Who are America's Creditors? or, Debt Economics for Beginners

Federal Reserve Bank, issues and then, using third party agencies, buys up the treasury bonds issued by the U.S. Govt. to cover spending. Huh?
Federal Reserve Bank, issues and then, using third party agencies, buys up the treasury bonds issued by the U.S. Govt. to cover spending. Huh?

Introduction to the world of your country's debt

Thanks to all of you who read and enjoyed The U.S. National Debt – 233 years in the making. Here, at last is the third article in this series on World Debt – Who are America’s Creditors? Or, debt economics for beginners.

Let us fittingly start this article with wise words from one of the founding fathers:


"There is in the nature of government an impatience of control that disposes those invested with power to look with an evil eye upon all external attempts to restrain or direct its operations. This has its origin in the love of power. Representatives of the people are not superior to the people themselves." Alexander Hamilton - Federalist Papers, 1787.

U.S. Treasury Department will tell us the current National Debt to the penny

As of today’s date (January 27, 2010), the U.S. national debt sits at $12,301,772,321,038.04 according to the U.S. Treasure department website. http://www.treasurydirect.gov/NP/BPDLogin?application=np

This is broken down into two main categories:

Debt Held by the Public $7,784,152,852,860.25

Intragovernmental Holdings $4,517,619,468,177.79

Which tells us very little

The treasury department will gladly tell you the detailed make-up of these amounts, along with impressive pie charts, bar graphs and officious tables, along with signed opinions from their auditors certifying the report as being fair, audited and truthful (in accordance with the legal guidelines as set forth in the U.S. generally accepted accounting principles and under 31 U.S.C. 3512 (c) and (d) – a piece of legislation commonly known as Federal Managers Financial Integrity Act. Here is a link to a PDF copy of their report on the audited financial statements of the United States Treasury. http://www.treasurydirect.gov/govt/reports/pd/feddebt/feddebt_ann2009.pdf Go there and read the document for yourself, but you know what?

It won’t tell you who America’s creditors are

Back to searching we go.

Be sure not to get lost in some of the more strident sites, or lose your perspective in the tons and tons of misinformation out there. Don’t be sidetracked by headlines such as “We Owe Our Nations Future to the Chinese -- $12 trillion” attached to sites with names like “America – Let’s Take Her Back.” Nope. And ignore those who call for “stiffing the bastards trying to steal our country,” those foreign S.O.B.’s taking advantage of U.S. spending and need, buying up our treasury bills in a bid to take over.

Keep your head. America’s biggest creditors are not foreign governments

Here is a link to a report listing the major foreign holders of treasury securities. http://www.ustreas.gov/tic/mfh.txt It’s dry, boring reading, so I’ve pulled out the highlights. And I’ve taken the liberty of breaking down the domestic portion, so now I can give you a countdown of those people holding the American pie.

America’s Major Creditors

Figures given are as of September 2009. (Latest available. Apparently, the Treasury Department can issue audited financial statements for fiscal 2009, but cannot account for foreign investment for the entire year. Who can figure?)

  • 15: Luxembourg – $104.2 Billion
  • 14: Depository Institutions – $107.3 Billion (commercial banks, savings banks, credit unions)
  • 13: Russia – $119.9 Billion
  • 12: Insurance Companies – 126.4 Billion
  • 11: Brazil – 139.8 Billion
  • 10: Caribbean Banking Centers – 189.7 Billion
  • 9: Oil Exporters – $191 Billion
  • 8: United Kingdom – $277 Billion
  • 7: Pension Funds – $465.4 Billion
  • 6: State and local governments – $522.7 Billion
  • 5: Other Investors – $629.7 Billion (“other” refers to individuals, government sponsored enterprises, brokers and dealers, bank personal trusts, estates, corporate and non-corporate businesses)
  • 4: Japan – $757.8 Billion
  • 3: China – $789.4 Billion
  • 2: Mutual Funds – $769.1 Billion
  • 1: Federal Reserve and Intergovernmental Holdings – 4.785 Trillion

Did you notice number 1 – the Federal Reserve and Intergovernmental Holdings? What does that mean?

You know who the Federal Reserve is: those folks who buy up Treasury Bills by running the printing presses overtime. They are trying to “plug the gap” caused by a slowdown of private credit/debt creation. You see, non-American demand for the good old greenback must remain high, or the dollar will fall in value (causing inflation) but demand for U.S. assets is negative these days, so the Federal Reserve monetizes Government debt by enabling foreign banks to swap their debt for Treasury debt, BUT the fact remains, however cleverly obscured, the money is being created out of thin air, and used to buy U.S. government debt.

This is a dangerous game – one that would make a flim-flam man on the street blush


Let’s think of it this way:

Check kiting – the flim-flam man has empty checking accounts at The Bank of High Hope and The Bank of Big Dreams. He writes a check for $25,000 to High Hope from his account at Big Dreams, and because he’s cleverly built up a reputation for credit at the former, they allow him to withdraw funds, before the check clears on the latter.

The same game is played on an international level. Central Bank of Noplace prints up a bunch of money and buys the debt of the Republic of Wherever. Then the Central bank of Wherever prints up a bigger bunch of money and buys the debt in the form of treasury bonds issued by the government of Noplace. This way it’s not so damn obvious they’re buying up their own printed paper.

Check kiting – individuals go to jail for it; countries run their economies on it.

Trading on U.S. paper assets now negative

Lately, according to reviewers of Treasury International Capital flows (TIC), they have noted a drastic decline in foreign demand for U.S. paper assets. In fact, those holding same have started selling them off (and who wouldn’t, considering their worth is baseless and dropping daily.)

Over the past year, a disturbing change has taken place. Prior to the Bush administration and the resultant spending spree, foreigners bought U.S. assets, and did this by bringing foreign earned money into the U.S. and leaving it here. Now, the process has reversed and become negative.

In the meantime, China is sitting on a huge reserve of U.S. paper, and so is Japan. This certainly puts them in a position to do harm to the U.S. dollar (and they are, by necessity.) But take heart, right behind the pension funds, sits Britain, a long time ally, and one who’s industrial recovery perplexes many who ponder America’s inability to turn things around.

What does this mean? Nothing good. Start up the presses and kite more checks.

And what about the other half of this $4.8 trillion – Intergovernmental holdings?

Did you notice, these two debt holders are lumped together? I wonder why. And what are they?

This represents the portion of the national debt on the books of federal government accounts, primarily Social Security, and Medicare, Medicaid – those plans paid in advance by American citizens, from which the government has spent every available dollar and replaced it with one of the Federal Reserve’s IOU’s.

That’s right. By far the biggest holder of the U.S. National Debt is the American citizen,

by way of what is facetiously called, the nation’s Trust Funds. Not only are Americans on the hook for this tremendous $12 trillion debt, they are owed money by the same body that collects their taxes each year. See this article on the pillage of the nation’s trust funds. http://mwhodges.home.att.net/cur-year-deficit-trusts.htm *1 see quoted text from this article below.

That’s right; you paid in to Social Security; you pay interest on the same money because the government spent what it actually owes you, and furthermore - - you now have to pay it back – again.

For more information on the history of Social Security and what has happened to the $2.6 trillion dollar surplus that is supposed to be there to pay the baby-boomers benefits (seeing as they were prepaid) go to "What we all need to understand about Social Security."

You are your nation’s creditor, cosigner, and collateral all rolled into one.

Don’t blame the Chinese; they’re only looking after China. (As they should do.)

A moment of silent contemplation here.

No! Can’t be so.

“Not to worry”, say the financial pundits. “The United States is the biggest economy in the world, and if you look at U.S. GDP (Gross Domestic Product see http://en.wikibooks.org/wiki/Principles_of_Economics/GDP) you’ll note that our debt in relation to our GDP has lowered from certain points in history. “

This is a true statement according to the charts –

which would only be explicable if the economy was in growth. Is it? Do you really need me to go dig up any facts on this question?

What is in the GDP?

It’s supposed to be the value of goods produced by a nation within any fiscal period. I believe the critical word in this phrase is goods. There’s far more than goods in today’s reported GDP, and this bears examination.

Debt to GDP ratio may be a reliable indicator of the current economic state of affairs if we can trust these numbers, though I have trouble believing anyone (individual, institution or nation) can be considered fiscally healthy when debts are equal to or more than the entire productive output from everyone for a year. ($14 trillion a year in production according to the financial reporters, and this leaves no room for service of privately held debt.)

But can we trust these numbers held out to us as indicators of our economic health?

That is the subject of the next article in this series on world debt. In the meantime, if anyone wants to jump ahead, here’s a link to an excellent article on the art of chicanery in financial reporting by the government. In particular, visit the section on statistical wizardry -- well worth reading. (http://mwhodges.home.att.net/product.htm)

Quotes relating to this article:


*1 “ …. the first real step in looting the Social Security Trust Fund was in 1985, when President Reagan was in a battle with Congress over raising the National Debt limit. The increase was badly needed to avoid going into default on Treasury Securities interest payments. So Treasury Secretary announced that he would sell Treasury Securities in the Social Security trust Fund to raise the cash until Congress raised the debt limit.

Congress called a Hearing on the subject. on 30 Sept 1985, "Hearing on Disinvestment of the Social Security Trust Fund to Finance the Public Debt." OK, so that meant (at that time) there were actual saleable securities being held in the trust fund or he could not have sold them. You can't sell an unmarketable IOU (which is all the trusts now hold). Congress was upset at the idea of selling securities which belonged to a trust fund. That would be illegal. So they held the meeting (declared a temporary emergency, and away they went). I got a copy by going to the archives at a local University Library. The 49 pages were in very fine print, and were on microfiche. The minutes show how shocked Congressmen were at the thought of doing something like this. Treas. Sec Baker's representative said that he was just using good management judgment and protecting the honor of the United States in paying the current debts of the country. This was the most expedient way to do it (unless they raised the debt limit for more outside borrowing, which politically they were afraid to do with Reagan as President). After hours of pros and cons, they all finally agreed that this was a temporary measure in an unusual case, and that when the emergency was over, the Treasury Securities would be replaced by buying them back. So they approved what Baker wanted to do.

I guess they saw a good thing, the emergency was never declared over, even when the debt level was raised, so they looted all of the trust funds, all 150 of them. And that is the way it has been ever since.

In some prior years, they had borrowed a little here and a little there. Changed laws to cover the allotment of FICA funds between SS /Medicare/ and Disability Ins. But that was generally all done in a legal manner. This activity since 1985 is a FRAUD pure and simple. “ – Tom Smith webmaster of National Debt. com

The Trust Fund is just an EMPTY IOU - just a piece of paper
(March 21, 2005, President George Bush - in Denver, Colorado) “Now, you probably think -- some of you may think there's what they call a Social Security trust: the government collects the money for you, we hold it for you, and when you retire, we pay it to you. But that's not how it works. You pay your payroll tax; we pay for the people who have retired, and if there's any money left over, we spend it on government. That's how it works. And what's left is an empty IOU, a piece of paper. Because it's a pay-as-you-go system, when more retirees start retiring, who are living longer, getting paid more, more money starts going out than coming in.”

"Treasury Secretary: Social Security Has 'no Assets' By Jeannine Aversa Associated Press Writer Published: Jul 10, 2001, WASHINGTON (AP) - Treasury Secretary Paul O'Neill, responding to Democratic critics in Congress, said anew Tuesday the Social Security retirement program has no real assets and must be strengthened. However, "because the Social Security trust fund does not consist of real economic assets, we are left to rely on the federal government's future decisions to either raise taxes, reduce spending or increase borrowing from the public to finance fully Social Security's promised benefits," O'Neill said.

Quotes from two economists commenting on the article “The Shell Game.”

“I predict, given that nothing will be done until the Treasury is within days of bankruptcy, that an emergency session of Congress will then slash social security and Medicare benefits to anyone with a resemblance of membership in the middle class or above. I.e. the first major default will be on promises the federal government made to its citizens.”

“I might take that bet, xxxxxx; what's the over-under on the household income cap for getting screwed?”


Need a smile after all this?

(smile courtesy of Michael Hodges author of Grandfather National Debt Report -- a site well worth visiting.)

Why did the chicken cross the road?

ANSWERS:

Bill Gates: I have just released the new Chicken XP, which will both cross roads AND balance your checkbook, though when it divides 3 by 2 it gets 1.4999999999.

The Bible: And God came down from the heavens, and He said unto the chicken, "Thou shalt cross the road." And the Chicken crossed the road, and there was much rejoicing.

Freud: The fact that you thought that the chicken crossed the road reveals your underlying sexual insecurity.

L.A. Police Department: Give me ten minutes with the chicken and I'll find out.

Richard M. Nixon: The chicken did not cross the road. I repeat, the chicken did not cross the road.

Saddam Hussein: This was an unprovoked act of rebellion and we were quite justified in dropping 50 tons of nerve gas on it.

Saddam Hussein #2: It is the Mother of all Chickens.

Saddam Hussein #3: I will not allow anyone to inspect my chickens.

CIA Director: No weapons of mass destruction here. They must be on the other side - - I hope.

Dr. Seuss: Did the chicken cross the road? Did he cross it with a toad? Yes! The chicken crossed the road, but why it crossed it, I've not been told!

Ernest Hemingway: To die. In the rain.

Buddha: If you ask this question, you deny your own chicken nature.

Martin Luther King, Jr.: I envision a world where all chickens will be free to cross roads without having their motives called into question.

The Pope: That is only for God to know.

Grandpa: In my day, we didn't ask why the chicken crossed the road. Someone told us that the chicken had crossed the road, and that was good enough for us.

Colonel Sanders: I missed one?

Government staff before congressional committee: I don't recall why chickens come home to roost on my side of the road - - but if you push I'll take the 5th or leave the coop.

Politician: A chicken in every pot will 'save the children' and protect my own perch.

Influence investor: I heard wealthy chickens receive free lodging while being plucked at a special house across Pennsylvania Avenue.

Affirmative action advocate: Chickens have been discriminated against. They should be granted special class privileges. Retribution payments might be realized across the road.

Retired Chicken: On this side they said they 'saved social security' for chickens by building a trust fund surplus, but actually they spent every penny of the surplus on non-pension stuff as fast as the money arrived, leaving non-marketable IOUs instead of real money. I hope the other side of the road has its trust fund 'surplus' saved for future chickens in hard cash or in fully marketable securities, since chickens can't buy corn during retirement with non-marketable IOUs.

Working Chicken: On this side they say my FICA taxes will produce a negative return toward my retirement. On the other side they believe in UFOs.

Attorney: Chickens are invited to cross the road to join a class action lawsuit against all non-chickens.

Parent: Teachers have credentials, but my chicks can't read. The President said he's looking for volunteers on the other side to teach chicks to read.

Environmentalist: The chicken crossed the road to escape blame for earth warming.

Voter: Maybe if I cross the road and believe the other party's slogan, "vote for us and you will not be plucked."

Voter #2: I will no longer vote, because they plucked me on the other side, too.

Economic student: Government said they had another surplus. How can that they say that when each year they increased total debt to another record? I hope they count chickens differently on the other side.

Bill Clinton: I did not cross the road with THAT chicken. What do you mean by chicken? Could you define 'chicken,' please?

8th Grade chicken: On my side two-thirds of graduates need remedial work in college to make up what they didn't learn in high school. On the other side you can skip high school and go direct to college.

12th Grade chicken: On this side we take 'math & science,' yet come in last measured against students from other nations. Maybe the other side lets us attend foreign schools..

Teenager: To prove that he wasn't a chicken.

Chicken lawyer: After the 2000 election all the nation's lawyers stopped chasing ambulances for awhile, and crossed over to Florida - - to count votes for Bush & Gore, 'til they dropped.

Accountant-auditor chicken with a Big 5 firm: Because it's more profitable to audit and OK 'cooked' books on the other side.

Enron chicken: on the other side you can run up debt and hide the fact, just like politicians do with the social security trust fund.

Truck driver: To prove to the armadillo that it could be done.

Federal Reserve Chairman: On this side of the road we can get away with reducing interest rates that wipes out 70% of income to senior citizen who saved for their retirement, so we can subsidize more debtors and our beloved banks. Horror of horrors if they move to the other side where Federal Reserve Banks are not allowed, and up-to-the-eyeball debtors are non-existent, and then those savors get to retain and improve their living standards.

Banker #1: on the other side of the road you can hide off-balance sheet debt from the markets, regulators, shareholders and auditors.

Banker #2: moving assets worth very little to the other side where we can mark them to whatever price we like to pump up assets and then sell them to the greater fools out there.

Banker #3: even a better idea on the other side is that there the Federal Reserve will bail you out and subsidize your bad assets.

Mortgage broker: get the nice couple to sign up for a toxic house mortgage, collect fees on this side and tell them not to worry as they can surely trust you, and then move your office to the other side where they can't find you.

Mortgage broker #2: make sure they borrow and spend all their home equity on this side and pay tons of fees and interest, because if they escape to the other side they might not borrow to consume their home equity and horror of horrors might never borrow again, instead becoming free and clear for their future.

CEO: if your company is going down the tubes, don't tell anybody but quickly grab your golden parachute and zip to the other side of the road to the cool life you earned.

Al Gore: I invented the chicken! So I, not the chickens, get to decide which side all chickens get to live.

Albert Einstein: Did the chicken really cross the road, or did the road move beneath the chicken?

Pat Buchanan: To steal the job of a decent, hardworking American.

Colin Powell: Now to the left of the screen, you can clearly see the satellite image of the chicken crossing the road ...

George W. Bush: We don't really care why the chicken crossed the road. We just want to know if the chicken is on our side of the road, or not. The chicken is either against us, or for us. There is no middle ground here.

Barack Obama: The chicken crossed the road because it was time for a CHANGE! The chicken wanted CHANGE!

That's right -- smile. A true hero smiles in the face of adversity.

Hope this article has been of some help -- Lynda M. Martin


More by this Author


Comments 57 comments

Hello, hello, profile image

Hello, hello, 6 years ago from London, UK

Thank you for doing such a lot of work and I enjoyed reading this informative hub.


lmmartin profile image

lmmartin 6 years ago from Alberta and Florida Author

My pleasure, hello,hello and thanks for leaving this comment. Hope the article helped in understanding what is going on out there. Writing it was certainly an education for me.


Nan 6 years ago

Excellent, I am going to pass this article on to my friends and associates!


lmmartin profile image

lmmartin 6 years ago from Alberta and Florida Author

Thanks, Nan.


martyjay 6 years ago

You have made your point. As I see it, we as American tax payers do not pay enough in taxes to cover the ongoing operations of government. The government in an attempt to continue to operate borrow money from its own citizens in the form of taking trust money. It would be interesting if research were done to find out if social security and medicare funds were actually trusts. Trust funds being held for the benefit of the payer where fiduciary liabilities attached.

Being a baby boomer and close to retirement you have certainly increased my interest in the topic.


Janna 6 years ago

This is scarey stuff. How can the government spend the money working people paid for programs designed to give them security? Isn't this spending other people's money? Isn't this stealing?


Laura in Denver profile image

Laura in Denver 6 years ago from Aurora

these statistics are shociking. thanks.


lmmartin profile image

lmmartin 6 years ago from Alberta and Florida Author

Hi Martyjay, Yes for those entering retirement years these days, the situation looks a little grim. With the financial chaos of the past several years, many have found their networth has disappeared, and are more reliant on Social Security than they every planned to be. And now it appears, that Social Security is itself reliant on the generosity of Congress -- the same congress that absconded with the citizen's funds to pay for other, unrelated activities. At one time the SSfund did hold marketable securities -- not so today. U.S. Federal Reserve IOUs are not marketable and on their face, worthless.

Hello Janna, Yes it is scarey. Is it stealing, you ask. Well, let's put it this way -- if the management of a private retirement fund used payments of their subscribers in this way, they would be in prison. Think beyond the fact that your money has been spent -- you are currently paying interest on your own money and are liable for repayment of your own social security installments to date.

Hi Laura -- yes it is shocking, but what is more shocking is how few people know or understand what is happening. This article is not an indepth analysis, is very superficial and as one emailed complaint to me stated -- simplistic. But the truth is often simple. Your money has been stolen, and the government has no plans to pay it back. So in effect, America's biggest creditor is her own ripped-off citizens.


William R. Wilson profile image

William R. Wilson 6 years ago from Knoxville, TN

Very interesting hub. I've bookmarked it and I'll be referring back to it. I've wondered many of these same questions and more - there's certainly a lot to think about.


lmmartin profile image

lmmartin 6 years ago from Alberta and Florida Author

Thanks William. Once again, I've enjoyed sharing my education -- one of the benefits of writing these articles is how much one must learn to do so. I find myself surprised the American people aren't demanding answers and change, but then change is a difficult thing to produce and usually has very messy repercussions. The truth is we are all living in castles of air. (This time I checked all my decimal places and corrected all the mess my fingers made.)

Thanks for coming by, William. Your input is very much appreciated.

By the way, your hub: Whose side are you on -- what is the real problem with America was excellent and good food for thought.


Ann Nonymous profile image

Ann Nonymous 6 years ago from Virginia

Way above my head until it came time for smiling and then indeed you were able to put a smile on my face. Not that I didn't enjoy reading your hub. I should really pay attention to what's going on around me, and it's nice that I can get that information on the hub. Ah, I am liking it here more and more! Thanks for everything, lmmartin!!!!


lmmartin profile image

lmmartin 6 years ago from Alberta and Florida Author

Surely not above your head, Ann Nonymous. Why then I've failed. I wanted to pull out the facts and write them simply for all to understand. It's not so difficult. The govt. was short of money and took the Social Security Funds and some others and spent them, even though this was a "Trust" account and full of money belonging to the people. In its place they left IOU's. So now, the Govt. has no real money in the fund, and no plans to pay it back.

There you go.


Ann Nonymous profile image

Ann Nonymous 6 years ago from Virginia

(Sigh...) I think I get it now! You have a good ability to explain! Thanks for taking the time out for me, lmmartin! Take care!


lmmartin profile image

lmmartin 6 years ago from Alberta and Florida Author

Any time.


someonewhoknows profile image

someonewhoknows 6 years ago from south and west of canada,north of ohio

Here's my take on why the chicken crossed the road.

The chicken crossed the road in order to get away from the snakes in the grass.Seeing snakes on the other side too,it stayed in the middle,and is about to get run over by a truck.


lmmartin profile image

lmmartin 6 years ago from Alberta and Florida Author

Poor little chickens -- stuck, plucked and f***ed.

Thanks someonewhoknows.


Jim Bryan profile image

Jim Bryan 6 years ago from Austin, TX

Though the content of the main article was good, my favorite part was the chicken jokes (sorry, I've had to be too serious lately and needed the chuckles). Regardless, here a few more:

Schroedinger: At the time the chicken crossed the road, it could be conceived as being on both, either, or neither side of the road.

Supreme Court: Because chickens have the same rights as people to express themselves.

Me: I don't know, but all this talk of chicken is making me hungry.


lmmartin profile image

lmmartin 6 years ago from Alberta and Florida Author

Hi Jim,

Don't we all need a chuckle. Particularly when someone throws the real state of affairs in our face. We live in scarey, crazy-mad times. Many of us have seen our net worth plummet over the past five years, and must consider our last line security, Social Security, as perhaps in peril as well. Not a pretty picture when you can see sixty without squinting.

Thanks for adding some more chicken thoughts.


Jason 6 years ago

ROOT OF ALL USA'S PROBLEMS: A MISTAKE IN THE CONSTITUTION.

SOLUTION: NATIONAL REFERENDA

Like this article shows, the US government is spending trillions of tax dollars even though the country is bankrupt. I am not sure how much of this money is actually being looted by politicians and diverted to their special interests who put them in office.

When you see our "representatives" (who are our servants) constantly on a warpath against us, squandering our money and pushing us into debt and we have to meekly beg our servants to stop their war on our nation, we know something is clearly wrong with our system.

The problem is that there are no binding national referenda in the United States. Many other countries have it, but not the US. Therefore America's secret shame is that we do not have a real democracy! That is why American democracy is a joke.

The constitution gave all the power to the 3 branches of govt. and assumed they will keep an eye on each other ("checks and balances"). The three branches have become corrupt, usurped power, and all three branches figured out that it is better to conspire, mug and terrorize the nation and totally ignore the owners, the US Citizens. To keep ultimate power in the hands of the people, the founding fathers put in the second amendment. The second amendment, which assumed that millions of armed citizens can easily ouster an illegal and anarchist govt. with equally armed thousands of soldiers, is effete because modern armies have weapons that can kill thousands at a time, so the people will be crushed in any violent uprising against a criminal government.

So they keep passing evil laws the against our country, the public and against our will.

But there is a solution to this govt's war on the nation. It is a constitutional amendment to allow national referenda, so people can pass good laws in the national interest themselves. These laws will supersede laws passed by Congress and cannot be overturned except on constitutionl grounds by a supermajority of both houses and unanimous vote of the Supreme Court. The people can then still pass it by 66% vote. Some believe that this right to amend the constitution is inherently vested in the American public. Others suggest an actual amendment.

We can pass a national referendum that all laws that affect the nation as a whole, such as raising taxes, large welfare programs, foreign aid, immigration, bailouts, and raising the debt ceilings, etc. can become law only if finally approved by the people. We will solve 90% of our problems this way.

For eg., see:

http://ni4d.us/index.htm

http://www.iandrinstitute.org/National%20I&R.htm

We Americans need to call radio talk shows, etc. and promote this idea and get the process started soon.


lmmartin profile image

lmmartin 6 years ago from Alberta and Florida Author

Thank you for this most interesting comment, and for the info. I am Canadian, and have voted in two reforandums so far. And I agree, this is truly democracy in action. I think the whole single payer health care system is one question that should be turned over to the electorate -- hold a reforandum and let's find out what the people really think. I know they don't want what's on the table undergoing yet more surgery.

Because reforandums appear to be as costly as an election to hold, in Canada, they have been used only on major issues, such as Quebec's right to secede from Confederation. (Not that things are perfect in Canada -- far from it, but we do have that mechanism for settling the big questions.) Still, as things stand right now, the American people have no idea what the majority really wants and instead, must listen to the politicians and the pundits tell them what they want. I'm sure most Americans would rather have health care than two wars, or 768 foreign military bases.

But we'll probably never know, because those in power are unlikely to give up their place at the trough.


kartika damon profile image

kartika damon 6 years ago from Fairfield, Iowa

Truly scary, and we the people are clueless about what is going on with the money! Two wars and a military industrial complex that is bleeding us dry - tax cut to millionaires at the same time - gifts to the insurance company as a result of a completely unregulated industry ripping of the people while making record profits - it all seems to be part of the dismal picture - But of course, Americans worship the free dept driven economy even while it drives them to debt and despair - after all, they wouldn't want to see us all become evil socialists like the Canadians! Eh, llmartin?


lmmartin profile image

lmmartin 6 years ago from Alberta and Florida Author

Well, before I get all puffed up and nationalistic, let me say the Cdn govt has spent our Canada Pension Plan funds as well. (But at least we get health care while being screwed.) As I see it, the "land of the free" is now your basic feudal society. Tip your hats to the Lords and Ladies, peasant, and if you can't afford the basics in your old age, it's your own fault for being such an 'underachiever.' Get thee to a homeless shelter. Dickens would be so at home.


kartika damon profile image

kartika damon 6 years ago from Fairfield, Iowa

OMG,lmmartin! You nailed it - the Lords and Ladies and the peasant class praying to get into a free health clinic before overtaken by death. Yes, if you have fallen through the ever widening cracks you are a loser in society - the tea baggers will get it someday when they are relegated to living in tent cities or the workhouses for the poor soon to be erected for in debt and homeless. It is truly a throwback to the work of Dickens.


lmmartin profile image

lmmartin 6 years ago from Alberta and Florida Author

Thank God there are no more "Australias" to send us to.


Neil Ashworth profile image

Neil Ashworth 6 years ago from United Kingdom

Good hub.


lmmartin profile image

lmmartin 6 years ago from Alberta and Florida Author

Thank you Neil


ryan 6 years ago

I have a question. In light of all this, when the "chickens come home to roost" because the people both owe and are owed, at some point, if the economy actually did collapse what would happen? Do the uber rich who had all their money on paper suddenly become paupers, and people who had solid holdings become the new wealth? Would all the mortgages suddenly become null and void?


lmmartin profile image

lmmartin 6 years ago from Alberta and Florida Author

Don't ask me -- but one thing I do know the uber rich will always come out just fine.


bgamall profile image

bgamall 6 years ago from Las Vegas, Nevada

Actually, it is a good thing that the US citizen owns much of the debt. In Greece it is foreigners and that destabilizes the financial structure. In Japan even more is owned by the citizens. So they are able to have even more debt without a destruction of their money.

The big problem is that the private federal reserve bank has loaned treasuries to the banks in return for crap real estate loans and CDO's. So if the economy turns down again, the US citizen will be on the hook, and that isn't good.


lmmartin profile image

lmmartin 6 years ago from Alberta and Florida Author

Hi bgamall -- Still, you miss the point -- much of the debt was funded by social security and other trust funds, which now sit empty with nothing but IOU's in place. Now, the American everybody is working to pay taxes that can barely pay the interest on these loans -- but none of it is finding its way back into the trust funds.

In truth, using my worthless national debt to buy up your worthless national debt is nothing more than check kiting on an international level. A house of cards that a breath of wind will bring down.

And all the combined earnings of all the taxpayers will have been squandered to line the bottomless pockets of the already super rich.

So -- does this sound like a solid system to you?


DemoDave profile image

DemoDave 6 years ago

Ok ... So we have been robbed and now paying the robber to rob us again ,with interest . Great work ... Bernie Madoff has done nothing when compared to the US Government.


lmmartin profile image

lmmartin 6 years ago from Alberta and Florida Author

Yes indeed, first in everything - the governments of the world. Do you remember when lotteries were illegal and called number-running? Now the mob is out of the loop and the govt is the bag man. Same with ponzi schemes -- what else would you call a system where previous investors (taxpayers collecting social security) are paid by the payments collected from current investors (those paying in but not collecting yet?) Yep -- may as well vote for Tony Soprano. Thanks for your comment. Lynda


Mr. Happy profile image

Mr. Happy 6 years ago from Toronto, Canada

"... the Federal Reserve monetizes Government debt by enabling foreign banks to swap their debt for Treasury debt, BUT the fact remains, however cleverly obscured, the money is being created out of thin air, and used to buy U.S. government debt."

If everyone could understand your above quote and actually understand how crooked and detrimental the Federal Reserve Bank is for the welfare of the American people ... the world would be better I think.

I am happy you wrote this!


lmmartin profile image

lmmartin 6 years ago from Alberta and Florida Author

Hi Mr. Happy, Oh I'm sure everyone can understand it; some even believe it, but most people buy into the cult of optimism -- the power of positive thinking -- the belief that things aren't really so bad, not here in the U.S. -- surely not! And with good old fashioned ingenuity and industry, everything will work out ..... Yeah!


GmaGoldie profile image

GmaGoldie 6 years ago from Madison, Wisconsin

Only you could take on this complicated subject boil it down and then leave us with a smile! Excellent story writer - and accountant too! Kudos once again! Excellent information delivered in a great format. I am off to count my chickens.


lmmartin profile image

lmmartin 6 years ago from Alberta and Florida Author

Make sure they're all hatched first. Thanks GmaGoldie for your comment. Lynda


berrtus profile image

berrtus 6 years ago from Beaverton, Oregon

What they are doing should be illegal. The perpetrators should go to prison and we should return to the gold standard. We have only ourselves to blame for the mess we will end up in. I personally do not look forward to a future where the Chinese have economic and military superiority to the US which will be a pathetic debtor nation. This is the true road of slavery for America and we can thank the socialists for it, and they may not mind as they never liked America anyway.


lmmartin profile image

lmmartin 6 years ago from Alberta and Florida Author

I don't know why you blame the socialists -- I suspect, like most people you don't really know what that is, only that it's bad. I haven't seen too many socialists in the U.S. And when we look at history of the national debt, the Republicans spend with a heavy hand. Truth is, America has been living high off a whole herd of borrowed hogs for a lot of years, something that hasn't changed with government outlook.

The Chinese already have economic superiority to almost all nations, though, like most who comment here, the rest of the world goes unmentioned. Every dog has it's day, or so they say....


ken 6 years ago

Ms Martin.. You say the only thing left in the SS trust fund is fed IOU's which you claim are worthless..Do you know what a Treasury bond is ? [hint:it's a gov.IOU]. Do you know what a federal reserve note{also known as a "DOLLAR"} is ?? a fed IOU..The SS trust fund will be paid just like all government bills,by raising numbers in a bank account.Government checks will never bounce..


lmmartin profile image

lmmartin 6 years ago from Alberta and Florida Author

You missed the entire point. Do I know what a dollar is? At one time it was another form of IOU. Now it is a scrap of paper worth less than a penny. And its value decreases -- daily. Why? Because the assets supposedly backing it are gone!

What dream world do you live in?


ken 6 years ago

I missed the point ? The assets backing it are gone ? The dollar is THE standard. ALL other things are valued in dollars. The asset backing the dollar is the full faith and trust of America. I think has as much faith and trust as it ever did. Most of our deficit is owed to ourselves. My county and state BY LAW store their money not currently needed in Treasury bonds. I'm not positive,but I think most other states and county government do the same. Most insurance and pension funds hole Treasury bonds. Do you think these institutions are wrong ?? The US does not NEED to borrow,or tax to spend. It is the MONOPOLY ISSUER of the DOLLAR,and can print as many as it needs to pay it's bills.Please stop being a "DEFICIT HAWK" telling people the US can go bankrupt.See http://moslereconomics.com/mandatory-readings/ and read the "Seven Deadly Innocent Frauds" or go to http://bilbo.economicoutlook.net/blog/?p=12414 And check it out, Or the university of Missouri/Kansas City web site http://neweconomicperspectives.blogspot.com/2010/1...


lmmartin profile image

lmmartin 6 years ago from Alberta and Florida Author

Right...Whatever you say, friend. Everything is just fine. That big number on which interest is owed is nothing to worry about. The US will never go bankrupt. And I do, I do, I do believe in fairies.


CPA 6 years ago

I've been asked to explain to Ken. First, Treasury Bonds do not represent the country/state's unspent funds. They are sold in order to raise money, therefore they represent another debt. Another IOU. Second: The dollar may be the standard of measure, but it is worth only its redemptive value, and that is based on the nation's ability to cover the face value of that note. Right now, the U.S., and most other countries could not redeem a tiny percentage of the face value. Third: at present it takes ALL revenues generated by taxes and bond issuance to service the interest on that debt. Fourth: Taxes are taken from the pockets of the working people, primarily, and interest payments on the debt go into the pockets of the wealthy. Fourth: The US government does not issue dollar notes -- the Federal Reserve, not a part of government and operating without audit or control does.

Fifth: your ignorance of economics and finances is showing. Read over what you wrote. Do you not see the holes. The government does not have to borrow to spend? It merely needs to raise numbers in a bank account and/or print more dollars, thereby reducing their value further in order to pay bills.

I would hate to have to balance your checkbook.


ken 6 years ago

"First, Treasury Bonds do not represent the country/state's unspent funds."

That is not what I said. I said COUNTY.Unspent county funds are stored as Treasury bonds. The county BUYS. The same for state funds. Ask your state treasurer how much state money is saved as Treasury bonds..

"The dollar may be the standard of measure, but it is worth only its redemptive value"

Go into any "Dollar store" and see what you can redeem a dollar for,Or any other store in America{Or the World}for that matter. The dollar today is a "Floating-rate,non-convertible,Fiat currency.. Like the Japanese YEN,or the British Pound,or any other Sovereign currency. We can always pay any bill denominated in Dollars as we are the monopoly issuer..

"Right now, the U.S., and most other countries could not redeem a tiny percentage of the face value."

Redeem them as what ?? You redeem bonds,not currency,at least since we came off the "Gold Standard" in 1971..

"Third: at present it takes ALL revenues generated by taxes and bond issuance to service the interest on that debt."

We do not need to tax or borrow to spend.{ask and I can supply references}And we can "Service" the debt by issuing more dollars. We can issue dollars as long as there is underutilized real resources.{More than that and you get inflation} The dollar is "Legal tender" which means you can pay taxes and other debts with them..

"Fourth: Taxes are taken from the pockets of the working people, primarily, and interest payments on the debt go into the pockets of the wealthy. Fourth: The US government does not issue dollar notes -- the Federal Reserve, not a part of government and operating without audit or control does."

Which "FOURTH" ? Oh well, I'll answer them in sequence:

"Taxes are taken from the pockets of the working people, primarily, and interest payments on the debt go into the pockets of the wealthy."

Taxes are taken from both the rich and poor[and primarily from the rich]and currently we are overtaxed,mostly the poor through FICA taxes..Interest payments go to rich and [somewhat]poor through interest payments to insurance companies and pension funds and state & local tax funds[ask your county auditor]and{the rich only}private holders of Treasury bonds..

2nd fourth:"The US government does not issue dollar notes -- the Federal Reserve, not a part of government and operating without audit or control does."

So I'd guess you are an Austrian Paulist{without audit or control}gave you away. The Treasury issues bonds to give to the fed to print notes. It works out as the government issuing dollars...O.K. so what ?? don't get your point on this..

"Fifth: your ignorance of economics and finances is showing." MY ignorance ?? {hello kettle,meet pot..} You are apparently under the impression our money system still works like it did in the 60's and before. Check out those links I posted..As for balancing my checkbook,thanks,but I'll do it myself..UM,CPA,are you familiar with "Double Entry Bookkeeping" ?? Public debt=Private saving..


lmmartin profile image

lmmartin 6 years ago from Alberta and Florida Author

There is no point in continuing this discussion. My thanks to CPA -- Jim, for his input. Anyone who wishes to argue that spending beyond your means is healthy; that borrowing to cover your operating budget (which the governments of ALL levels do;) that the existing taxation system is equitable; that the wholesale printing of dollars without foundation of assets does not affect its redeemable value; that corporate and foreign holdings of massive amounts of public debt does not affect policy; and that the magical thinking of "Faith and Trust" is enough to keep the boat afloat, is beyond hearing any argument to the contrary. In the age of debt economics, the voice of reason is lost in the chorus of those who have staked all on today at dire cost to tomorrow.

Thank you Ken for commenting here. Your input is appreciated despite its form. We will leave things as they stand. We may all agree to disagree and hold to our pet theories, however reality will raise its ugly head and soon enough, I'm afraid. And it won't matter who was right or wrong...


Anne 5 years ago

Our biggest problems started with the Savings and Loan Crisis way back in the eighties.

http://useconomy.about.com/od/grossdomesticproduct...

Some may have financial responsibility in this country, but we have absolutely no idea how to vote responsibly. We have been sitting on our "idiocy" for a long time and wishing away our problems. It's really too late now to fix it, no one really gets the big picture.

We have sold our children's education and their entire futures down the river, thanks to the baby boomers for that one, while they were smoking dope and protesting the war with alcohol and sex and mary-jane, instead of voting responsibly, the big players on this continent were selling our futures over seas. OOOps I forgot, you aren't supposed to say anything bad about the previous generations, they were just perfect.


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

"We have sold our children's education and their entire futures down the river, thanks to the baby boomers for that one, while they were smoking dope and protesting the war with alcohol and sex and mary-jane, instead of voting responsibly, the big players on this continent were selling our futures over seas."

First, the rest of the world is in the same situation. Second, there are a lot of 'baby boomers' who weren't at Woodstock, you know. Third, if future generations choose to live a life of indentured servitude, that's up to them. Somewhere along the line, there will come a time when people will simply say, "To hell with it." There is NO WAY these debts around the world will ever be paid off -- they far exceed the world's assets. Debt has become a line of meaningless numbers.

Any economy based on infinite growth cannot exist in a world of finite resources. You'd think this very simple truth would be obvious, but no. Apparently not.


Oh snap 5 years ago

Another day older and deeper in debt

Saint Peter don't you call me 'cause I can't go

I owe my soul to the company store(US Gov)


Murray 5 years ago

Interesting observations, and a lot of the usual comments, but major lack of awareness of what I now believe to be the real case.

See some links below. I came across MMT about 3 months ago, and almost rejected it out of hand as it flies in the face of the economics I was taught 50 odd years ago and just accepted as gospel since. It never occurred to me that going off the gold standard changed anything. I have now studied the subject fairly intensely for 3 months, asking numerous questions and seeking answers. My conclusion is that the theory is totally correct. Actually it is more a recognition of basic accounting facts, with their inescapable implications than a theory. Application in the real world is still fraught. However concerns of bankruptcy and SS fund raiding etc are happily baseless.

http://neweconomicperspectives.blogspot.com/ Study the primer

http://bilbo.economicoutlook.net/blog/

http://rodgermmitchell.wordpress.com/

http://moslereconomics.com/mandatory-readings/

It sure changes one's world and economic views.

Cheers. Murray


rasta1 profile image

rasta1 5 years ago from Jamaica

i like this. the whole world is depending on America not to collapse. then the world will also collapse. Remember to create links for your other articles in your first paragraph. This article is like as if you predicted the future accurately.


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

Thanks for commenting rasta1. I did not predict only reported what was. I'm not much for predictions. Thanks again. Lynda


PegCole17 profile image

PegCole17 5 years ago from Dallas, Texas

This was packed full of statistics which stagger the brain when you get right down to the facts. Quite surprised after reading your numbered chart on who owns the largest piece of the American pie. I'll be forwarding this on to a few friends.

Thanks for adding the smile part with the quotes. My favorites were the Retired Chicken one and Bill Clinton's.

Great bit of research here Lynda.


lmmartin profile image

lmmartin 5 years ago from Alberta and Florida Author

Hi PegCole. I really should update this article to keep up with the times, but the truth is, little has changed.

Always happy to pass out smiles. Lynda


Lisa Smith 4 years ago

this is very good , i would love to meet you in person so you can tell me more hitsory..god bless you :)


lmmartin profile image

lmmartin 4 years ago from Alberta and Florida Author

Hey Lisa and I'd love to meet you, too. Don't suppose you're in Florida?


The Republican profile image

The Republican 4 years ago from USA

Hi, i like how yo write, and you make a good point. could you read my writings?

Thank you, Repub.


lmmartin profile image

lmmartin 4 years ago from Alberta and Florida Author

I will do my best The Republican. Thanks for dropping by.

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