Guest Post: The Counterfeit Economy

Tyler Durden's picture

By Charles Hugh Smith from Of Two Minds

The Counterfeit Economy

The U.S. has a deeply counterfeit economy.

Counterfeit money exploits trust by presenting a facsimile of authenticity. A high-quality counterfeit bill (for example, the $100 bills exported by North Korea) are facsimiles of authentic paper notes which then gain the trust of users.

A counterfeit gold bar is a piece of lead coated with a layer of authentic gold. The mechanism is the same: a veneer of integrity tricks the buyer into trusting the validity of the entire bar.

The U.S. has a deeply counterfeit economy.

The predatory mortgages of the subprime era were presented as legitimate mortgages similiar to time-honored 30-years fixed notes with a few "minor differences." These were in effect counterfeit mortgages designed to fool the borrowers and buyers. They were mere simulacra of "safe investments."

Like the counterfeiter who plates the lead bar with a thin coating of gold, the ratings agencies coated the lead bar of toxic, high-risk mortgages with the gold veneer of a AAA rating.

The buyers of the securitized mortgages were promised gold but they were actually buying lead--and the sellers knew it. The trust engendered by the AAA rating and the veneer of authenticity issued by Wall Street was exploited in a vast counterfeiting scheme of breathtaking depth and range.

The budget of the U.S. government as presented by the Office of Management and Budget (OMB) is a counterfeit budget, inauthentic and riddled with blatantly false projections. As late as 2009, in the midst of the Great Recession, the OMB was projecting surpluses in the Federal budget by 2012.

By 2009, the OMB had plenty of data on the recession and the opportunity to revise their previous estimates to more realistic levels.

But instead, the OMB continued issuing pie-in-the-sky estimates which grossly underestimated future deficits:

2009 estimate: receipts: $2.7 trillion outlays: $3.1 trillion deficit: $–407 billion

2010 estimate: receipts: $2.93 trillion outlays: $3.09 trillion deficit: $–159.9 billion

2011 estimate: receipts: $ 3.07 trillion outlays: $3.17 trillion deficit: $–94 billion

2012 estimate: receipts: $ 3.26 trillion outlays: $3.22 trillion deficit: $+48 billion

The reality is that the 2012 deficit is expected to hit $1.6 trillion, a sum that equals 11% of the nation's gross domestic product (GDP).

In other words, the OMB and the rest of the Federal machinery issues simulacra of authentic budgets--counterfeits designed to fool the people and win their trust via artifice and facsimiles of authenticity.

As Bernie Madoff recently observed--and we can suppose he is an expert in manufacturing facsimiles, fraud, embezzlement and counterfeiting authenticity out of lies--the U.S. is a giant Ponzi scheme.

The financial "reforms" are counterfeit reforms.

The "balancing the budget cuts" are counterfeit.

The projections of future growth are counterfeit.

The unemployment numbers are counterfeit.

The inflations statistics are counterfeit.

And of course, the "news" which drives the stock market ever higher is also counterfeit.

When everything is counterfeit, then what's left that's authentic and trustworthy? Essentially nothing.

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Bob's picture

I just heard a rant by Dylan Ratigan like nothing I've ever heard before on TeeVee.  Think what you like about the network otherwise, but to the extent that the online personalities have any say in the matter, MSNBC has declared War on the banksters and elite. 

SparkyvonBellagio's picture

Banksters should all be drawn and quartered.

Frauds everyone one of them. Leveraged Gambling with no recourse to them.

 

 

sbenard's picture

What? Don't you believe the mirage?

Diogenes's picture

"Canada, meanwhile, saw its December Treasuries holdings revised sharply lower to US$76.8-billion from a previously reported US$134.6-billion, suggesting that its banks also may be purchasing on behalf of buyers elsewhere."

From this article.

http://www.financialpost.com/news/owes+China+third+more+than+thought/436...

The above innocent looking paragraph may be more significant than it looks. Over the years I have noticed a common pattern. Every time there is a shakeup in the financial world and the big banks lose billions, at the bottom of the article there is a paragraph explaining that the Canadian banks were in on the scheme while the getting was good but for some reason began to lighten up a year and a half to two years before TSHTF and ended up losing hardly anything.

It happened in 2008 just like every other financial crisis I have seen in the last 40 years and it is happening now.

The Canadian banks can leave the rest of the world's  banks frozen against the cushion the best day they ever saw, including the Swiss.