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Government hiding Greek future

March 11, 2012
Small part of hidden liabilities

Small part of hidden liabilities

Government hiding Greek future through unrealistic accounting. Rules designed to make incumbents look good are hiding the juggernaut of the coming debacle.

If the $2.65T of debt identified by the CBO is added to the Fannie/Freddie debt ($6T), the Trust Fund IOU’s ($4.6T) and Debt Held by the Public ($10.4T, it comes to $24T. That would put true Debt to GDP at 160%. So in reality, the USA is worse off than Greece, Portugal, Spain or Ireland.

Producing all the liability they can

Hiding the true cost of credit transfers liability to the future and away from re-election campaigns.

Not only does FCRA treatment hide the true cost of credit extension, it  actually turns debt into a budgetary benefit . When the government makes a loan  guarantee it realizes a net gain. Referring to the $100 million loan described  above, the CBO shows that booking a new guarantee reduces the current year  budget deficit: […]

Rather than create a reserve against future losses, the government realizes a  reduction in the current year deficit. So the “solution” to a big budget  deficit is to make more loan guarantees! This is, of course, what has  happened. [- ibid.]

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