The US Government Now Has Less Cash Than Google

Tyler Durden's picture

Authored by Simon Black via SovereignMan.com,

In the year 1517, one of the most important innovations in financial history was invented in Amsterdam: the government bond.

It was a pretty revolutionary concept.

Governments had been borrowing money for thousands of years… quite often at the point of a sword.

Italian city-states like Venice and Florence had been famously demanding “forced loans” from their wealthy citizens for centuries.

But the Dutch figured out how to turn government loans into an “investment”.

It caught on slowly. But eventually government bonds became an extremely popular asset class.

Secondary markets developed where people who owned bonds could sell them to other investors.

Even simple coffee shops turned into financial exchanges where investors and traders would buy and sell bonds.

In time, the government realized that its creditworthiness was paramount, and the Dutch developed a reputation as being a rock-solid bet.

This practice caught on across the world. International markets developed.

English investors bought French bonds. French investors bought Dutch bonds. Dutch investors bought American bonds.

(By 1803, Dutch investors owned a full 25% of US federal debt. By comparison, the Chinese own about 5.5% of US debt today.)

Throughout it all, debt levels kept rising.

The Dutch government used government bonds to live beyond its means, borrowing money to fund everything imaginable– wars, infrastructure, and ballooning deficits.

But people kept buying the bonds, convinced that the Dutch government will never default.

Everyone was brainwashed; the mere suggestion that the Dutch government would default was tantamount to blasphemy.

It didn’t matter that the debt level was so high that by the early 1800s the Dutch government was spending 68% of tax revenue just to service the debt.

Well, in 1814 the impossible happened: the Dutch government defaulted.

And the effects were devastating.

In their excellent book The First Modern Economy, financial historians Jan De Vries and Ad Van der Woude estimate that the Dutch government default wiped out between 1/3 and 1/2 of the country’s wealth.

That, of course, is just one example.

History is full of events that people thought were impossible. And yet they happened.

Looking back, they always seem so obvious.

Duh. The Dutch were spending 68% of their tax revenue just to service the debt. Of course they were going to default.

But at the time, there was always some prevailing social influence… some wisdom from the “experts” that made otherwise rational people believe in ridiculous fantasies.

Today is no different; we have our own experts who peddle ridiculous (and dangerous) fantasies.

Case in point: this week, yet another debt ceiling debacle will unfold in the Land of the Free.

You may recall the major debt ceiling crisis in 2011; the US federal government almost shut down when the debt ceiling was nearly breached.

Then it happened again in 2013, at which point the government actually DID shut down.

Then it happened again in 2015, when Congress and President Obama agreed to temporarily suspend the debt ceiling, which at the time was $18.1 trillion.

That suspension ends this week, at which point a debt ceiling of $20.1 trillion will kick in.

There’s just one problem: the US government is already about to breach that new debt limit.

The national debt in the Land of the Free now stands at just a hair under $20 trillion.

In fact the government has been extremely careful to keep the debt below $20 trillion in anticipation of another debt ceiling fiasco.

One way they’ve done that is by burning through cash.

At the start of this calendar year in January, the federal government’s cash balance was nearly $400 billion.

On the day of Donald Trump’s inauguration, the government’s cash balance was $384 billion.

Today the US government’s cash balance is just $34.0 billion.

(Google has twice as much money, with cash reserves exceeding $75 billion.)

This isn’t about Trump. Or even Obama. Or any other individual.

It’s about the inevitability that goes hand in hand with decades of bad choices that have taken place within the institution of government itself.

Public spending is now so indulgent that the government’s net loss exceeded $1 trillion in fiscal year 2016, according to the Treasury Department’s own numbers.

That’s extraordinary, especially considering that there was no major war, recession, financial crisis, or even substantial infrastructure project.

Basically, business as usual means that the government will lose $1 trillion annually.

Moreover, the national debt increased by 8.2% in fiscal year 2016 ($1.4 trillion), while the US economy expanded by just 1.6%, according to the US Department of Commerce.

Now they have plans to borrow even more money to fund multi-trillion dollar infrastructure projects.

Then there’s the multi-trillion dollar bailouts of the various Social Security and Medicare trust funds.

And none of this takes into consideration the possibility of a recession, trade war, shooting war, or any other contingency.

This isn’t a political problem. It’s an arithmetic problem. And the math just doesn’t add up.

The only question is whether the government outright defaults on its creditors, defaults on promises to its citizens, or defaults on the solemn obligation to maintain a stable currency.

But of course, just like two centuries ago with the Dutch, the mere suggestion that the US government may default is tantamount to blasphemy.

Our modern “experts” tell us that the US government will always pay and that a debt default is impossible.

Well, we’re living in a world where the “impossible” keeps happening.

So it’s hard to imagine anyone will be worse off seeking a modicum of sanity… and safety.

Do you have a Plan B?

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Lady Jessica's picture

This is because Bretton-Woods was trashed.  We can rehabilitate with Bancor.

VinceFostersGhost's picture

 

 

Time for the Google bail-in.

 

Pretty sure we have the votes...

NugginFuts's picture

You're right - the US govt should raid bitcoin and bail in the US Treasury with the proceeds. I mean hey, China feels like they can step in and regulate it or at least intimidate the shit out of bitcoiners. Why not US?

Are we any less desperate than them?

Gold...Bitches's picture
The US Government Now Has Less Cash Than Google

 

Bullshit - it has a printing press and therefore can never be out of cash.  Seriously Simon?  Now if you'd like to talk about the value of those dollars that would be a valuable discussion.

NugginFuts's picture

Correction: the FED has a printing press. The US Treasury has a dependency on said press. Guess who really wears the pants in that relationship?

MEFOBILLS's picture

Correction:

The FED has a keyboard for monetizing debt intruments.  The FED then puts government into public debts, and then rebates the interest to treasury.

Private banks have been allowed by law to hypothecate the public, thus create debts and credit simultaneously.  

So, debt emission is public (via TBills) and private (people hypothecating themselves to buy houses, cars, etc.).  

The actual pyramid of money power is TBTF banks, who brought the FED into existence by scheming.  Then there is the New York FED where all reserves point.

The FED itself is part of a system, but not the actual point of pyramid.

Treasury by Constitutional law has the big boy pants, but they took them off and gave them to private money power.  (Or, were hpnotized and paid off to give their pants away.)

Anybody who says that a sovereign issuer of money is out of money, is passing hypnosis.  

www.sovereignmoney.eu

bobbbny's picture

Correction: The Fed rebates some of the interest to the Treasury.

The rest is split up by the banks who own the Fed.

Who are they? We can only guess, but they have built a nice stash of $4.2 trillion in bonds without putting up a nickel.

Nice racket they got going there.

MEFOBILLS's picture

This is true, they take their cut, and then rebate.  This way they insure they make profits no matter what.

 

ATM's picture

Google IS the government.

HRClinton's picture

Red herring, Simon Black. Google needs cash, because it can't conjure what the US Gov can: perpetual credit from the money class, whose instrument and vassal it has become. 

Quantum Bunk's picture

Not true. The US treasury cant print cash.

 

Only the Fed can. And some political gridlock could in fact sieze this process up for a time

ToSoft4Truth's picture

What kind of political gridlock prevented the senior debt of GM disappearing?  None. 

 

The beggars outweighed them.

MEFOBILLS's picture

The FED and private banks are allowed by law to create FEDERAL RESERVE NOTES.

The treasury by law, can issue U.S. NOTES.

The Treasury CHOOSES not to issue U.S. notes, but HAS in the past.  The past laws are still on the books, ergo Treasury has money power it chooses to not use.

Lincoln's greenbacks were U.S. notes, issued debt free.

The Treasury could issue a $1T coin to FED (via the Mint), and it then goes into Treasuries account at the FED.  Then the Treasury has $1T to spend.

This notion that only private banks can issue a nations credit is preposterous.  It is part of your brainwashing since birth.

www.sovereignmoney.eu

 

Quantum Bunk's picture

No it cant. Nancy Pelosi could never have a Bernanke Fed computer

MEFOBILLS's picture

Coinage clause is a provision of the U.S. Constitution granting Congress the power to coin money. Article I, section 8, Clause 5 of the Constitution says that “Congress shall have power to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.”

 

LoL about Pelosi.

doctor10's picture

that's why the GOP is only going to be allowed to rebrand ObamaCare

Zorba's idea's picture

Solving "Triffins Paradox" would be a constuctive way forward, but not with our stinking sinking FIAT currency.

Cognitive Dissonance's picture

There will soon enough be a new breed of zombie walking the streets, wondering what the hell happened to their beloved government paymaster.

This is precisely why massive war is on the horizon. When discovered with a mess on your hands, the only thing left to do is make an even bigger mess.

css1971's picture

When you have problems at home, you can export them to other countries.

 

... Recruitment drive ...

SonsOfLibertyReborn's picture

Yeah, how exciting, to go to war to defend pornography, homosexuality, abortion, feminism, transgenders, and the Jewish bankers. I know my morale is through the roof of a house that collapsed into its basement so the roof is actually underground....

DavidC's picture

Aw, what the heck, the US indices are up pre-open, what's to worry about?

DavidC

(sarc OFF)

Cognitive Dissonance's picture

DavidC,

As I have found out lately, the 'sarc' tag needs to fly once again on ZH. Too many sensitive people from both sides of the aisle have shown their colors and are immediately trigger by undeclared humor or sarcasm.

<Umm, that was just a little too close to the bone for my comfort.>

Mustafa Kemal's picture

CD sarcism using a sarc tag doesnt sound very Fight Club to me.

Jim in MN's picture

Sarc tag?  We don't need no stinking sarc tag.

Don't get me started on other lines from that film.

"The Fed Chief is a....."  never mind.

Giant Meteor's picture

Well the trouble is if its sarcasm all the time ...

Don't make me do the little boy that cried wolf fable again  ..

;)

espirit's picture

Come on, we need morale.

(spare Safely Graze tho')

spanish inquisition's picture

CD, You have failed to provide a sarc on/off tag. I am confused if I should feel offended.  sarc null.

Giant Meteor's picture

There is a safe space for that ;)

Jim in MN's picture

Yeah, it's called.....The Comfy Chair.

Chupacabra-322's picture

@ Cog,

Fuck them. No sarcasm needed. This is Fight Club the Snowflakes can suck on my gooch. That's the space between my nutsack & asshole.

Sick Underbelly's picture

Fuck losers and pussies who can't handle sarcasm, noted or not, clear or subtle, in whatever state of "refinement" it appears.

Fuck "sensitive people from both sides"...and on both sides of the aisle.

MFL5591's picture

This explains the N Korean problem!

Elliptico's picture

Google ain't got no stinkin' nukes.

Jim in MN's picture

But Google has the spyware and personnel to control them...so maybe.

1stepcloser's picture

Google! how fucked are we?

Jim in MN's picture

"Siri, how fucked are we?"

"OK, let me see.....more fucked than a hooker at a Hamptons blow party."

"Siri, what is Plan B?"

"Cannibalize me for parts before I electrocute you in your sleep."

espirit's picture

Makes you wonder if 'Alexis' told the truth...

We Are The Priests's picture

Thank you so much.  I was beginning to think I had forgotten how to laugh.

cowdiddly's picture

Yep 1.4 Trillion for last year and growing. So they will have to raise the debt ceiling over a trillion or meet every 3-4 months now. The choice is theirs.

You either scare the crap out of everyone with a couple trillion raise or you put a monthly hot patch on the problem.

Markets ought to just llllluuuuuuv this week.

 

espirit's picture

I quit counting at ten, no twenty.

(just got my socks off) ... make it twenty-one.

Mustafa Kemal's picture

Yes, you read ZH long enough and you have to. Most agree, it cant continue. Its just that nobody knows when it will stop. Plan accordingly. We are also planning for the children and some of the neighbors since they arent paying attention either. 

SonsOfLibertyReborn's picture

Yes, that is both wise and noble. Always be prepared.

wherewasi's picture

What's in your wallet?