It's official! U.S. government is bankrupt 'It's only a matter of time before the public realizes it'

(Analyst's note:  Absolutely must read.)

from Jerome Corsie's Red Alert reports

The real 2008 federal budget deficit was $5.1 trillion, not the $455 billion previously reported by the Congressional Budget Office, according to the 2008 Financial Report of the United States Government released by the U.S. Department of Treasury, Jerome Corsi's Red Alert reports.

The difference between the $455 billion "official" budget deficit numbers and the $5.1 trillion budget deficit based on data reported in the 2008 financial report is that the official budget deficit is calculated on a cash basis, where all tax receipts, including Social Security tax receipts, are used to pay government liabilities as they occur.

The calculations in the 2008 financial report are calculated on a GAAP basis ("Generally Accepted Accounting Practices") that includes year-for-year changes in the net present value of unfunded liabilities in social insurance programs

such as Social Security and Medicare. Under cash accounting, the government makes no provision for future Social Security and Medicare benefits in the year in which those benefits accrue.

Economist John Williams, who publishes the website Shadow Government Statistics, told Corsi, "As bad as 2008 was, the $455 billion budget deficit on a cash basis and the $5.1 trillion federal budget deficit on a GAAP accounting basis does reflect any significant money reflected to the financial bailout or Troubled Asset Relief Program, or TARP, which was approved after the close of the fiscal year."

He continued, "For 2009, the Congressional Budget Office estimated the fiscal year 2009 budget deficit as being $1.2 trillion on a cash basis, and that was before taking into consideration the full costs of the war in Iraq and Afghanistan, before the cost of the Obama nearly $800 billion economic stimulus plan, or the cost of the second $350 billion tranche in TARP funds, as well as all current bailouts being contemplated by the U.S. Treasury and Federal Reserve."

Williams told Corsi the federal government's deficit is hemorrhaging at a pace that threatens the viability of the financial system. He said the 2009 budget deficit will clearly exceed $2 trillion on a cash basis and the full amount must be funded by Treasury borrowing. He noted that it's not likely to happen without the Federal Reserve acting as lender of last resort by buying Treasury debt and monetizing the debt.

Corsi explained, "'Monetizing the debt' is a term used to signify that the U.S. Treasury will ultimately be required to print cash to meet Treasury debt obligations, acting in this capacity only because the Treasury cannot sell the huge amount of debt elsewhere, possibly not even to the Federal Reserve."

So far, the Treasury has been largely dependent upon foreign buyers, principally China and Japan and other major holders of U.S. dollar foreign exchange reserves, including Middle East oil-producing nations purchasing U.S. debt through their financial agents in London.

"The appetite of foreign buyers to purchase continued trillions of U.S. debt has become more questionable as the world has witnessed the rapid deterioration of the U.S. fiscal condition in the current financial crisis," Williams noted.

Corsi wrote, "The sad reality is that the U.S. Treasury has not reserved any funds to cover the future Social Security and Medicare obligations we are incurring today."

Williams said there are no funds held in reserve today for Social Security and Medicare obligations each year. He said it's only a matter of time until the public realizes that the government is truly bankrupt.

Corsi wrote that if President Obama adds universal health care to list of entitlement payments the federal government is obligated to pay, the negative net worth of the United States government will only get worse.

Calculations from the 2008 Financial Report of the United States Government show that the GAAP negative net worth of the federal government has increased to $59.3 trillion, while the total federal obligations under GAAP accounting now total $65.5 trillion.

Williams explained the federal government is truly bankrupt and argued that in a post-Enron world, if the federal government were a corporation such as General Motors, "the president and senior Treasury officers would be in federal penitentiary." ....