Figures That Don't Add Up

THE PUBLIC DEBT
The Outstanding Public Debt of the world’s super power – the United States as of 8th day of July 1998 is $5.5 trillion or US $5,530,290,097,783 up from $5,368,022,982,421 in July 1997. Here is where it gets confusing. The Treasury Budget for March claimed a budget surplus of $50 Billion. The Treasury gives the explanation of the "Deficit" as the amount the government goes into debt each year (a surplus is the opposite), while the "Debt" is the accumulation of all those deficits.

HOW DOES IT WORK?
The documentary "Millennium Money" reported that for many years government have been using creative accounting and incorrect and misleading reporting to get around laws and give the appearance that things are better than they really are. This is done by shifting projects off the balance sheet, applying for temporary budget extensions, raiding the Social Security Trust Fund or simply transferring excess spending into the next fiscal year. These methods all create the illusion of reduced spending without incurring the pain of actually making cuts. CONFUSION ON THE STREETS
With an estimated population of the United States of 270 million, each citizen's share of this debt is therefore over $20,000. It is worth remembering that the public debt belongs to the public – every man, woman and child. The government accumulate this debt on your behalf.

In Australia and the US there are a lot of people that just don’t understand the difference between deficit and debt. During our last trip to the US, as we traveled around and spoke with the "man on the street", many believed that the reported surplus meant that President Clinton had in some mystical way dealt with the "Public Debt" and making it simply disappear.

THE INEVITABLE QUESTIONS
When thinking about the non-sustainable nature of this mess, some unanswered questions remain; We are in a period of a strong growing economy (currently in the longest economic expansion in peace time history), lowest inflation rates in over 20 years and a booming stock market. The government is collecting the largest federal tax revenue in all history, yet it cannot prevent the national debt from growing. Will they be able to prevent exponential growth in the debt at the next economic downturn when revenue to the government starts to dramatically deteriorate? Or how will they cope if Y2K precipitates a even greater lose in revenue when the IRS computers start to hiccup or go down? If the government can’t survive without raiding Social Security and Pension trust funds now, what happens baby boomers start to retire? What happens when people come looking for their pensions and social security? People get angry when they don’t get paid. The US Treasury bond market like every market relies on confidence. People buy government debt on the understanding that one day the issuer of those bonds and bills will honour them - with interest. What happens to the confidence in that market when it realises that government is hopelessly broke and must continue to issue new bonds to cover old bonds?

Philip Judge

Anglo Far-East Company

Also by Philip Judge

Philip Judge is the 3rd generation of a family that has had substantial involvement in the Precious Metals markets. He has researched, written and spoken on the gold, silver and commodities markets for over a decade. Philip works in the marketing and operations department of The Anglo Far-East Bullion Company, an internationally based Bullion Banking, Investment Management and Financial Services Company