Guest Post: The Big Lie: Lunch (and Debt) Are Free

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Actions create consequences, and not necessarily the consequences that were planned or expected.

A central tenet of propaganda is that the Big Lie repeated often enough is accepted with greater ease than small lies. Thus it is no surprise that the leadership and propaganda organs of the Fed, Federal government and the Keynesian cargo Cult of fellow travelers all repeat our era's Big Lie: There is a free lunch after all.

The common-sense saying that "there's no free lunch" has been refuted, according to the Fed and our political "leadership" (if you call bought-and-paid-for toadies, lackeys and apparatchiks for the monied classes "leaders").

There are two free lunches, according to our financial and political leaders: free money, in the form of money created out of thin air by the Fed, and almost-free money borrowed into existence by the Federal government.
With the Fed's free lunch, trillions of dollars are created and distributed to banks and those who can borrow this free money for next to nothing.

In the Federal government's almost free lunch (it is almost free as a result of the Fed's financial repression of interest rates to zero, the infamous ZIRP - zero interest rate policy), the central state borrows and blows essentially limitless sums on favored cartels and constituencies: sickcare, global empire, bridges to nowhere, etc.

We are constantly reassured that the Fed can print (and distribute to its banker buddies) $1 trillion a year with nothing but positive consequences for the bottom 99.9%. On the fiscal side, the Federal government borrowing and squandering $1+ trillion a year is heralded as equally positive for everyone--especially the 49% of the populace drawing a direct cash benefit from the Federal government: Census: 49% of Americans Get Gov’t Benefits; 82M in Households on Medicaid.

Possible blowback? None, or so we're told. If anything, the Keynesian parrots squawk, we need to borrow and blow $2 trillion a year rather than a paltry $1+ trillion. (We're running out of cartels, quasi-monopolies, foreign wars, spy agencies and other ratholes to pour trillions down; yikes, what a problem for Krugman et al. Maybe the Martians can supply us with some more rapacious cartels or a planetary war.)

These two charts raise doubts about the sustainability of the Fed and government's free lunch. The first is the monetary base, which just hit $3.5 trillion.

The second one is Federal external debt, i.e. the Federal debt not including "intergovernmental holdings," what is "owed" to the fictitious Social Security Trust Funds. Total national debt is $17 trillion, debt we actually have to roll over is $12 trillion and rising by $1 trillion a year. Debt to the Penny (U.S. Treasury site).

At the start of 2008, before the global financial meltdown gathered momentum, debt owed to the public was $5.1 trillion. Now it is $12.2 trillion, an increase of $7 trillion in less than six years. According to the Big Lie, this is no problem, and entirely sustainable: here's your Free Lunch, America, enjoy!

Big Lie, meet unintended consequences. The problem with Big Lies is reality has not been disappeared; it still exists. Actions create consequences, and not necessarily the consequences that were planned or expected.

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999.9's picture

The output will be something new that we don't know

Cdad's picture

You mean the outcome?  Pretty clear it will be known...and that is...a massive hit to the US dollar.

No need to make it more complicated than it is.

Dick Buttkiss's picture

"We can evade reality, but we cannot avoid the consequences of evading reality." — Ayn Rand

Ham-bone's picture

things to ponder...


1- SS surplus has ceased and this was for a long period helping to soak up excess treasury debt...the early version of QE?  The non-marketable debt has hardly grown while nearly all debt growth is in "marketable debt" ($5 T to $12 T)

2- this marketable debt has been soaked up primarily by two sources...Fed, $2.5 Trillion (Fed had primarily Bills in '08 but dumped all Bills and purchased solely Notes/Bonds) and Foreigers, $3.5 Trillion.  When looking at the increase in foreign countries ownership, many have like the Fed spectacularly increased their T debt ownership since '08...but seems very few discuss this Foreign rate of increase as wildly unsustainable...

Fed increased Treasury holdings by 300+% from '08...

China by 120% since '07 ($476 B to $1.1 T)

Japan by 100% since '07 ($620 B to $1.1 T)

Belgium by 800% ($16 B to $133 B)

Norway by 1200% since '06 ($5 B to $68 B)

Brazil by 800% since '09 ($33B to $245 B)

Russia by 3000% since '06 ($5 B to $163 B)

UK by 100% since '09 ($57 B to $127 B)

Switzerland by 400% since '08 ($45 B $170 B)

Ireland by 600% ($16 B to $90 B)...and the same true for so many more countries while nearly none were sellers???

Only major that hasn't spectacularly increased T ownership...Germany...$60 B then and $60 B now.

All these countries massive increases in ownership of a debt instrument yielding a negative return is maybe just as big a story as the Fed's increase.  And done w/out negatively impacting the dollar.  How would these countries ever "normalize" while the Fed tapered or actually shrank it's balance sheet (ha ha).  No, these are all one way hyperbolic movements and there is no exit or going back...these cannot be undone w/out an interest rate super spike to destroy the whole ponzi....(for instance).



Kobe Beef's picture

Interesting figures. Thanks.

The chart of the Monetary Base certainly looks hyperbolic. 

Dick Buttkiss's picture

Thanks for providing the numbers behind the quote, Hb. Makes it clear how much in denial the lone down-voter is.

GetZeeGold's picture



Well don't look at me......I didn't spend all that money!


I no longer have an official Representative!

BaBaBouy's picture

This Is GREAT NEWS... Abama Apppoints Isreali To Head CTFC!

The CTFC Will Finally Be Cleaned Up !&^%$

GetZeeGold's picture what do those guys do?

BaBaBouy's picture

I Don't Know But They Sure Are EFFECTIVE...

Cognitive Dissonance's picture

Mrs. Cog and I were out and about in civilization yesterday and what we saw was an illusion that, while certainly frayed about the edges, pretty much still puts on a great show. Why would anyone look deeply at the flaws when the machine still provides a pretty good high?

pods's picture

Funny you bring that up Cog (and a belated welcome to tar heel country), I always observe people when I am out and about.  Especially when I am picking something up from the store. Our area hasn't really been hit since '08, not like some areas, and I can say that people now, even here, seem hollowed out.  Just a shell.  They are still trying to cling to "stuff" but the effect is wearing thin.  Now I don't frequent high end places, so I can't speak about those places, but in J6P places people are either picking up basics or the cheapest junk you can actually put on a shelf and call it a product.


lordbyroniv's picture

"Everybody, soon or late, sits down to a banquet of consequences."

- Robert Louis Stevenson

pods's picture

That is a whole lot of scratch that someone got.

What say you ZH'ers, feel richer?


Bearwagon's picture

Remember: The less something costs - the less it's free!

Dr. Engali's picture

Remember....It's not a lie if you believe it.


George Costanza

Bearwagon's picture

And 400 000 repetitions will make a truth whatever you like to.  Huxley tought me that.  ;-)

GetZeeGold's picture



Costanza.....the Architect?

Rehab Willie's picture

Obama needs to appoint a "STFU & get back to work" czar to keep all us plebs in line.


all-priced-in's picture

If you like your money you can keep your money - PERIOD.*


* the words - if, you/your, like, money, can, keep and PERIOD are subject to definition revision.







Cthonic's picture

Right, just don't ask about purchasing power.

shovelhead's picture

In Ponzi-World, you CAN keep the free lunch bond fiction going forever...

Until the muppets refuse to play and head for the exits.

Then the sacrifices stop and you face the Wrath of Math-God.

Math-God is cruel and unwavering and will demand his flesh.

Kantbelieveit's picture

All the debt terror freaks seem to have forgotten WWII. The US took on staggering levels of debt to equip troops with lots of FREE STUFF: gun, tanks, planes, ships. You might call them the FSA (Free Stuff Army). Did this cause a debt apocalypse? No. It took America out of the Great Depression and proved that Keynesian economics works.

If you want to see austerity failing miserably, look at the EU, which has been driven into a double dip recession by the debt scolds. National economies are not like home budgets. Keynes was right and the debt scolds are idiots.

Cthonic's picture

How did your mother survive birthing such a tool!?

cypherk1's picture

I assume you are joking although it seems like you are serious. We have participated in QE the likes of which the world has never seen. Which brings us to 1980 levels labor force participation. Keynesian economics work alot like the Zimbabawe economy.

Unique Snowflake's picture

Killing people and destroying other countries so you can then sell them shit in order to service the debt you incurred to destroy them. Great plan Poindexter.

National economies are exactly like home budgets. Maths scales up, in case you went to Obamaschool.

You deserve what's coming. Most people deserve it too, though slightly less than you. The small number of awake people can't do anything but hope to survive the tsunami that's about 10 miles out and closing. 

RKDS's picture

I love when business types try to lecture me about free lunches.

Because having moved so many jobs out of the country, just where do they think their sales come from?

Time was, Zenith paid Bob $X to build TVs and then Bob paid Zenith $Y for a TV.  Money changes hands but it stays inside the domestic economy.  Now Sony pays Chin Lee $1/X to build TVs but still expects Bob, who now works at Best Buy selling TVs for a fraction of $X, to pay Sony $Y+ for a TV.  It's like taking a bucket of water out of the pool and putting a glass of water back in; eventually you run out of water.

Expecting profits to go up forever is as stupid as expecting home values to go up forever.

malek's picture

That free lunches thing brings a modified quip to my mind:

If nobody ever realizes that things were/are stolen from them (purchasing power), is it theft?

Kantbelieveit's picture

Let's hear the debt fear mongers tell us how cutting spending is the right way to reduce unemployment. When you cut government spending, people have less money to spend, and this leads to growth? When you cut taxes for an unemployed person, how does this lead him to spend more?

This terror of high levels of government spending never seems to be a problem when the government is spending on killing people. It is only when it goes to feeding the poor or building public works that the debt-obsessed right wingers start screaming.