Fake Accounting Creates Fake News
On Tuesday, US stock markets rallied. The Dow was up over 500 points. That led a lot of people to conclude that the recent declines were just a correction. But as Peter Schiff pointed out in his most recent podcast, bear markets have rallies. Just because the market goes up a few days doesn’t mean we haven’t entered a bear market. The fact is — at this point we just don’t know.
But the dynamics are in place for a bear market. In fact, Peter has said the recession is obviously coming.
But remember, some of the most spectacular moves that you’re going to see to the upside in a market happen in bear markets. Historically, the biggest up-days have been in bear markets. And that is to try to create a false sense of confidence, a false sense of hope. You know that is the slope a bear market slides down is a slope of hope just like a bull market climbs a wall of worry.”
So, maybe we will make new highs. It’s too soon to tell. But as Peter pointed out, you have to look at the evidence — and the evidence points to the end of the bull run.
Peter noted the massive 2018 budget deficit that came in as the highest in six years. Peter also pointed out the fact that the national debt went up even faster than the reported deficit would indicate. (We noted this back in August.)
The actual increase in the debt was better than 60% greater than what the government pretended the debt increased and what the media is reporting.”
The fact is government accounting doesn’t account for all of the spending that is part of the budget. Any borrowing for off-budget spending isn’t counted in the official deficit number. In other words, the government cooks the books to make the deficit look lower than it is. It’s fake news. As bads as the deficit sounds, it’s actually worse!
Peter called this nonsense.
Just because it wasn’t budgeted — if a bunch of extra spending occurred that was off-budget, well you still have to count that as part of your budget deficit for that year. But the government doesn’t, and the media lets them get away with it.”
Peter also pointed out that the government doesn’t account for contingent liabilities. For instance, the feds guarantee billions of dollars in home mortgages. Some of those will default. This’s a contingent liability. Corporations have to account for these. The government doesn’t.
The government isn’t concerned about accuracy. They just cherrypick the accounting rules that they like, then they ignore the ones that they don’t.”
Then, of course, you have the unfunded liabilities such as Social Security and Medicare. These aren’t included in the national debt numbers.
Simply put, the $21.7 trillion figure actually understates the debt. Again, the official number is fake news.
What is being reported as far as the extra debt that the government has taken on is just the tiny tip of an enormous iceberg, and it’s the entire iceberg that we have to worry about, not just the tip.”
We’ve been hammering on the issue of debt for months. As Peter put it, debt is very dangerous in an environment of rising interest rates.
If we’ve actually turned the corner and we’re now in the early stages of a long-term bear market [in bonds] where interest rates keep getting higher and higher and higher, this debt is going to produce an enormous crisis. It’s going to create the equivalent of a national bankruptcy, whether through default or through inflation.”
Sears declared bankruptcy this week. Basically, America is a giant Sears. This is why Peter thinks we have likely entered into the bear market phase. There is too much debt. Interest rates are going up. It’s simply not a sustainable scenario.
Listen to the entire podcast for a breakdown of some of the other economic numbers the mainstream has pretty much ignored.
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