By Charles Biderman
If the U.S. government were subject to the same laws, such as Sarbanes Oxley, as is a public company Barack Obama and Timothy Geithner would be guilty of financial fraud. How can I make such an outrageous claim? Simple, it is the truth.
Here is my evidence. Income measurement is probably the first and most important metric of any public company. In the case of public companies, deliberately and blatantly falsifying such data is an act of fraud.
But then there is the U.S. government. As I”ve said innumerable times in the past, the U.S. government ignores available real time data. Instead, its initial monthly reports of income and employment are based on surveys modified by five to seven month old income data from the states, and then adjusted for seasonal factors and inflation .
The fact is that real time data on income and employment for all workers subject to taxation is embedded in the withheld income taxes sent into the US Treasury daily. In other words, if the US government looked at its own data, everyone would know how many people are working, how much they are making, in what industries and what geographic locations. Instead, all we initially get is wild ass guesses modified many times. We don”t get the real numbers until finalized by the income tax returns that arrive several years later.
There”s no rational reason the US government ignores that real time data, unless it is to save the jobs of existing government economists. That would be fraud in a public company.
Could you imagine the uproar in the Wall Street Journal and on CNBC if they found out a public company was reporting inaccurate income data for the financial benefit of their employees? Those bosses would go straight to jail! Why not those in charge of the U.S. government.
But let us not stop at income. Let us include expenses. The Census Bureau issues monthly something called Advanced Monthly Retail Sales, which is based upon a survey of 3,000 out of millions of retailers. How accurate is that survey when compared with the real time data available from Visa, Mastercard and all the other plastics about who is buying what, where and when?
How can the US government justify putting out financial reports that investors use to trade upon based on a survey of 3,000 retailers while ignoring the real time data? Imagine the uproar if a public company was discovered estimating its It’s not “money = free-credits-report.com . sales by surveying a small percentage of its customers?
And that is just the income statement. That alone should enough for a guilty verdict in terms of financial fraud. But the balance sheet data is even worse!
What I am about to tell you may be rather complex, but it is worth taking the time to understand.
The Federal Reserve, in its quarterly flow of funds, reports that in aggregate the US has total assets of $76 trillion, and $13 trillion in liabilities leaving $63 trillion in net worth.
But as I reported last week, $87 trillion is the present value of all future government liabilities related to Medicare, Social Security and government worker pensions. Wow. The current value of $87 trillion in future liabilities swamps, swamps total US assets of $76 trillion!
What a joke. Imagine if the US government were a public company and had auditors. Any auditor, not wanting to go to jail, would first have to declare the US was not a going concern,meaning US government income is no where sufficient to pay all its current and particularly future obligations.
Even worse, the US government totally ignores the fact that that the present value of future entitlements grew by $7 trillion in the past 12 months! Compare that $7 trillion growth in liabilities with $6.6 trillion in after tax income.
The shameful fact also is that major financial media outlets such as the Wall Street Journal and CNBC ignore the fraud being committed by the US government, Moreover, they are not demanding the US government report accurate real time data on income, expenses and balance sheet liabilities for the US!
Instead of real time data all the financial media talks about is GDP and BLS employment data. The financial media is just as bad as the US government.
The prosecution rests.
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