THE ENTIRE NATIONAL DEBT IS TIED UP IN TREASURY PAPER. In order to fully understand why we have this enormous discrepancy between the "reported" deficit and the increase in the national debt it's important to first understand some aspects of how the US Treasury operates.
In 1993 the US Treasury employed 115,000 people and had an operating budget of $7.2 billion, that's $7,200,000,000 folks. The U.S. Treasury may be the busiest place in Washington.
The US Treasury holds 12 to 16
auctions
a month. In these auctions the Treasury sells notes, bonds, bills, or securities sufficient to maintain the national debt level and/or procure additional funds for the federal government. Anyone can attend these auctions. Anyone can purchase Treasury paper (notes, bills, bonds, etc.) at these auctions. They are advertised in advance. If you bid, you will be given a number of days to submit payment and, of course, if you do not come up with the cash, you will not get the items you bid on.
Because the Treasury has been doing this for ages, there is not a single day of the year when Treasury paper does not mature and thousands of notes must be paid off. Because dates fall on different days of the year most years, this includes Saturdays, Sundays and holidays as well. Exceptions may be July 4th, December 25th and January 1st.when payoffs are suspended.
Interest payments also become due on every day of the year. You might say that 1/365th of the roughly 5 percent interest on $5.3 trillion, or 1/365th of the 1997 $344 billion interest payment, is due every day of the year, Saturdays, Sundays and holidays included. We are rapidly approaching the time when $1 billion per day will be due in interest alone---with nothing to show for the money.
Proceeds from the sale of Treasury paper all go into the federal government's "general fund."
This $69 billion was all invested in Treasury paper. Although committees investigating the health of the Social Security Administration have recommended that Social Security be permitted to invest its funds in the stock market where they would get a much better return, current law forbids them from investing in anything other than Treasury paper. And, of course, the politicians are not about to change this since it's all money they get to spend.
Although this money is definitely borrowed from the Social Security Administration, the federal government does not count it in their reported deficit; i.e., the deficit they tell you about.
(We are being very generous here by deducting $69 billion when, in reality, about $36 billion of this figure was "interest" paid to Social Security on the $481 billion it held at the end of fiscal year 1995; i.e., it was "paper" issued by the Treasury.)
Does the Social Security Administration seem to be an organization in trouble? What company would not want an excess (profit) of $69 billion a year, and a bank account with more than one-half trillion drawing simple interest? Are we hearing stories about Social Security's expected financial demise simply because politicians see that the baby-boomer years may cause Social Security to use more of their income/savings and diminish the horn-of-plenty for the federal government?
This is your money they're talking about here folks. In 1996, you "overpaid" Social Security $69 billion.
In 1996, the CIVIL SERVICE RETIREMENT TRUST took in an excess of $33 billion. This is an interesting figure. Doesn't it tell you something about the size of Civil Service? It's almost half the excess for all other working people in the country; i.e., those paying Social Security. Anyway, add $33 billion to the real deficit.
The reason the Civil Service Retirement Trust is so large (and has such an excess) is not because of the number of employees but the size of the benefits they receive. Unlike the average American's Social Security system where employers match employee contributions 1-to-1 or dollar-for-dollar, the civil service people are matched 8 dollars to one. For every dollar an employee puts in, the government "matches" it with 8 dollars. Nice, isn't it? After all, it's your tax money. And the same is true with your own local government. It may not be as much as 8-to-1 but check your local police, fire, and civic workers. By law it's reported in the annual financial report for your city, county, and so forth. You may have to dig, but it's all there. Take a look at what government people across the board are socking away.
In 1996, the MILITARY RETIREMENT TRUST had an excess of $9 billion. Another interesting figure. Is this telling us that all the people in the Army, Navy, Air Force and Marines are merely one-fourth the size of Civil Service? Add $9 billion more.
Unemployment Insurance Trust took in 9 billion more than they paid out. Others had lesser amounts.
See table.
(Again, we're being generous here because this figure includes "interest" paid to the funds.)
Since most of these trust funds have been around for a long time, they hold Treasury paper which is both maturing and drawing interest yearly. Whatever interest is paid them goes right back into more Treasury paper, a perfect round-robin. We will assume that these interest payments are included in the "yearly excess" although it could be part of our missing money.
At this point we must admit that the 14 months which made up the "missing $310 billion" (now whittled down to $178 billion) cannot truly be used to figure the 12 month fiscal year 1996 which began October 1, 1995 and ended September 31, 1996. While our 14 months ran from November, 1995 until January 2, 1997, and wasn't really a full two months, the overlap must still be accounted for somehow. However, we do not feel that it could possibly account for the full $178 billion still missing. We are going to make a liberal adjustment at this point.
ADJUSTMENT: Averaging the 14 months into the full $417 billion increase to the national debt, we come up with a monthly average of $29.8 billion per month. For a full two months we will take off $60 billion.
IMPORTANT NOTE: There are at least two possibilities in regard to where this money may have come from. We are going to present them both and let you decide which is more likely.
Bear in mind that it may be a combination of both; i.e., some of the money may have come via each of these channels.
While the U.S. Treasury actually prints the bills you and I have in our pockets, the Federal Reserve seems to run things. See attachment.
For a thorough examination of the Federal Reserve we are going to simply refer you to an excellent book by G. Edward Griffin titled "The Creature from Jekyll Island" ISBN#0-912986-18-2. We strongly suggest that you purchase this book. It reads easily. Another is "Secrets of the Temple- How the Federal Reserve runs the country" by William Greider, ISBN#0-671-47989-X.
At best a quasi-government institution, the
Federal Reserve is the subject of debate
over its status as federal or private, despite the name. For example, the city of Washington, D.C. has, since the seventies, carried on a demand that the "Fed" pay property taxes. The Fed claims exemption as a government organization. The City counters that if it were a governmental entity why did it purchase the property and pay for the erection of the building standing on this land. No other governmental body does. Try to run a "search" on your computer restricting the search to government. If you get anything on the Fed, let us know.
Whatever the Treasury does not sell at any given auction is picked up by the Federal Reserve. If the Treasury does not sell all the paper it advertised to auction on any given date, they do not take it back and put it up for sale again at the next auction, the Federal Reserve buys it. For example, when Japan did not show up to purchase the $13 billion in bonds they promised to buy, the Federal Reserve bought it.
The "Fed" pays for this Treasury paper with fiat money. They may write a check to the U.S. Treasury but it's backed by nothing. The Federal Reserve actually has no reserve. They have plenty of assets in the form of loans, gold, and so forth, but it's all held in accounts of their stockholders A & B. The "B" stockholders are generally their twelve branch banks and other prominent investors. The "A" stockholders are a great secret but generally believed to be the old aristocracy families from the days when Henry Morgan sponsored this entity in 1913 and gave us the central banking system.
The Fed distributes purchased Treasury paper to its twelve regional banks. These banks may then sell the paper to customers directly, through your own local bank which the Fed controls, or simply keep it on hand. Either way, they can't lose. The profits are considerable, particularly since they didn't pay anything for it.
Once the federal government begins to use the check the Fed gave the Treasury, once they begin paying for salaries and services, then this fiat money becomes real. New money has entered the market.
Haven't you noticed that no matter how hard you work, how much time you put in or how many jobs you hold, it just seems to get harder and harder to keep your head above water. The economy is supposed to be good, unemployment rates are low, we don't have much inflation, but your money just doesn't seem to go as far as it once did. Utility payments seem to eat up your budget. Now you might have the reason.
.
Your government doesn't exactly lie to you, they just use different words to explain minor insignificant variations on the theme.
You can view this fact at the Treasury's page... LINK
REASON FOR THE DIFFERENCE: What is not included in the $241 billion "interest" expense politicians will point to, but is included in the $344 billion "cost/interest" of/on carrying the debt, is the discount rate, plus a few other minor expenses we won't bother with. .
Besides the yearly interest rate paid on notes, bonds, bills and securities sold by the Treasury and set at the time of purchase, we also have the "discounted" price of those papers at time of purchase and the fact that at muturity they are worth full face value. For example, on April 11, 1996 the Treasury's 30 year bonds were selling for $93.15 with a 7.17 percent interest rate. This means that for 30 years the Treasury will pay the bearer $7.17 for every $100 bond he holds, and at the end of 30 years he will get an additional $6.85 besides the interest for the last year. It's the $6.85 that constitutes the "discount" rate payment.
Now this may not seem like enough to account for a hundred billion dollars until you realize that there are thousands of these notes, bonds, bills, and securities maturing every single day of the year. There are 30 year bonds purchased on this date 30 years ago, 10 year notes purchased on this date 10 years ago, 5 year notes due on the same date, 2 year notes, 1 year notes and so on, all due on each and every day of the year.Of course, the discount rate on shorter term Treasury paper is less but it still adds up to millions per day. It could account for a lot of the $102 billion mentioned above and added to the debt.
What's the interest on half a trillion?
At the close of fiscal year 1995, Social Security held $481 billion in Treasury paper. In 1996, this figure rose $69 billion to $550 billion. Now, we do not know whether these are long or short term bonds but it would be a safe assumption that Social Security would opt for the long term high interest securities. At a minimum, it's safe to assume that Social Security received at least 5 percent on their holdings. At half a trillion, this would amount to an income of $25 billion in 1996. Thus, all of the $69 billion excess for 1996 did not come from citizen tax. Some of it came from interest on the accumulated pile. And the federal government just issued Treasury paper to cover this interest.
Of course, if Social Security had been allowed to invest in the stock market the return would have been a minimum of at least 14 percent.
