CBO Comes Clean on “Fraudulent Accounting” with Fair-value Estimates on 2024 Loans and Loan Guarantees. Economic Picture: Bleak.

Washington Admits Fraudulent Accounting Again – WSJ

CBO flags a $66 billion Beltway bamboozlement.

By James Freeman, Aug. 22, 2023 – Excerpts:

You have to laugh or cry when the Congressional Budget Office issues an occasional reminder that lawmakers use bogus accounting to hide from taxpayers the true cost of federal programs. Give CBO credit for honesty as it points out how required official estimates are at odds with real-world bookkeeping. Last week CBO explained how its new report on federal support for consumer and business lending measures the downside:

The report shows two kinds of estimates: those currently used in the federal budget, which are made by following the procedures specified in the Federal Credit Reform Act of 1990 (FCRA), and those referred to as fair-value estimates, which measure the market value of the government’s obligations…

Using FCRA procedures, CBO estimates that new loans and loan guarantees issued in 2024 would cost the federal government $10.9 billion over their lifetime. But using the fair-value approach, CBO estimates that those loans and guarantees would have a lifetime cost of $76.7 billion.

The fair-value estimate is 10 times what Beltway accounting claims!….

A government that habitually embraces such financial shenanigans over decades could someday run up a debt of $32.7 trillion.

Now that someday has arrived, the question is when the reckoning will occur…..

Net interest costs hit 14 percent of tax revenue in July, the level we consider the inflection point for fiscal policy, and, not surprisingly, the bond market has reacted. The next president faces a dour fiscal environment: high deficits despite low unemployment, rising net interest costs, a demographic strain that is pulling forward the insolvency of Social Security, and fewer international buyers of US Treasuries. If that is not enough, all the Trump tax cuts for individuals and the generous Obamacare subsidies expire in 2025….

At near full employment, the budget deficit should be much lower than it is today. A slight increase in unemployment and deficits can balloon quite quickly on top of the interest costs… ultimately Congress will need to act on entitlements like it did in 1983, the last time net interest costs surged.

Perhaps the candidates at this week’s Republican presidential debate will be kind enough to offer plans for serious governing. Reforming entitlements would be a good place to start. The watchdog group Truth in Accounting figures the real federal debt is not $33 trillion but more like $159 trillion if one counts all the unfunded Social Security and Medicare promises.

Swearing off accounting frauds would also be a good place for reformers to start.

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Question: Did any of the Republican presidential candidates in this weeks’ first debate offer up any “plans for serious governing”… and addressing entitlement reform..?

Answer: No.

Solution: Main Street America Republicans have just such a plan.

The Leviticus 25 Plan will produce not only balanced budgets each of the first five years of activation, it will generate $619.5 billion annual budget surpluses for the U.S. Dept of Treasury.

This powerful plan will also vastly reduce entitlement program participation, eliminate trillions of dollars of household debt, and bolster the financial security of millions of American families for years to come.

It will set America up for a healthy, long-term economic growth cycle.

The Leviticus 25 Plan is a dynamic economic initiative providing direct liquidity benefits for American families, while at the same time scaling back the role of government in managing and controlling the affairs of citizens.  It is a comprehensive plan with long-term economic and social benefits for citizens and government.

The inspiration for this plan is based upon Biblical principles set forth in the Book of Leviticus, principles tendering direct economic liberties to the people.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2023 (6887 downloads)

U.S. House Republicans “Contract With America” – Sep 17, 1994…

Twenty-nine years ago, Republicans seeking new terms in the U.S. House of Representatives formulated a bold new vision, a “Contract with America,” to restore honesty and trust in government, get America’s fiscal house back in order, and revitalize The American Dream.

Republicans won buy a landslide and took control of the U.S. House of Representatives in the November election.

Note Aug 21, 2023 – Washington Republicans have no plan.

Main Street America Republicans do have a plan…

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University of Delaware historical review – Contract with America

Highlights / Excerpts:

Background: On Tuesday, September 27, more than 300 Republicans hoping to serve in the House of Representatives next year will gather on the steps of the United States Capitol to unveil a proposed “Contract With America,” the ten bills Americans would see in the first 100 days of the first republican controlled House in 40 years.

After nearly two years of the most promise-breaking, waffling and spin-addicted White House in history, the public has grown cynical of promises to provide middle-class tax relief, reform welfare, restore accountability to congress and cut spending. And after 40 years of one party control of the House, they no longer feel they have the power to hold their elected representatives accountable. The Contract will allow people to hold us accountable, measure our performance and, if we break the contract. throw us out….

With the prospect of working control, if not numerical control, of the House in the next Congress, it is our responsibility to present a clear vision of how republicans would govern. After swearing in the first republican Speaker since Joe Martin (R-MA) in the 83rd Congress, we will on the first day of session cut the number of committees and subcommittees, cut committee staff by one-third, ban proxy voting, require a three-fifths vote to pass any tax increase, eliminate “baseline” budgeting and use honest numbers, and announce an audit of the House’s books.

After changing the way the House conducts business, we will change the kind of business the House has been conducting. Instead of passing bills that pile taxes, spending regulations ever higher, we’ll scale back the size of government to make it more efficient and ease the burden on taxpayers and small business people.

In the first 100 days, we’re pledging in writing to bring to a vote:

  • A balanced budget amendment and line item veto;
  • A crime bill that funds police and prisons over social programs;
  • Real welfare reform;
  • Family reinforcement measures that strengthen parental rights in education and child support enforcement;
  • Family tax cuts;
  • Stronger national defense;
  • A rise in the Social Security earnings limit to stop penalizing working seniors;
  • Job creation and regulatory reform policies;
  • Common sense legal reforms to stop frivolous lawsuits; and
  • A first-ever vote on term limits for members of Congress.

……………..

Rep. Dick Armey (R-TX) “Contract with America,” Sep 27, 1994 Excerpts:

Today we enter a new era in American government. Today, one political party is listening to the concerns of the American people and responding with specific legislation. We are united here today — over 150 current Members of the House and over 200 candidates — united in the belief that “the people’s House” must be wrested from the grip of special interest groups and handed back to “the people.”

Americans today are cynical. They are tired of broken promises, tired of being misled, tired of “spin” from a White House that seems to govern on the principle that you can fool all of the people some of the time….

If the American people are willing to let us, we’re willing to change all that.

Today, we Republicans are signing a “Contract with America.” We pledge ourselves, in writing, to a new agenda of reform, respect, and renewal: Reform of congress and other government institutions. Respect for the people we serve and represent. And renewal of the American Dream that each day seems to slip further from the grasp of too many families.

We make this explicit offer: Give us majority control of the House of Representatives for the first time in four decades and we will bring to the House floor on the first day real Congressional Reforms. In the first 100 days, we will bring to a vote ten bills that would have an immediate and real impact in the lives of ordinary Americans.

We will bring all these bills to the floor for an up or down vote, with open and fair debate, where everyone’s views are heard as we embark on a new direction for congress and a new partnership with the American people.

We put these bills in a contract so people can hold us accountable — and there’s an enforcement clause. We explicitly state, “If you give us control and we don’t do what we say, throw us out.” We mean it, and we take it as an article of faith that the American people will mean it, too….

Our Contract with America is just the opening one hundred days of accountable government. The Contract is not the answer to every problem facing America today. It is an honest beginning, and an effort to invest this election with some positive meaning, because running solely against an unpopular president would only deepen the public’s cynicism.

…. After 40 years of uninterrupted control, the Democrats have exhausted every other possibility, and it is time for the Republican party to accept the role of leadership the American people are demanding. Today we pledge to begin by bringing relief to the average family, which now pays more in taxes than food, shelter and clothing combined; cutting the size and influence of the federal government; and restoring accountability to the political process.

In short, we propose to cede back power from the hallowed halls of Congress to the more hallowed kitchen tables of America, where night after night families bow their heads in thanks and make decisions about education, charity, jobs, spending, debt, and values with a wisdom and compassion that no number of agency heads, cabinet secretaries or members of congress could ever match.

Our contract recognizes the limits of government and the unlimited contribution of husbands and wives, mothers and fathers, children and grandparents in a safe and prosperous America.

It is now my pleasure to introduce Congressman Bill Paxon of New York, who chairs the National Republican congressional Committee….

Like Lincoln, our first Republican president, we intend to act “with firmness in the right, as God gives us to see the right. To restore accountability to Congress. To end its cycle of scandal and disgrace. To make us all proud again of the way free people govern themselves.

On the first day of the 104th Congress, the new Republican majority will immediately pass the following major reforms, aimed at restoring the faith and trust of the American people in their government:

FIRST, require all laws that apply to the rest of the country also apply equally to the Congress;

SECOND, select a major, independent auditing firm to conduct a comprehensive audit of Congress for waste, fraud or abuse;

THIRD, cut the number of House committees, and cut committee staff by one-third;

FOURTH, limit the terms of all committee chairs;

FIFTH, ban the casting of proxy votes in committee;

SIXTH, require committee meetings to be open to the public;

SEVENTH, require a three-fifths majority vote to pass a tax increase;

EIGHTH, guarantee an honest accounting of our Federal Budget by implementing zero base-line budgeting.

Thereafter, within the first 100 days of the 104th Congress, we shall bring to the House Floor the following bills, each to be given full and open debate, each to be given a clear and fair vote and each to be immediately available this day for public inspection and scrutiny.

____________________________________

It is time for a new Contract with America, one that builds on the 1994 contract, to: 1) Get America’s enormous fiscal deficits back under control; 2) Minimize the scope of government control over the daily lives of citizens; 3) Require Congress, along with the Executive and Judicial branches of government, to live under the exact same laws and mandates that they force upon the people; 4) Restore 100% border security to America’s northern and southern borders, and welcome only those guest workers / visitors who enter America legally, respect America’s laws, and earnestly seek to make America better and stronger.

This new Contract with America, hereby sponsored by Main Street America Republicans, begins with the most powerful economic acceleration plan in the world:

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2023 (6860 downloads)

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August 2023 quote:  President Ronald Reagan:  “I know that it is fashionable in some circles that no one in government should encourage others to read the Bible.  We are told that will violate the Constitutional separation of church and state, established by the Founding Fathers.  The First Amendment was not written to protect people and their laws from religious values. It was written to protect those values from government tyranny.”

Rand Paul’s Balanced Budget Plan Shot Down in June…

…. by 17 GOP Senators who shamefully do not have a plan of their own to deal with this national security issue.

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With Plenty Of GOP Help, Senate Shoots Down Rand Paul’s Balanced-Budget Resolution

ZeroHedge, Jun 17, 2023 – Excerpts

Every few years, Kentucky Senator Rand Paul puts forth a quixotic proposal to balance the federal budget. It’s not the financial math that makes it a daunting task, but rather Washington’s bipartisan addiction to spending. 

It predictably fails each time, but accomplishes two things in the process. First, it puts senators who’ve espoused fiscal discipline on the record as opposing it when the rubber meets the road. Second, over time, Paul’s proposals illustrate the insidious effect of kicking the can down the road—as each new proposal requires bigger cuts to push Uncle Sam to breakeven.

Paul’s first such budget resolution, in 2011, didn’t even cut spending. By merely freezing it for five years, the budget was projected to reach balance this year. 

…Things have gotten a lot worse. In just the two years since Paul’s last proposal, our federal overlords have added an astounding $11 trillion to the national debt. Interest payments on the now-$30.5 trillion balance have grown by 32%.….

The measure was defeated by a 67-29 voteFaithful to their big government values, no Democrats backed the measure.

However, 17 “fiscally conservative” Republicans voted against it: Blunt (MO), Boozman (AZ), Burr (NC), Capito (WV), Collins (ME), Cornyn (TX), Graham (SC), Inhofe (OK), McConnell (KY), Murkowski (AR), Portman (OH), Rounds (SD), Sasse (NE), Shelby (AL), Thune (SD), Tillis (NC) and Young (IN).

Dodging Paul’s intent to put everyone’s true fiscal colors on the record, four Republicans skipped the vote altogether: Daines (MT), Moran (KS), Toomey (PA) and Wicker (MS).  

Things were already bleak, but the fiscal math is now taking a sharp turn for the worse. Today’s rising interest rates translate into more money required just to cover interest payments.

According to the Congressional Budget Office’s latest baseline, interest expense will triple from nearly $400 billion in 2022 to $1.2 trillion in 2032—totaling $8.1 trillion over that horizon. As terrible as that sounds, it’s going to be a major understatement.

That’s because CBO’s Treasury rate assumptions are in the midst of being mugged by reality. For its baseline, CBO assumes the 3-month T-bill rate will average 0.9% this calendar year, but it’s already spiked to 1.69%. Similarly, CBO assumes the 10-year will average 2.4% in 2022 and only rise to 3.8% ten years from now.  It was 3.28% on Thursday. 

At least Rand Paul can say he tried. 

_________________________________

While Rand Paul’s latest plan would surely get Republicans ‘crushed’ at the polls in the next major election, the 17 so-called “fiscally conservative GOP senators who voted against it, along with the four Republicans who skipped the vote altogether … should at least present their own politically defensible economic plan to get America’s fiscal crisis back under control.

Washington Democrats have a plan: Increase spending to get as many Americans dependent on government as possible, blow out the budget, destroy the dollar, decimate the free market system, and set America on track for economic and social disaster.

Washington Republicans have no plan: They are content to complain about Democrat policies, twiddle their thumbs, and allow America to hit what the GAO calls “the fiscal cliff.”.

Main Street America Republicans do have a plan, an economically viable, politically defensible plan that will: 1) Generate enormous new tax revenue flows into the U.S. Treasury coffers and yield $619 billion budget surpluses each of the first five years of activation; 2) Pay for itself entirely over a 10-15 year period; 3) Eliminate massive amounts of household and small business debt across America; 4) Reduce dependency on government by millions of citizens; 5) Restore financial security for millions of working-class American families; 6) Strengthen the U.S.Dollar and solidify its position as the world’s most stable and trusted currency; 7) Set America back on track for long-term economic prosperity.

The Leviticus 25 Plan is a dynamic economic initiative providing direct liquidity benefits for American families, while at the same time scaling back the role of government in managing and controlling the affairs of citizens.  It is a comprehensive plan with long-term economic and social benefits for citizens and government.

The inspiration for this plan is based upon Biblical principles set forth in the Book of Leviticus, principles tendering direct economic liberties to the people.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2023 (6856 downloads)

U.S. Government Giveaways – to Foreign Economies, Including Those of America’s Enemies…

Over the past decade…:

IMF: $12 billion additional funding to shore up Egypt’s ailing economy

Bernanke’s give away to global financial elites: The greatest transfer of wealth in the history of the world.

U.S. taxpayer dollars – ‘to Russia with love’….. (a look back in time)

“The U.N.’s Fat Kleptocrats”.. and why we need the Leviticus 25 Plan – $2.6 Trillion per Year

Bloomberg: “Libya-owned Arab Banking Corp. drew at least $5 billion from Fed in crisis”

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More recently...

Biden Wants $8 Billion In Taxpayer Funds To Shut Down Coal Power In South Africa

The green energy scam continues…  DEC 16, 2022

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Biden sued for sending half a billion in Palestinian aid that could fund acts of terrorism  Jan 7, 2023

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Biden Has Handed Taliban Over $2 Billion In 2 Years; SIGAR Report Finds

ZeroHedge, Aug 09, 2023 – Excerpts:

Authored by Steve Watson via Summit News,

A report by the Special Inspector General for Afghan Reconstruction (SIGAR) notes that the Biden administration has given $2.35 billion to Afghanistan over the past two years, despite the fact that it is now ruled by the Taliban again following the disastrous U.S. withdrawal in 2021.

The Washington Free Beacon shared details of the findings Tuesday, noting that the funds could be propping up the Taliban’s terrorist government.

The SIGAR report found that approximately $1.7 billion “remained available for possible disbursement” at the time writing. The Beacon notes that “it is more than likely that a sizable portion of these funds will end up in the terror group’s coffers.”

____________________________________

America’s financial coffers are being drained, and hard-working, tax-paying U.S. citizens are being fleeced by the U.S. government with these massive giveaways.

It is time now to balance the books.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2023 (6819 downloads)

America: Drowning in Debt. Main Street America Republicans Have the Solution – Loaded Up and Ready to Launch.

Federal Debt:  $32.704T

State Debt:      $1.264T

Local Debt:     $2.371T

…….

The Market Ear – Aug 13, 2023

Debt ATH
The US now has $17.1 trillion in household debt….$12 trillion in mortgages….$1.6 trillion in auto loans….$1.6 trillion in student loans….$1 trillion in credit card debt….all of those are all time records.
TME

Plummeting Money Supply Growth will most certainly add negative velocity to the debt load across all sectors of the economy in America.

Lowest ever money supply growth U.S. and ECB M2 money supply growth rates have fallen to their lowest year-over-year levels ever recorded.
State Street

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Washington Democrats and Washington Republicans have no plan, and no clue about how to get America back on track for long-term prosperity.

Main Street America Republicans do have a plan – it is the only economically viable, politically feasible solution to America’s enormous debt dilemma.

The Leviticus 25 Plan is a dynamic economic initiative providing direct liquidity benefits for American families, while at the same time scaling back the role of government in managing and controlling the affairs of citizens.  It is a comprehensive plan with long-term economic and social benefits for citizens and government.

The inspiration for this plan is based upon Biblical principles set forth in the Book of Leviticus, principles tendering direct economic liberties to the people.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2023 (6818 downloads)

America’s Powerhouse Plan for Raising Teachers’ Pay for Five Consecutive Years (2024-2027): The Leviticus 25 Plan

Teacher pay is a critically important goal for attracting and retaining dedicated, top notch teachers and providing the best resources for high achievement by America’s school children.

At the same time, rejuvenating financial health for all working American families is a vital cause, all across America.

All working Americans – military, law enforcement, medical / healthcare, maintenance workers, construction, fire and rescue, service workers – are deserving of an opportunity, a comprehensive initiative, to strengthen their families’ financial status and relieve the burden of government interference in their daily lives.

Let’s do some math, and make a comparison between two significant economic initiatives.

Plan 1: The Leviticus 25 Plan – $90,000 per U.S. citizen. $60,000 per U.S. citizen is
electronically deposited into a Family Account and $30,000 per citizen is electronically deposited into a Medical Savings Account.

Who benefits?
Answer: All U.S. citizens and their families.

Who pays?
Answer: The Federal Reserve creates a funding facility, a Citizens Credit Facility, to channel liquidity to American families, in the same way that they set up various credit facilities to fire-hose liquidity out to Wall Street’s financial sector during the great economic crises years (2008-2010). Many of these U.S. and foreign banks and insurers were the very institutions that had precipitated the financial crisis with their financial innovation schemes and leveraged speculation – which ‘bled out’ in the form of gaping balance sheet ‘capital holes’ when the big mortgage default wave hit.

How does the Federal Reserve then get the money back, in order to reduce its balance sheet back down to ‘normal dimensions,’ over time?
Answer: Through a series of simple recapture provisions.

#1. Participating families would be required to give up their tax refunds each year for a period of five years.

#2. Participating families would also be required give up means-tested welfare benefits, income security program benefits, unemployment insurance, workman’s comp, SSI, SSDI, and various other social welfare benefits.

#3. For participating families, there would be a $6,000 deductible for five years ($30,000 total) for those enrolled in Medicare, Medicaid, VA, TRICARE, FEHB.

The Plan pays for itself over a 10-15 year period.

How much would The Leviticus 25 Plan benefit a typical teacher’s family?
Case 1: Family of four. Mother teaches – salary $50,000 / year.
Father also works. Two school-age children.
$100,000 balance on mortgage – maturing in 20 years.
Two modest car loans.
Monthly health care premiums – fairly substantial.

Through the Citizens Credit Facility, $240,000 would be electronically deposited into their Family Account, and $120,000 would be electronically deposited into their Medical Savings Account.

These liquidity grants are tax-free. The net benefit of these grants would be reduced slightly over the course of time through the loss of income tax refunds for five years (estimate: $5,000 per year for five years: $25,000).

Family pays off $100,000 mortgage balance (estimate: $100,000 at 4% interest / 20-year maturity / principle and interest payment of $605 per month). Total savings / year: $7,260.  This more than offsets the anticipated $5,000 loss from income tax refunds.

Total savings over 20-year maturity: $145,000.  This benefit eliminates $100,000 principle and $45,000 of interest costs on the mortgage.

Family retains $140,000 in Family Account for additional installment debt reduction, discretionary purchases and savings.

With $120,000 in Medical Savings Account, family chooses to purchase a high-deductible ($15,000 / year / family), thereby reducing premium costs by an estimated 40-50%).

Total impact on family financial health: significant. Benefits: powerful

And even more importantly, all families in America would benefit.

…………………….

Plan 2: Raise teachers’ pay by a healthy 15% – via tax increases.

Who benefits?
Answer: Teachers and their families.

Who pays?
Answer: Everyone whose taxes were raised to cover the additional outlay on behalf of teachers. And that would include teachers themselves, whose taxes would also go up – and would therefore slightly reduce the net benefit of a 15% pay raise.

How much would a 15% pay hike actually benefit a typical teacher’s family?
Case 1: Family of four. Mother teaches – salary $50,000 / year.
Father also works. Two school-age children.
$100,000 balance on mortgage – maturing in 20 years.
Two modest car loans.
Monthly health care premiums – fairly substantial.

A 15% pay raise for the teacher in the family would generate additional gross income of $7,500 per year, or $37,500 over a five-year period – before taxes.

This increased income would provide additional resources for some possible modest reductions in mortgage and installment debt, certain discretionary spending, and it might allow for additional modest savings for their children’s future college education.

Teachers and their families alone would benefit financially. Others would not. Mortgage debt reduction: modest.
Health plan premium reduction: none.
Net cash benefit over five years: $37,500.
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America needs a comprehensive economic acceleration plan that benefits all Americans – through massive debt reduction and the restoration of economic liberty..

The choice is clear.

The Leviticus 25 Plan will also generate $619.5 billion budget surpluses at the federal level during each of its first five years of activation – compared to trillion dollar deficits each year into the foreseeable future.

The Leviticus 25 Plan is a dynamic economic initiative providing direct liquidity benefits for American families, while at the same time scaling back the role of government in managing and controlling the affairs of citizens.  It is a comprehensive plan with long-term economic and social benefits for citizens and government.

The inspiration for this plan is based upon Biblical principles set forth in the Book of Leviticus, principles tendering direct economic liberties to the people.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2023 (6785 downloads)

Fed’s Free Money to Banks: “About $273 Billion Annually at the Current Rate.”

How Much Free Money is the Fed Giving Banks and Financial Institutions?

Mishtalk.com – Economics

July 29, 2023 – Excerpts:

The Fed pays interest to banks on all reserves, largely crammed down banks’ throats via past QE. How much free money is that?

Free money to banks based on reserves, reverse repos, and current interest rate paid by the Fed. Chart and calculation by Mish.

Understanding Reserves

The Fed used to pay banks interest on “excess reserves”. Excess reserves are total reserves minus required reserves.

As announced on March 15, 2020, the Board of Governors reduced reserve requirement ratios on net transaction accounts to 0 percent, effective March 26, 2020. This action eliminated reserve requirements for all depository institutions. 

Since there are no reserve requirements on either checking or savings deposits, all reserves are effectively excess reserves, and the Fed pay banks interest on everything. That includes free money crammed down banks throats via QE.

Reverse Repos

The Fed also pay interest on reverse repos. A reverse repurchase agreement (RRP, or reverse repo) is a short-term agreement to sell securities in order to buy them back at a slightly higher price. The primary recipient of reverse repo interest are the money market funds.

It’s not important to understand these functions, just follow the math below.

Target Fed Funds Rate

The New York Fed explains: The New York Fed conducts repo and reverse repo operations each day as a means to help keep the federal funds rate in the target range set by the Federal Open Market Committee (FOMC).

In order to suppress a free market in interest rates and to help control the mess the Fed created via Quantitative Easing (QE), now Quantitative Tightening (QT), the Fed is handing out free money left and right.

To calculate free money, we need to watch three things: Interest rates, reserves, and reverse repos.

Reserve Balances at the Fed, Reverse Repos, Interest Rate

Reserve Balances at the Fed, Reverse Repos, Interest Rate, data from the Fed, chart by Mish

Understanding the Free Money Forces

  • In isolation, rising interest rates add to the free money given to financial institutions.
  • QT reduces bank reserves and thus free money.
  • Reverse Repos are now slowly declining. This also reduces free money payouts.

The net impact of these forces has been pretty stable for about six months, roughly between $250 billion and $280 billion in free money given to banks at an annual rate.

The impact of QT is moving faster than rate hikes so net free money will decline over time.

Free Money at Taxpayer Expense

My numbers are approximate, using end of month interest rates and monthly average balances. In practice, this is all calculated daily. But within a few billion dollars, the Fed is giving banks about $273 billion annually at the current rate.

It’s important to note that free money that should be going to taxpayers. Instead the Fed gives it to banks because its QE/QT programs made a huge mess out of monetary policy.

Thank former Fed Chair Ben Bernanke for this. He is the one who lobbied Congress for the right to send out all of this free money. He said it was necessary for the QE program he launched, and every Fed president since maintained.

Continue reading…

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The Fed’s current liquidity flow schemes does nothing to: 1) Shrink the federal government debt profile; 2) Nothing to restore financial health for millions of American families; 3) Nothing to revitalize long-term economic growth; 4) Nothing to strengthen the U.S. Dollar’s status as the global reserve currency.

The Leviticus 25 Plan corrects these glaring deficiencies by re-targeting Fed liquidity flows through the hands of tax-paying U.S. citizens — and then on to the banks through household debt and consumer debt elimination.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2023 (6784 downloads)

The answer to America’s liquidity problems: Grant U.S. citizens the same access to direct liquidity extensions that was provided to Wall Street’s financial sector 2008-2012. The Leviticus 25 Plan

A brief review…

During the peak of the housing boom, mortgage tranches were packaged and securitized as Mortgage Backed Securities (MBS)  –  and peddled as income-producing investments by major investment houses.  Participating parties like Goldman Sachs and others also purchased ‘insurance’ to hedge their risk profiles in the event of a housing market ‘swan dive’ – and a potential collapse of the underlying payment streams supporting the value of these MBS investments vehicles.

 The ‘insurance’ was purchased (primarily from AIG) in the form of Credit Default Swaps (CDS).  And, thanks to some nifty deregulation orchestrated by Robert Rubin (Treasury Chief under Clinton), AIG was not required to carry any meaningful level of reserves to back the Credit Default Swaps – to pay their counterparties if the Mortgage Backed Securities market… ‘went south.’ 

It did just that, and the rest is history.  Housing tanked.  MBS’ tanked.  And AIG had no reserves  with which to pay Goldman and others.  Had normal bankruptcy proceedings prevailed, Goldman Sachs would likely have received just pennies on the dollar in settlement – for placing a huge ‘blind bet’ on an investment that had no reserves backing it up.

But – the U.S. Government stepped in, and through an arbitration process, brokered a settlement of 100 cents on the dollar, amounting to a direct cash transfusion of a cool $12.9 trillion – from the U.S. taxpayer – to Goldman Sachs.  

And then the real ‘fun’ began.  The investment banking heavyweights, Goldman Sachs and J.P. Morgan, were ‘fast-tracked’ for “federal bank charters.’  Their newly acquired status as commercial banks allowed them to joined in with “Bank of America, Citigroup, J.P. Morgan Chase and other banking titans who could go to the Fed and borrow massive amounts of money” at near-zero percent interest. 

“The ability to go to the Fed and borrow big at next to no interest was what saved Goldman, Morgan Stanley and other banks from death in the fall of 2008.  “They had no other way to raise capital at that moment, meaning they were on the brink of insolvency,” says Nomi Prins, a former managing director at Goldman Sachs. “The Fed was the only shot.”

“In fact, the Fed became not just a source of emergency borrowing that enabled Goldman and Morgan Stanley to stave off disaster — it became a source of long-term guaranteed income. 

Borrowing at zero percent interest, banks like Goldman now had virtually infinite ways to make money. In one of the most common maneuvers, they simply took the money they borrowed from the government at zero percent and lent it back to the government by buying Treasury bills that paid interest of three or four percent. It was basically a license to print money — no different than attaching an ATM to the side of the Federal Reserve.”

“You’re borrowing at zero, putting it out there at two or three percent, with hundreds of billions of dollars — man, you can make a lot of money that way,” says the manager of one prominent hedge fund. “It’s free money.” 

(Source:  Wall Street’s Bail out Hustle – Matt Taibbi,  2-17-10)

And that is one of the primary justifications for the Leviticus 25 Plan  – granting U.S. citizens the same direct access to the Federal Reserve discount window – that was bestowed upon Goldman Sachs, J.P. Morgan, and certain other banking titans. 

After all, it is ‘our money.’  And granting U.S. citizens direct access to liquidity extensions from a Federal Reserve special “U.S. Citizens Credit Facility,”  would clean up liquidity issues at the family level: $90,000 per U.S. citizen at zero percent interest – with a specified  ‘recapture provision.’

The Leviticus 25 Plan pays for itself over a 10-15 year period.  It would generate $619.5 billion federal budget surpluses each of the first five years.  It would reignite a powerful economic growth cycle for America’s main street small businesses, restore financial security for millions of American families, eliminate massive tracts of household and government debt, and restore economic liberty in America.

America, currently, has no other viable option.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizens – Leviticus 25 Plan 2023 (6749 downloads)

Fitch Downgrades US Credit Rating, Cites “Fiscal Deterioration,” Government Debt Burden”…

America’s well-paid Democrats, Republicans, and Independents in the U.S. Congress are running up the national debt and have no economically viable plan to address this national security issue.

Note – Main Street America Republicans do have a plan…

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Fitch Downgrades US Credit Rating on Fiscal Deterioration, Government Debt Burden, and Debt Ceiling Standoffs

by Wolf Richter • Aug 1, 2023 Excerpts:

Second major US ratings agency to downgrade the US to ‘AA+’. The first rating agency got whacked by the US government.

Following the shocker of an announcement by the Treasury Department yesterday that it would have to borrow $1 trillion in the quarter through September and another $852 billion in the quarter through December, on top of the $32.6 trillion the government already owes,  Fitch Ratings threw in the towel today and became the second major US rating agency to downgrade the US of A.

Fitch cut the long-term credit rating of the US to ‘AA+’ from ‘AAA’. It already had the US on negative outlook, meaning a downgrade was possible. With the downgrade today, Fitch removed the negative outlook and assigned a stable outlook.

As reason for the downgrade, Fitch cited a litany of issues, which it summarized:

  • “The expected fiscal deterioration over the next three years
  • “High and growing general government debt burden
  • “Erosion of governance relative to ‘AA’ and ‘AAA’ rated peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions.”

Here are some key points that Fitch made:

“Erosion of Governance”: Fitch cited “a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025. The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management.”

“The government lacks a medium-term fiscal framework, unlike most peers, and has a complex budgeting process. These factors, along with several economic shocks as well as tax cuts and new spending initiatives, have contributed to successive debt increases over the last decade.”

…..

Rising Government Deficits: Fitch said that it expects the general government (GG) deficit to reach 6.3% of GDP this year, from 3.7% in 2022, “reflecting cyclically weaker federal revenues, new spending initiatives and a higher interest burden.” Fitch forecasts the deficit to reach 6.6% of GDP in 2024 and 6.9% of GDP in 2025.

Rising Government Debt: Fitch said that the debt-to-GDP ratio at 112.9% in 2023 is “well above the pre-pandemic 2019 level of 100.1%.” It expects the ratio to reach 118.4% by 2025. “The debt ratio is over two-and-a-half times higher than the ‘AAA’ median of 39.3% of GDP and ‘AA’ median of 44.7% of GDP,” it said.

“Fitch’s longer-term projections forecast additional debt/GDP rises, increasing the vulnerability of the U.S. fiscal position to future economic shocks,” Fitch said.

Medium-term Fiscal Challenges Unaddressed: “Over the next decade, higher interest rates and the rising debt stock will increase the interest service burden, while an aging population and rising healthcare costs will raise spending on the elderly absent fiscal policy reforms,” Fitch said.

But the US of A still has some strengths, Fitch said: a “large, advanced, well-diversified and high-income economy, supported by a dynamic business environment.” And of course, inevitably, the US has the dollar, “the world’s preeminent reserve currency, which gives the government extraordinary financing flexibility.”

Continue…

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The Main Street America Republicans’ plan not only eliminates mushrooming annual federal government deficits, it generates hundreds of billions of dollars in surplus each of the first five years of activation.

It also eliminates massive amounts of household debt for millions of American families; revitalizes long term economic growth; restores economic liberty; puts the U.S Dollar on track for long-term strength and stability.

The Leviticus 25 Plan – Economic Scoring:

 ·    The Leviticus 25 Plan – 2024 Generates $619.5 billion Federal Budget Surpluses (2024-2028) Part 1: Overview, Deficit Projection

 ·    The Leviticus 25 Plan Generates $619.5 Billion Federal Budget Surpluses Annually (2024-2028). Part 2: Federal Income Tax Recapture; Economic Security / Means-Tested Welfare Recapture.

 ·    The Leviticus 25 Plan Generates $619.5 Billion Federal Budget Surpluses Annually (2024-2028). Part 3: Medicaid, Medicare, VA, TRICARE, FEHB, SSDI Recapture.

 ·    The Leviticus 25 Plan Generates $619.5 Billion Federal Budget Surpluses Annually (2024-2028). Part 4: Interest Expense Recapture, Totals Summary

The Leviticus 25 Plan is a dynamic economic initiative providing direct liquidity benefits for American families, while at the same time scaling back the role of government in managing and controlling the affairs of citizens.  It is a comprehensive plan with long-term economic and social benefits for citizens and government.

The inspiration for this plan is based upon Biblical principles set forth in the Book of Leviticus, principles tendering direct economic liberties to the people.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2023 (6748 downloads)