-the-loop" knows about this and condones it but Treasury has deniability.  The dirty money creation is contracted out.

And that is how the national debt could be much larger than is publicly reporting.  This is a theory because it is not proven.  Is there a way of disproving it? 

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