Thefts There Are — Safety Nets There Are Not


Whoever dreamed up the term Safety Net should start a Ponzi scheme. They should hire the person who concocted Too Big To Fail.

The government has no bank account. It has no money of its own. The government is a gang with a collection agency and enforcers. It cannot and does not provide a real safety net on its own. It cannot and does not save those that are too big to fail.

There is no safety net and there never was. What has been called a safety net has always been simply promises of future theft backed up by the ability of the government to extract wealth from those it rules. We, in effect, are forced to save ourselves. This sort of safety net is a fraud. It’s a zero-sum game and worse. At great cost, we take from our left pocket and shift it to our right.

One place where the government, via the Federal Reserve, might have placed a safety net was under the value of the dollar. This was completely under its control and within its power, and it did not require taxpayer levies. Stability in the currency would have been a boon. No such safety net was forthcoming. In fact, we got the opposite. These are strong signals that the government has no interest in providing true safety.

The government collects from some of us and turns it over to others of us, including its own. The total amount of safety does not go up. It goes down because the taxpayers endure a vast increase in uncertainty about their wealth. It goes down because much of the amount collected is wasted. Instead of being turned over directly to others, it is spent on losing projects.

Whoever benefits from a government "safety net" is being bailed out at taxpayer expense. And the taxpayers, who usually are ignorant of who these beneficiaries are and how much they are getting, are not writing the checks voluntarily. Their wealth is being snatched on payday by employers forced to serve as involuntary publicans and collectors for the government.

Whoever is either too small to fail, too big to fail, or in between is likewise picking the pockets of taxpayers. The government doesn’t save them. You do.

Economists use the euphemism subsidy to describe the transfer of these stolen goods. They also euphemistically call them transfer payments.

The term bailout is a bit closer to the truth. It means a rescue from financial difficulties. But the taxpayer is being forced to finance the rescue, not the government. The government is deciding who is the beneficiary of its thefts.

Wherever you see the terms safety net, too big to fail, subsidies, transfer payments, and bailouts, think thefts. And then think thefts from taxpayers. The taxpayers are the Golden Goose.

We hear talk of bailing out those homeowners whose houses now have lower value than their mortgages. We hear talk of bailing out some of those whose homes have been foreclosed. We hear talk of bailing out another investment banker or two or some large banks.

We hear talk of bailing out Fannie Mae and Freddie Mac, which are gigantic companies that buy, hold, and sell huge amounts of mortgage debt. In the latter case, Standard & Poor’s recently announced the possible loss of the AAA rating of the U.S. government debt. This is a public indication of an awakening from a deep slumber during which the public dreamed it was safe because there was a safety net.

What does a lower rating mean? It means that the debt of the U.S. government has become more risky, or less certain to be paid off. It means that the U.S. is traveling on the road to banana republicsville. It means that the potential thefts of the government are so large that they are placing a strain on the ability of the government to steal that much from taxpayers.

If Standard & Poor’s and the other rating agencies were clear-headed and honest about it, they would have lowered the bond rating of the U.S. long ago. The risk of U.S. bonds is already worse than a AAA rating suggests. Investors haven’t yet gotten to that stage in their thinking. These things take time.

The interesting thing about our current situation is that the promises have become so huge that people are finally beginning to doubt that the government can carry out thefts of that size. And as those doubts grow, people are beginning to doubt that the purported safety net exists.

There is no way (in real terms) that the government can shore up the declining price of houses. The market is too big. The government can impose all sorts of controls. It can alter the pattern of its thefts and transfers of stolen goods (subsidies), but the amounts involved are so huge that the transfers from the left pocket to the right pocket will be so troublesome that even the bond rating agencies will respond.

Even without getting further involved in the housing markets than it already is, government guarantees, another version of the term safety net, already amount to untold trillions of dollars. One estimate of only the financial safety net, made in 2002, placed them at about $9.2 trillion or 26 percent of all private liabilities. This included such things as

  • Small Business Administration (SBA)
  • Federal Deposit Insurance Corporation (FDIC)
  • Federal Savings and Loan Insurance Corporation (FSLIC)
  • National Credit Union Share Insurance Fund
  • Federal National Mortgage Association (Fannie Mae)
  • Federal Home Loan Mortgage Association (Freddie Mac)
  • Farm Credit System
  • Federal Home Loan Bank System
  • Pension Benefit Guarantee Corporation
  • Farm Service Agency
  • Federal Housing Administration (FHA)
  • Veterans Administration
  • Rural Housing Service
  • Federal Family Education Loan

The Export-Import Bank was excluded as were ad hoc bailouts such as the Chrysler Corporation loan. Other guarantees are surely excluded. The government, for example, seeks to guarantee national security and extracts a large annuity in its futile effort. Then there is flood insurance and disaster relief.

This totally excludes the social safety net, that is, all those thefts that have been promised as payments for contingencies involving human events such as unemployment, poverty, health problems, and old age. In other words, they exclude Medicaid, Medicare, Social Security, and unemployment insurance. These liabilities come to about $60 trillion.

The U.S. government guarantees mentioned above add up to about $70 trillion. That is distinct from the outstanding debt of everyone (public and private), which is about $53 trillion. The total is $123 trillion.

The annual gross domestic product in the U.S. is about $13 trillion. Now, 123/13 = 9.46. The debts are 9.46 times the annual income. Imagine every person (man, woman, and child) in America having an income of $60,000 a year. The corresponding debts are 9.46 x $60,000 = $567,692 per person. A family of four with an income of $60,000, which is more realistic, is then accorded a debt of 4 x $567,692 or $2.27 million per family.

It would take this family 38 years to pay off this debt if it devoted its entire income to doing so and paid no interest! The impossibility of this leads me to the following conclusions.

The safety nets that people imagine are there are not there. There are only promised thefts.

The promised thefts are so huge that they cannot occur without killing the Golden Goose.

This means that the promised thefts will probably not happen, which means that the imagined safety nets, to be funded by these prospective thefts, are not there.

Whatever safety nets we ever get are not really safety nets. They are thefts.

The promised safety nets require such huge thefts that they will never be there when the safety is required. The government promises are fraudulent. This is to be expected from a gang of criminals.

Best secure your own future.