3 Biggest Lies the Government Is Telling You

by Charles Goyette | January 24, 2012 10:55 am

Government lies are legion. 

So many are its lies, that narrowing them down to three of the most important is a demanding task. But our current crisis has been chiefly enabled by monetary policy, fiscal policy and the global military empire.

So I have chosen to focus on lies about each: the Federal Reserve, the orchestrator of monetary policy; the U.S. budget, the accounting of government fiscal policy and just a little of the war lies of the empire. I am sharing just a smattering of this astonishing record of duplicity in three areas, for life is short, or at least far too short to recount all of the state’s lies about each.

Lie #1: The Federal Reserve Is a Bank

Practically everything the government says about banking is a lie. Central banks are not banks. The Federal Reserve, the central bank of the United States, is not a bank. 

A bank is a company in the free market that competes with other banks in offering willing customers a safe place to make deposits and earn an interest rate return, while also competing to offer loans from these deposits to willing borrowers. 

Central banks are government-created bureaucracies that do nothing of the sort. 

The Federal Reserve is typical of central banks. It is not a free market institution in which people willingly make deposits. Instead, it wields monopoly power over actual banks. In place of managing deposits and loans, it creates money out of nothing by a variety of means, including debt monetization, in which it buys government debt by simply creating a credit in the account of a commercial bank with a nothing more than a booking entry. This act is made possible only by the state’s creation of a legal monopoly empowering the central bank to do what, if done by a private bank, would be a crime called counterfeiting.

Central banks, like the Federal Reserve Banks, thus have the ability to unilaterally boom and bust their economies at will. And they have done so throughout their history, either to the benefit of the commercial bank cartels, in response to political pressure, or because of outright economic ineptitude.

The representation of central banks as actual banks produces confusion in which they are said to earn “profits.” For example, a January 2012 Federal Reserve press release reporting its “earnings” announced $76.9 billion in 2011 net income. This was described in stories in The New York Times and The Financial Times as the Fed’s “profits,” as would a story about any commercial bank describing its profits. 

Yet, in what sense does the Fed show a “profit” or have “earnings”? It is as inappropriate as would be describing the collections of the Internal Revenue Service as “profits.”

Where are the Federal Reserve’s “profits” derived? They are the result of printing new dollars to buy assets; that is, they are the result of diluting the purchasing power of every dollar you or anyone else has. It is not any different than a dairy watering down 100 gallons of milk to sell 110 gallons. It is fraud. But it is a fraud legalized by act of Congress.

But the Federal Reserve is not alone. Another non-bank is the World Bank, which loans money to governments and government enterprises. The World Bank has been a useful place to pasture failed U.S. government warmongers like the disastrous Vietnam War Secretary of Defense, Robert Strange McNamara and Iraq war co-author, Paul Wolfowitz. Both were named World Bank president even as their deadly wars raged on.

The World Bank gets almost all of its money by way of the International Bank for Reconstruction and Development (IBRD) — also not a bank — which gets its money from taxes, the largest share coming from the American people. The IBRD also sells World Bank bonds, but they too are guaranteed by taxpayers. 

American tax dollars go to other multi-national organizations such as the Asian Development Bank, the African Development Bank and the Inter-American Development Bank. None of which are banks.

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Lie #2: We Were Attacked … We Face a Grave Threat … There’s No Cover-up

Governments and politicians lie incessantly about war. They lie about the reasons for war, they lie about the progress of war and they lie about the costs of war. They lie without reason.

In just the last 50 years, the American people have been lied to about U.S. government wars from Vietnam to Iraq. 

The Gulf of Tonkin incident, a purported attack by North Vietnam on U.S. ships off its coast, was used by President Johnson (an “unprovoked” attack he told the nation) to win legislative authority, the Gulf of Tonkin Resolution, for a war in Vietnam. But it was an incident that did not happen, and Johnson knew it even as he escalated Vietnam into a full-blown war. “Hell,” he told his secretary of state just a few days after the resolution passed, “those dumb, stupid sailors were just shooting at flying fish!”

Lying is so intrinsic to the nature of government, that even the truth about old lies is concealed to protect new lies.

In 2001, a National Security Agency report found that officials had actually doctored documents to cover up the truth that the Tonkin Gulf incident hadn’t really happened. But the report of that cover-up was itself delayed for years for fear that it’s release would cast doubt on the intelligence that the Bush administration was using to justify an invasion of Iraq.

In the case of the Iraq war, not only did defense Secretary Donald Rumsfeld lie about knowing where the non-existent weapons of mass destruction were in Iraq (“We know where they are. They’re in the area around Tikrit and Baghdad and east, west, south and north somewhat.”), in a later exchange with my friend, former CIA Senior Analyst Ray McGovern, Rumsfeld even denied he had made such a claim. 

Aside from reasons for war, the government can also be counted on to lie about the costs of war. George W. Bush administration economist Lawrence B. Lindsey was fired for suggesting in advance that the Iraq war would cost $100 billion to $200 billion. Although estimates in the trillions of dollars would have been closer, Rumsfeld called Lindsey’s estimate “baloney.” 

The government tries to conceal war spending by keeping it off the budget books with supplements, appropriations and emergency measures. It even spreads war costs off the defense department budget and into the budget of other departments such as state and energy.

I have written more about the government’s war lies in my new book, Red and Blue and Broke All Over: Restoring America’s Free Economy, but I must finish the  point here with a reminder of the government’s lies through the cases of Jessica Lynch and Pat Tillman.

Private Lynch was a 19-year-old clerk when her company was ambushed in Iraq after taking a wrong turn. She suffered injuries when her Humvee overturned, and was taken by Iraqi soldiers to a nearby hospital. U.S. officials reported that Lynch had gone down fighting and had been shot, stabbed and slapped around as she was interrogated on her hospital bed. But Private Lynch had no such wounds, she had never fired her weapon, and, by her own account, was well cared for in the Iraqi hospital. And although, the doctor who had cared for her tried to turn her over to the Americans, the Pentagon instead staged a dramatic raid to “rescue” Lynch, all with cameras rolling. 

Then there’s the story of Pat Tillman, who was killed by friendly fire in Afghanistan and was posthumously awarded the Silver Star, a combat honor given for valor in action against an enemy. There was no encounter with the enemy, but you wouldn’t have known it from the fraudulent accounts of his demise: Senior commanders’ prints were all over the cover-up about Tillman’s death. General John Abizaid approved the Silver Star despite knowing within days of Tillman’s death that he had been shot by friendly fire. 

Lieutenant General Stanley McChrystal cited Tillman for actions “in the line of devastating enemy fire,” but the very next day, he sent a confidential memo about the fratricide to senior government officials including Abizaid, warning them to protect themselves and President Bush from embarrassment in the episode.    

Tillman’s family charged the military with repeatedly lying to them about his death and about its investigation, delaying its account of his friendly fire death until after a nationally televised memorial service orchestrated by the Bush administration. By one account, his fellow soldiers were even told to lie to the family at Tillman’s funeral. 

The government not only lies about war, it routinely lies about its lies about war. 

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Lie #3: U.S. Debt Is $15 Trillion

This may be the most brazen and transparent lie of all, the one about the U.S. national debt, now over $15 trillion dollars. It is a number that hides the severity of our situation. 

Washington acts as though that is the real debt of the nation. Politicians posture for weeks at a time about it, devoting long debates to raising the ceiling on this national debt. And yet, the real federal debt is much, much larger and like an iceberg — most of it is hidden out of sight below the water line. 

Like the Titanic, Republican and Democrats have the country headed for a collision with reality.  

Each year, the federal government makes promises and adds trillions in new financial obligations that do not show up in the visible, official national debt. The persistent growth of these hidden debts each year far outpaces the increases in the visible debt. In 2010, for example, the visible federal debt grew by an astonishing $1.5 trillion. But the hidden debt grew — out of sight and without debate — by more than $5 trillion! 

When a private business takes on an obligation to pay something, it is required to report it as a liability. It shows up on the books. Not so for the state. 

Politicians make promises without adequate revenues to pay for them. It is easy to understand why this should be so. Giving things to constituents feels good. Making them pay for those things causes them pain. Like most living creatures, politicians like to feel good and avoid pain. So when they add to the obligations of the state, when politicians make commitments for the future or promise entitlements like Social Security and Medicare to win re-election, the means to pay are often inadequate. But there is no such thing as a free lunch, which is to say, that the cost will have to be borne eventually by somebody. But for the time being the preferred political expediency is keeping the costs, the liabilities, off the books.

Unfunded liabilities are the difference between a program’s projected costs and its projected revenues, both valued in today’s dollars. 

Medicare and Social Security both have promised benefits that outrace revenue streams. They are major components of the unfunded liabilities, the hidden debt of the nation. But there are other federal retirement programs with not merely inadequate funding like Medicare and Social Security, but with no revenue streams of their own at all. Among them are retirement programs for military and federal workers. 

In September 2011, USA Today analyzed dozens of overlapping programs for retired federal workers. It reported that despite the existing debt crisis, Congress continues to add to the promised benefits, so that retirement programs now have a $5.7 trillion unfunded liability.

The total unfunded liabilities of the U.S. government have been calculated with a number of present value and discount models. Results of the shortfall from these methods range from about $70 trillion to $120 trillion dollars. For a family of four this represents a liability between $900,000 and $1.5 million. (You can follow the debt as it adds up at www.USdebt.org[2].)     

What does the state say about its unfunded liabilities? 

Here’s a response from the Congressional Budget Office, which answers, “… no government obligation can be truly considered ‘unfunded’ because of the U.S. government’s sovereign power to tax — which is the ultimate resource to meet its obligations.”

That is utter hooey. It conjures up an absurdity in which the government could meet its obligation by sending your Social Security check, even as it raises a tax to take 100 percent of everything you get from Social Security. The reason that is an absurdity is that it is a two-step process to do what the government will do in just one step. It will unilaterally reduce its “obligation,” leaving millions of people betrayed. 

Because it is the government. And it lies about everything.

Including obligations.

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Endnotes:
  1. [Image]: http://investorplace.com/order/?sid=IQ7112
  2. www.USdebt.org: http://www.usdebt.org/

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