Fiscal Discipline You Can Believe In

In 2008, Barack Obama complained that President Bush had increased the debt from $5.7 to $8.8 trillion, over 8 years. Apparently that wasn’t anywhere near fast enough for Obama’s tastes, so he nearly doubled the debt over the next five years. He calls that “fiscal discipline you can believe in.

ScreenHunter_1080 Mar. 27 09.50

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19 Responses to Fiscal Discipline You Can Believe In

  1. gator69 says:

    Cost the nation?

    1. a large aggregate of people united by common descent, history, culture, or language, inhabiting a particular country or territory.

    I don’t see anything about a common debt, or bank account. Taxes cost real people real money, nations be damned.

    • Gail Combs says:

      Most of the ‘Debt’ is either R/R pensions, SS. Medicare, government bonds held by real people who paid with cash they earned and Federal Reserve funny money. Funny money printed by the bankers on the spot.

      … it starts in Congress which is spending money like crazy. It spends far more money than it takes in. It is spending way beyond its income. How can it do that? Basically this is what happens. Let’s say Congress needs an extra billion dollars today so it goes to the treasury and says “we want a billion dollars” and the treasury official says “you guys have got to be kidding, we don’t have any money here, you spent it all a long time ago…..

      So they stop at the printing office and they don’t print money at the printing office, they print certificates and they’re very fancy things with borders on the edge with an eagle across the top and a seal at the bottom and it says “US Government Bond” or “Note” or “Bill” depending on the length of the maturity of it. If you hold it up to the light it really says “IOU” because that’s what it is. They print these things up and it looks very impressive and then they offer them to the private sector; they’re hoping that people will come up and loan money to the federal government and a lot of people do and are anxious to lend money to their government. Why? …. We’ve all heard that these loans are backed by the full faith and credit of the US government. They’re not quite sure what that means but it sure sounds good. I’d like to explain for you who are in doubt what that means. The full faith and credit of the US government means that the government solemnly promises to pay back that loan plus interest if it has to take everything you and I have in the form of taxes in order to do it, it’s going to do it. It will take everything we have if necessary to hold its pledge. People don’t realize that they’re putting themselves on the line, they’re going to get their own money back minus a substantial handling fee.

      Plenty of money is loaned to the government but never enough. Congress needs more money than that. They say not to worry. They go further down the street to the Federal Reserve building. The Fed has been waiting for them, that’s one of the reasons it was created. By the time they get inside the Federal Reserve building the officer of the Fed is opening his desk drawer. He knows they’re going to be there and he’s ready and he pulls out his checkbook and he writes a check to the US Treasury for one billion dollars or whatever the amount is that they need. He signs the check and gives it to the treasury official.

      We need to stop here for a minute and ask a question. Where did they get a billion dollars to give to the treasury? who put that money into the account at the Federal Reserve System? The amazing answer is there is no money in the account at the Federal Reserve System. In fact, technically, there isn’t even an account, there is only a checkbook. That’s all. That billion dollars springs into being at precisely the instant the officer signs that check and that is called “monetizing the debt,” that’s the phrase they throw at you. That means they just wrote a check, a big rubber check. If you and I were to do that we would go to jail but they can do it because Congress wants them to do it. In fact, this is the payoff, this is the benefit to the government side of this partnership, this is how the government gets its instant access to any amount of money at any time without having to go to the taxpayer directly and justify it or ask for it…..

  2. Andy Oz says:

    Every dollar of debt is a link in the chains enslaving Americans.
    It’s ironic that an African president is reintroducing slavery to the US.

    • Gail Combs says:

      Unless the Fed stops printing it OR the Chinese and Russians succeed in getting the US $$ removed as the world reserve currency either officially or defacto.

      If the USD loses its reserve status there is a very good change you could see hyperinflation and currency revulsion.

      The key to Weimar’s hyperinflation was two-fold.
      1. The German government had a large foreign currency debt obligation.
      2. The German economy lost huge amounts of productive capacity causing prices to soar as demand outstripped supply.

      1. The US trade deficit is growing.
      2. The US manufacturing capacity has been boxed up and shipped to China we are now a nation of store clerks and burger flippers.
      3. The ‘Shadow Economy’ in the USA is growing thanks to the high unemployment.

      …So, hyperinflation has very specific preconditions that are not apparent in the U.S..
      No foreign currency liability: The U.S. dollar is the world’s reserve currency so the U.S. can pay for trade goods in U.S. dollars. The U.S. does not have a peg to gold or some other currency which acts as a de facto foreign currency liability. And the U.S. government has substantially no foreign currency liabilities. All of the debt is issued in domestic currency.
      Price pressures are still anchored: While commodity prices are rising, they are rising in all currencies, not just in USD. Moreover, their rise will create demand destruction before any hyperinflation could occur. Why? Unemployment is high and capacity utilization is low, meaning there are no inflationary pressures on that front to help push inflation higher before demand destruction sets in.
      Currency revulsion has not set in: Tax compliance is high in the U.S. We are not talking about Russia, Greece or Argentina where government has had a difficult time in raising tax. Moreover, as the USD is still the world’s reserve currency, there has been no freefall sell off of dollars, nor do I anticipate any in the near-to-medium term.

      April 8, 2011 What are the preconditions for Hyperinflation?

      As I said earlier today China and Russia want to kill the USD as World Reserve Currency. China has just made a side deal with Australia that circumvents the USD as well as with Russia. Also China, Russia, India and South Africa are buying/mining gold.

      I can foresee the BRICS countries shifting back to a gold standard which would kill the USD.

      India endorses BRICS bank

      India’s prime minister said Thursday that international institutions are failing to lift up the developing world and endorsed the creation of a new development bank to be run by five fast-rising nations.

      Prime Minister Manmohan Singh spoke at a summit of the so called BRICS group — comprised of Brazil, Russia, India, China and South Africa — aimed at harnessing the nations’ increasing global clout and forging stronger ties between their fast-growing economies.

      The five countries represent 45 per cent of the world’s population, a quarter of its land mass and a quarter of its economy at $13.5 trillion US….

      The five nations are expected to agree to do more business with each other in their local currencies, to help insulate from U.S. dollar fluctuations while lifting trade within the bloc from last year’s $230 billion to $500 billion by 2015.

      They also hoped to move closer to creating a new development bank, much like the World Bank…..

      There is definitely some economic maneuvering going on and Obama’s proposed ban on Russian President Vladimir Putin’s participation at the upcoming G20 summit in Australia has the BRICS countries lodging a protest.

      We live in interesting times.

      BTW I foresaw Russia’s move on the Crimea before it happened and made a comment on some other blog about the Russian armed forces being moved into the area supposedly because of the Olympics being the precursor to a move to annex the Ukraine. (They need the farmland.)

      • policycritic says:

        The fact that the US Trade deficit is growing is proof that other countries want to net save in dollars, so they sell their stuff to us for them.

        The reserve currency only goes away when other countries do not want US$.

      • policycritic says:

        “If the USD loses its reserve status there is a very good change you could see hyperinflation and currency revulsion.”

        By whom? Britain didn’t experience hyperinflation when it lost its reserve status in the 60s. The Japanese Yen isn’t the reserve currency and it’s one of the strongest currencies and economy in the world.

        Big whoop if we lose reserve status. We still create our own currency as Japan and Great Britain do. We (meaning federal government) still provision itself–create jobs for infrastructure, communications, research, education, and health care–by paying for it in dollars.

      • policycritic says:


        1. The dollars are diverted from the efficient private sector to the very inefficient public sector and that is not even getting into the wasted dollars spent on Crony Capitalism or fraudulent science.

        No. There are two different kinds of dollars. The kind that Congress creates in the government sector by spending into the economy, and the kind the bank creates in the private sector: credit money (deposit money to the Brits) which is created when you and others walk through the door of your local bank and get a loan. Your loan creates the deposit. Yes, out of thin air. Based on your credit worthiness and the willingness of the bank to lend to you. It’s the cut of your jib. [Bet you don’t know you can complain to your district Federal Reserve non-bank directors if denied a loan.]

        Imagine this graphically as a big closed circle (system) split in half: federal government on the left, private sector banks on the right. There’s a button in the middle. That’s the Federal Reserve serving both. It acts as the US government’s banker on the left. It acts as the banks’ banker on the right. The rules of operation are different for each side.

        When Congress appropriates (spends), as the sole entity that can do so under the Constitution, the US Treasury is authorized to tell the Federal Reserve to mark up the amount of the appropriation in the US Treasury’s general account. The Federal Reserve uses its keyboard. Done. The US Treasury gives the Federal Reserve the names of the banks of the private sector vendors that will fulfill the appropriation. The Federal Reserve pays that $ to the banks’ reserve (checking) accounts by keystroke. Done. The banks get the money to you.

        So now we have an increase in the money supply in the economy as a result of Congress spending and we probably have a negative balance in US Treasury’s general account as a result of that dough rolling through. So the US Treasury issues treasury securities in the amount of the appropriation to restore the money supply on paper and drain excess reserves. People sloppily call that ‘borrowing’; it isn’t. And the people and institutions that buy the treasury securities at auction get a safe place to park their money, and the rich clip their coupons.

        The government money is interest-free, risk-free real money. It’s the high-powered money that is the unit of account of the United States, sometimes referred to as the vertical money, and it built this country from an agricultural society into an industrial powerhouse.

        Bank credit money is horizontal money. It requires interest and collateral, and you have to pay it back within a certain timeframe or you lose yourentire collateral.

        Since Reagan’s time, banks have taken on the jobs formerly planned and supplied by the federal government—look at the student debt scam—loading down the economy and its citizens with more debt. Banks don’t support and loan for industrial growth. 40% of the GDP is finance capitalism.

        It used to be that you paid 25% of your salary in rent or mortgage. Now the banks want 45%.

        When the banks take over what the government formerly handled -because everyone stupidly bought Reagan’s smaller government line, something that applies to state governments only–they have short-term goals. They urge their big players to liquidate pension funds to pay off the bank debt. They cut subsidiaries to the bone, firing employees and sending them home without a retirement fund—they stole it–except their social security payments.They sell off all the assets and use the funds to buy higher-paying assets, driving the prices up, but who benefits?

        Companies are buying their shares back these days, raising the price of shares, so the upper management can pay themselves monster stock options because a trigger price was reached. It’s a lot easier to make money that way than introduce a new product, risk facing competition in the market. They borrow that money from the bank, take their options, and who cares whether the company goes belly-up after that. And the middle class becomes poor. So we protect the banks?

        You’re a scientist. Find out how this really works. I thought like Griffin, Mullins, Kah, and Scharf for 30 years. No longer. We were duped.

        Read these:

        At least read page 1.

        Click to access qb14q102.pdf

        Pay attention to the last two paragraphs

        Excuse all typos. It’s my damn autocorrect with a mind of its own.

    • Yglesias is right, we can never run out of money (subject to certain constraints, such as the lack of total government collapse). Of course, we can always run out of wealth, & other countries can refuse to buy our debt.

      I, for one, relish the thought of paying a few trillions of dollars for a sandwich, while my IRAs contain a few tens of thousands of dollars.

      • policycritic says:

        “Buy our debt?”

        Debt at the federal level is real interest-free money the record of which is written down in Treasury’s double-entry accounting system–actually it’s been a quadruple-entry accounting system since 1949–as a liability. As an IOU. An IOU that never, never, never gets paid back. If that ‘debt’ were ever paid back, none of us would have a goddam dollar to our names. USA halted instantaneously, back to the jungle.

        This ‘debt’ is the money that built the government buildings, interstate system, airports, roads, bridges, dams, national parks, post offices, the WWII planes, ships, and boats and ammunition, and pays for the military, courts, Social Security and Medicare, and used to pay for real science research.

        Debt at the bank level is the opposite. It requires collateral and interest, and a time repayment schedule. The bank can take the collateral away if you don’t pay. The bank marks your loan up on the right side of its ledger as a liability, a debt, and your mortgage is their asset (left side).

        It’s a lousy situation to use the same word for things that don’t mean the same, but blame accounting. It’s an accounting artifact.

      • policycritic says:

        Oh, I forgot to deal with “Buy our debt?”

        OK. Walmart buys 10 million tires from China for 5 bucks. Walmart owes iChina $50 million.

        TIME OUT: The Federal Reserve only allows the US government, US banks, foreign governments, foreign banks to have accounts at the Fed. The Federal Reserve has two types of accounts: checking and savings. Forget their real names. Banks and the aforementioned governments have checking and savings account at the Fed. Got that?

        So Walmart wires $50 million to China.

        The way the settlement system works is that the $50 mill gets wired (FedWire) to China’s checking account at the Fed.

        China has three choices:
        (1) go on the open market, exchange for Yuan, and wire the money home.
        (2) leave it in checking earning zip.
        (3) buy treasury securities–equivalent to a US Treasury CD–and earn interest.

        China picks Door #3.

        China tells the Federal Reserve to move the $50 mill in checking into its savings account.

        China buys treasury securities at the monthly auction. (Treasury bills mature within a year. Treasury notes mature 2-10 years. Treasury bonds mature 10-30 years.)

        When the treasury securities come due, China tells the Federal Reserve to sell them and move the capital and interest back into its checking account.

        The act moving China’s money from its savings to checking account is called Paying off the National Debt.

        Now if you or I bought a CD at Chase for $5,000 and cashed it in and took the interest, we tell our friends we cashed in our CD. Right? Hell, the bank teller would tell you its cashing in your CD. But the technical accounting fact is that Chase paid off the debt it owed to Stark Dickflüssigbecause it was on its ledger as a ‘liability’ to you..

        The US government doesn’t have to sell treasury securities. It doesn’t have to issue them at all. But anyone who has more than the FDIC $250,000 limit in their bank account loves to have their dough in treasury securities instead of banks, which are risky. Treasury securities are the safest financial instruments in the world.

        Why does the US Treasury issue treasury securities? Congress made it a law during the gold standard days that the US Treasury’s general account at the Fed could not have an overdraft, could not have a negative amount as a balance. So after Congress issued appropriations (spent money) authorizing the US Treasury to fill its general account, and tell the to Fed deposit the money in the private sector vendors bank accounts, the money supply was up and the US Treasury’s general account was down. They issue treasury securities to restore the balance all around. ((These days there are also other uses as in the Fed maintaining the Fed Funds rate (the rate at which banks can borrow from each other and the Fed) but that’s too complicated to go into here. The Fed, incidentally, cannot buy treasury securities from the US Treasury at auction. It can only buy them on the open market like you or I.))

        The United States cannot go broke. It is not a household, business, or state or local govt. It does not have to ‘live within its means’ (Edward Griffin is to the Federal Reserve what John Cook is to climate change). The US issues its its own currency. There is no factory in downtown China manufacturing dollar bills that we borrow. We could afford to give all those banks $5 trillion. Where the hell was Congress failing to appropriate money to save the people from the mess it failed to regulate? Hmmn? Congress could have appropriated a $10,000 per capita transfer to each state–for less money than it gave the banks– and stopped the blood-letting. Nixon did it. The much maligned Nixon. No one ever had to pay that money back.

    • policycritic says:

      The National Debt is not what we owe. It’s what we own. It’s a record of all currency created since 1791 minus current destroyed (taxes).

      Don’t you think if it was such a problem someone would have thought about it when it was $900 billion, or maybe $12. trillion?

  3. SDB says:

    Steve Goddard,

    The way the the ‘left’ fearmongers about climate change, you are here perpetuating fear about the National Debt.
    Read this:

    The National Debt should more accurately be called something like Net U.S. Dollar World Savings.

    New money comes into existence primarily two ways: 1) banks lend money into existence, and 2) the U.S. government spends money into existence.

    1) Most people think that banks simply intermediate between savers and borrowers. This is not correct. The money supply expands and contracts, via the banks, based on the private sectors demand for credit. This is sometimes referred to as Endogenous money. Recently the Bank of England, in very clear language, that this is how it works. The Post Keynesian branch of the economics profession has been accurately describing it like this for decades. See the Bank of England piece here:

    2) The consolidated Treasury + Federal Reserve Bank, as agents of Congress, is effectively a currency-issuer. The U.S. government has an endless supply of dollars because it and it alone has the legal authority to create them. When thinking about the National Debt, it’s useful to take a step back and consider what ‘is’ deficit spending.

    Deficit spending is when the U.S. government spends more money into the economy than it taxes out of the economy. Whenever this happens – which is nearly every year, for the past 100+ years – what happens is an injection into the economy of Net Financial Assets. Why “net’ financial assets? Well, banks create financial assets when they expand the money supply via issuing credit. But there there is an liability attached to the asset, both of which occur ‘within’ the private sector. Said another way, if all bank loans were to be paid back tomorrow, then the only U.S. currency that would exist is an amount equivalent to our National Debt… to the penny! Think about it.

    Clue: the U.S. government’s debt is the non-government’s savings.

    Final point: at the beginning of this comment I said “New money comes into existence primarily two ways: 1) banks lend money into existence, and 2) the U.S. government spends money into existence.”

    Technically anybody can create money. If I create an IOU on a piece of paper and give it to you to mow my lawn, I’ve just created money. Money is just IOUs. Somebody issues the IOU. The issuer IOU is his debt, the IOU to the receiver of it is money, or savings. What makes my IOU different from U.S. dollars? Nothing really, accept that my IOU is not widely accepted. As the Post-Keynesian economist Hyman Minsky said: “everyone can create money, the problem is to get it accepted” (by others).

    • New money comes into existence primarily two ways: 1) banks lend money into existence, and 2) the U.S. government spends money into existence.

      Mr. Krugman, is that you?

      • Gail Combs says:

        He is completely missing the other side of the “lend money into existence”

        Think of the wealth, the physical assets of the economy as a pie. When the Banks create more fiat money it changes the ratio of ‘physical assets’ to money. As the number of dollars in the economy goes up and the physical assets stays the same or does not increase as fast, the number of dollars needed to buy that physical asset goes up.

        For example:
        * My parents bought a house in the NYC area for $3,000 around WWII.
        * We moved back to the NYC area in 1960 and bought a house for $30,000.
        * In the 1980’s my cousin bought a house in the NYC area for $300,000.

        When the bankers create that fairy dust money that they lend into the economy, where does the ‘Value’ come from? – It is stolen from the poor and middle class as ‘Devaluation of wages’ You can see how this is done intentionally with the poor and middle class as the sheep being sheared if you look at gold vs US dollars.

        The Corporate head honchos who are in on the fraud are not about to get caught in the fleecing.

        In 1976 A typical American CEO earned 36 times as much as the average worker. By 2008 the average CEO pay increased to 369 times that of the average worker.

        The typical American CEO is still paid the same amount in “buying power” (actually more) but the rest of us are now paid a tenth of what we were paid in 1976. The price of gold indicates the steady devaluation of the US dollar as it’s purchasing power is diluted by the ever increasing money supply.
        (Dollars are in billions)
        Date. .gold -$/oz. .$$$ supply..increase…min. wage
        1959 — 35.25 — 50.1 bil………………………..$1.00
        1963 — 35.25 — 51.6 bil. — up $1.5 bil……..$1.25
        1974 –195.20 —101 bil. — up $51 bil………$2.00 gas prices doubled over night and the Money supply continued to double at approximately ten year intervals

        1985 — 354.20 — $205 bil — up $103 bil…$3.35
        1994 — 409.80 — $ 406 bil — up $201 bil..$4.25
        2006 — 636.30 –$808 bil — up $402 bil…$5.15
        2008 — 880.30 –$831 bil — up $23 bil…..$5.85
        09 –1,020.28– $1663 bil… up $921 bil….$5.85

        CEO wages in gold (1976) – 0.663.oz and in 2008 – 2.44.oz
        Peons wages – gold (1976) – 0.0184 oz and in 2008 – 0.0064.oz.

        If you look at the price of gold, you can see how the value of the dollar has dropped and how the minimum wage no longer has the buying power it had in 1960 especially when compared to the wages of the corporations CEO.

        Gold price (wwwDOT)

        Money supply research(DOT)

        Min Wage usgovinfo(DOT)

        NOTE: I am well aware of the argument that gold is changes value depending on the whims of the public however the price is actually set by the Rothschilds.

        Apr 2004 Rothschild to pull out of gold market after 200 years
        The investment bank that has chaired the London meetings setting the world gold price since 1919 is quitting the market.

        NM Rothschild will withdraw from all its commodity trading activities, which also include an oil trading business set up less than two years ago, as part of a strategic review.

        The move brings to an end nearly 200 years of tradition. NM Rothschild was founded in London in 1810 by Nathan Mayer Rothschild, who helped finance the Duke of Wellington’s army in the Napoleonic wars through gold trading.

        The company hosts and chairs twice-daily meetings which effectively set the world’s gold price. The meetings are held in a plush chamber in the bank’s offices at St Swithin’s Lane in the City. The other four firms involved are Deutsche Bank, HSBC, Canada’s Scotia Bank and Societe Generale….

  4. Gail Combs says:

    I blew the blockquote offs and screwed up the table. Here it is again:

    Date…gold -$/oz…$$$ suppl…increase…min. wage
    1959 — 35.25 — 50.1 bil………………………..$1.00
    1963 — 35.25 — 51.6 bil. — up $1.5 bil……..$1.25
    1974 –195.20 —101 bil. — up $51 bil………$2.00
    gas prices doubled over night and the Money supply continued to double at approximately ten year intervals

    1985 — 354.20 — $205 bil — up $103 bil…$3.35
    1994 — 409.80 — $ 406 bil — up $201 bil..$4.25
    2006 — 636.30 –$808 bil — up $402 bil…$5.15
    2008 — 880.30 –$831 bil — up $23 bil…..$5.85
    09 –1,020.28– $1663 bil… up $921 bil….$5.85

    CEO wages in gold (1976) – 0.663.oz and in 2008 – 2.44.oz
    Peons wages – gold (1976) – 0.0184 oz and in 2008 – 0.0064.oz.

    Gold price (wwwDOT)

    Money supply research(DOT)

    Min Wage usgovinfo(DOT)

  5. Gail Combs says:

    As I said above the expansion of the money supply is supposedly justified by the expansion in the economy.

    Here is the Alternate Gross Domestic Product Chart

    Here is an explanation of how GDP is calculated: Calculating GDP

    ….The final component is G. The government buys (with your tax money) goods and services (G). These purchases are a measure of those goods and services produced. Be aware that many people make the mistake of thinking that the money paid in taxes and spent by the government is “lost” and therefore subtracts from the GDP. Tax money may indeed be spent inefficiently but this fact has no bearing on the calculation of the GDP….

    Including G is rather laughable when you think about it from the point of view of increasing the WEALTH of the nation.

    1. The dollars are diverted from the efficient private sector to the very inefficient public sector and that is not even getting into the wasted dollars spent on Crony Capitalism or fraudulent science.

    2. It is not tax dollars that are spend but fiat money borrowed via bonds or the Fed.

    Grace Commission Report
    …Resistance to additional income taxes would be even more widespread if people were aware that:

    o One-third of all their taxes is consumed by waste and inefficiency in the Federal Government as we identified in our survey.

    o Another one-third of all their taxes escapes collection from others as the underground economy blossoms in direct proportion to tax increases and places even more pressure on law abiding taxpayers, promoting still more underground economy — a vicious circle that must be broken.

    o With two-thirds of everyone’s personal income taxes wasted or not collected, 100 percent of what is collected is absorbed solely by interest on the Federal debt and by Federal Government contributions to transfer payments. In other words, all individual income tax revenues are gone before one nickel is spent on the services which taxpayers expect from their Government.

    Here is Shadow Statistics on the usual fudging of the data by the US Government. (so what is new.)

    Gross Domestic Product

    A Series Authored by Walter J. “John” Williams


    The Gross Domestic Product (GDP) is one of the broader measures of economic activity and is the most widely followed business indicator reported by the U.S. government. Upward growth biases built into GDP modeling since the early 1980s, however, have rendered this important series nearly worthless as an indicator of economic activity. The analysis in this Installment will indicate that the recessions of 1990/1991 and 2001 were much longer and deeper than currently reported, and that lesser downturns in 1986 and 1995 were missed completely in the formal GDP reporting process. Furthermore, the current economic circumstance is suggestive of an early-1980s-style double-dip recession.

    The distortions from bad GDP reporting have major impact within the financial system. For example, Alan Greenspan’s heavy reliance on productivity gains to justify some of his policies is equally flawed, since the methods applied to GDP estimation influence the numerator in the productivity ratio. As with the CPI distortions discussed in Installment III, the Federal Reserve Chairman knows better.….

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