Mercifully, the US government accounting year, Fiscal Year 2020, ended a few weeks ago. It was one for the books.
The record books.
We’ll get to the numbers in a moment. But we must tell you that in some ways this a repeat of a commentary we posted two years ago, with the ending of FY2018. And we could have run it again last year, at the end of FY2019. But we don’t like to repeat ourselves that often.
The problem is that there are a lot of things fishy about the way the government operates. But nothing is fishier than government accounting.
That’s a problem for us all, because government accounting helps determine what people consider the prospects for the US dollar to be.
So, with the ending of FY2020, the financial news outlets have been filled with stories about the US budget deficit. They report the deficit $3.1 trillion. That’s nothing to sneeze at, but it is way short of reality.
Here’s the way the Wall Street Journal reported the news:
“WASHINGTON—The U.S. budget deficit tripled to a record $3.1 trillion in the fiscal year that ended Sept. 30….
“As a share of economic output, the budget gap in fiscal year 2020 hit roughly 16.1%, the largest since 1945, the Treasury Department said Friday, when the country was financing massive military operations to help end World War II.
“Federal debt totaled 102% of gross domestic product, the first time it has exceeded the size of the economy for the full fiscal year in more than 70 years, according to estimates from the Committee for a Responsible Federal Budget.”
Okay. $3.1 trillion. That’s big. It’s a triple from last year. But it’s not right.
Here’s what really happened. At the end of FY2019, the gross federal debt was $22.798 trillion. At the end of FY2020 the gross federal debt was $27.026 trillion.
That means the debt actually rose by $4.228 trillion.
There’s a big difference between the $3.1 trillion deficit the government news release and the media report, and the $4.2 trillion I am describing. The difference is $1.1 trillion. And that’s real money!
Who’s right? If the picture of the nation’s finances the government provides is correct, you should go your merry way.
But if the picture I provide is correct, you will want to make sure you are substantially protected with precious metals.
Let me show you how to find out for yourself who is telling you the truth. The US Treasury maintains a site that reports the federal debt “to the penny” each business day. Here is the link.
Call up the national debt at the end of September this year, FY2020. It was $27.026 trillion. Now, look up the national debt one year earlier, at the end of September 2019. You will see that FY2019 finished with a national debt of $22.798 trillion.
The difference is the increase in the national debt in a year. It represents a deficit, a gap between what the government took in and what it spent.
It is not $3.1 trillion billion. It is more than $4.2 trillion.
Even the $27.026 trillion national debt figure – as mind-boggling as it is – is another product of government accounting. As we wrote about the practice two years ago, an honest measure of its indebtedness should include promises the government has made to pay for things. That’s how we reckon debts in the real world.
Among the promises the government has made that people rely upon are things like Social Security and Medicare. These unfunded liabilities are debts of the country, no less than any other government promises to pay.
Accordingly, the real national debt should be measured in the hundreds of trillions of dollars!
Government accounting is also what has allowed the Federal Reserve to destroy 97 percent of the dollar’s purchasing power, even at it is charged with maintaining price stability.
If private businesses operated with the flim-flammery of government accounting, people would be locked up in jail.
There is really only one broad-spectrum protection against government accounting and the destructive practices in enables.
It is gold.