Hi everybody, this is Stefan Molyneux
from Freedomain Radio. Hope you’re doing well. As I’ve been saying for six or seven years,
there will be no economic recovery. Please prepare yourselves accordingly
with the latest data from 2014. This is…
The Truth About Government Debt So at the start of the financial crisis,
in 2007, worldwide global government debt stood at around $70 trillion. Now, a little over a half decade later,
the amount of global government debt has increased 40%
to over $100 trillion. During that time,
the outstanding United States government debt has soared
to a record $17.5 trillion. And recently former Senior Economist
for the President’s Council of Economic Advisors, Laurence Kotlikoff
reported that when accounting for unfunded liabilities,
US debt exceeds $205 trillion. Right? So there is decifit which is
the amount of money the government can’t pay this year. There is the debt
which is the accumulation of deficits. And then there is the unfunded liabilities,
which are all the promises that governments have made
to future recipients that they do not have the money for. So this is pretty staggering. It’s a staggering increase
in the amount of debt. Now, of course, the government says
–and this is governments all around the world,
but in particular the U.S.– says, well we had to spend that money,
you see, because we needed to create jobs, we need financial relief
to struggling families, we need rebuild local infrastructure,
invest in small businesses, and so on. Yes, well, where is
that money really going? Are you seeing much of it?
Are you seeing much economic recovery? Well, no. So, there’s this Federal Reserve policy–
and the Federal Reserve of course, is a quasi-private institution
that creates money out of thin air, which the politicians then use
to bribe special interest groups by selling off the unborn foetuses
of the next generation to foreign banksters. And the Federal Reserve
has been creating massive amounts of money. Now they keep changing the name
so that you think that the crime is different. In the past it used to be called
money creation, inflating the money supply, and before that
it was called counterfeiting. Now they call it Quantitative Easing. And this creation of crazy fiat currency in the American economic system
has been referred to as the greatest back-door
Wall Street bailout of all time. The Federal Reserve purchases assets
with this money that it creates out of nothing from private banks at inflated prices,
props up the price of their assets on paper. A lot of major financial institutions
in the United States are technically insolvent,
but they get to pretend they have more money than they do
because the Federal Reserve is buying up their crappy assets
at inflated prices. Making them look
a little bit better on paper and pretending that the whole house of cards
is somehow staying up. It all would have fallen, right? So in Iceland, where they have to be
a little bit more rational because it’s really cold and nobody
really wants to live there, so they have to make it
economically more inviting. This is why warm countries
tend to be the most corrupt, because you’ll put up with crap
to get decent weather and insects the size of biplanes. But in Iceland they basically,
when the financial institutions were fraudulent and corrupt
and went heavily into debt, overleveraged and went bankrupt,
the Icelandic government said, “Oh, go pound sand, forget it.
You’re going to go out of business. Oh and by the way, we’re going to
prosecute you for fraud,” which is something
conspicuously absent in the U.S. As a result, the Icelandic economy
is doing very, very well. Billionaire hedge fund manager
Stanley Druckenmiller in 2013 says, this isfantasticfor every rich person.
This is thebiggestredistribution of wealth from the middle class
and the poor to the rich,ever. Ever!
And this counts war. So income disparities,
as you are probably aware, have been widening considerably
in the United States, and whenever income disparities widen,
the economy tends to do poorly for a variety of reasons.
And this is another reason why things aren’t going to
get better any time soon. According to economist Steve Keen,
“this is the biggest transfer of wealth in history,” as the giant banks
have handed their toxic debts from fraudulent activities
to the countries and their people. So this is like going to the casino.
You get to keep all your winnings and all of your losses
are handed off to other people. Well, it doesn’t take a gambling genius
to make money inthatsituation. Robert D. Auerbach, an economist
with the U.S. House of Representatives Financial Services Committee reported that
although the Federal Reserve has distributed over $2.2trillion
between August 2008 and June 2013, 81.5% of that money
that is created to supposedly stimulate the economy now sits idle
as private banks’ excess reserves. So, the Federal Reserve is creating money
and using it to buy up toxic assets from banks that
would otherwise be insolvent and the banks are
just sitting on the money. Why? They’re not required
to hold these excess reserves. In fact, since 1959,
the excess reserves at banks have stayed
at approximately zero. Because why would they
leave money sitting around when they should be out there
investing in businesses and people and loaning money,
and greasing up economic activity. Why are they doing that? Well, because the Federal Reserve
is paying them to do it. Because as of 2008, the Federal Reserve
says, “oh, we’ll pay interest on these excess reserves. We’ll pay interest on whatever money
you don’t put in to the economy.” And we’ll get in to
the why of that in a moment. Most of the Fed’s new money issues
of $65 billion a month is added to these excess reserves. Why are they holding
all of these excess reserves? Well, the Federal Reserve started
paying risk-free interest on those reserves and they are discouraging the banks
from lending to Main Street, because, if all of that money
that they’re creating through the Federal Reserve
makes its way into the economy as a whole, inflation is going to explode. I mean, inflation is going up,
but we’re talking, like Weimar-style hyperinflation– wheelbarrow of money
to buy a loaf of bread, potential for Zimbabwe supernova
of the currency inflation. A lot of the people who are skeptical
of Austrian economics are saying, “Well the Fed is printing all this money,
why is there no hyperinflation?” Well because, it’s getting
stuck up in the banks. The Fed’s giving the money to the banks
and then paying the banksnotto invest it in Main Street. So, the Federal Reserve creating
$65 billion out of thin air each month to buy assets from large private banks
and then pays them billions of dollars of interest on this new money
when it’s placed in excess reserves. Banks have $2.6 trillion
in these excess reserves and they’re paid
a quarter of a percentage point interest by the Fed. That’s an additional $6.5 billion
annual subsidy from the general public to the private banks. Of course the Federal Reserve
doesn’t reallyhaveany capacity to make money any more than
the government does as a whole. So this is all debt. So, this– fundamentally what has been
occuring over the past six or seven years isnota financial crisis,
it’s a bank robbery. Profits are being privatized
and losses are being socialized. Right, this is the too-big-to-fail. Why are banks swallowing up smaller banks? Because smaller banks cannot compete
with banks deemed to large to fail that are certainly guaranteed
to get government bailouts. Now, what’s going to happen
when all of this new money leaves the excess reserves
and enters the available money supply? Massive, massive inflation. Let’s see where the American government
is sitting at right now. President Obama’s
2015 budget proposal continued to paint a troubling picture
to put it mildly. Budget deficit shrinks to $564 billion
from $649 billion this year. And this is assuming that we take
with any credibility the made up magic
pixie-leprechaun-unicorn numbers that come out of the ass
of the government economists. So if you were $17,500 in debt,
you cut your overspending by $85 and aimed to only be $18,064 in debt
by the end of the next year what would people say about
your financial advisor? Well, he’s smoking something
he probably shouldn’t but in the U.S. budgetary world,
this is described assound economic policy. By 2017, U.S. taxpayers will be
paying more in interest on the debt than on the budget for medicaid. By 2020, U.S. taxpayers will be paying
more in interest on the debt than they would
on the entire defense budget. This is with 700+ military bases
around the world. So what does this mean?
Let’s break it down to person. $17.5 trillion in debt, not even
the unfunded liabilities, just the debt: $55,750 for every American.
Or,$121,982 for every employed American. Even counting those who are clogging up
the bureaucratic arteries of the government. By 2024, the total national debt would rise
from $17.5 trillion to nearly $25 trillion, even using the government’s own numbers.
It’s going to be worse than that. $25 trillion in debt amounts to
almost $80 thousand for every American. Or almost $175 thousand
for every employed American. I don’t know about you,
when I check under my couch and in the pockets of my old jeans,
I don’t quite come up with that money. Maybe you’re doing a little better than me
in the loose change department, but there’s just no way
that this debt can possibly be paid off.Ifwe include
the unfunded liabilities, current debt plus unfunded liabilities
of $205 trillion. That amounts to $653,074
for every single American. Or, over $1.4 million in debt
for every employed American. You understand that this is madness. And a lot of what the government is doing
is just trying to keep the house of cards propped up for just a little bit longer. They just don’t want the dollar
to collapse just yet. They don’t want the catastrophe to occur
on their watch. They basically want to scoop as a much money
out of what remains of the treasury before the giant stone doors
of mathematical reality come down. That which mathematically cannot continue,
will not continue. There will benoeconomic recovery. I really strongly urge you to prepare
yourself accordingly. Get used to these new realities. The odds are that the government
is going to continue to try and do what Japan has been trying to do
for the last 20+ years. Which is to continue to inject
fresh healthy blood into the zombie rotted corpse
of their existing financial institutions and pretend that
they still have an economy. This is really, really important
to understand. This is not going to work. And please, please
don’t talk to me or anyone else about blaming the free market
or the death throes of capitalism. Look, there is only ever a free market
when money is in the hands of the free market. Money has been taken out
of the hands of the free market in America since 1913. That’s a little over 100 years,
government has been in control of the money. When the government
is in control of the money, there is no free market. There’s a few vestiges of the free market,
but that’s sort of like saying there’s a free market
in the Soviet Union under Stalin because people did work under the table. There’s very little free market left
once the money is socialized. Once the money is socialized,
either the money becomes privatized or the entire economy,
as we’re seeing under Obamacare, is going to get socialized too. So please, please, please,
don’t even think about blaming the free market for this. Trying to blame the current mess
on the free market is like disinterring a 101 year oldcorpse. And trying to convict it
of a current murder. This is Stefan Molyneux,
from Freedomain Radio. Take care, my friends.