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Notes From The Field By Simon Black
April 3, 2019 Dorado, Puerto Rico
US Government’s Net Worth Is Now Negative $75 Trillion
Usually around the middle of February each year, the US Treasury Department releases an annual report of the federal government’s financial condition.
It’s called the Financial Report of the US Government... and it looks a lot like an annual report that you might see filed by a big company like Apple or Facebook.
Except that, unlike Apple and Facebook, the US government’s annual report is absolutely gruesome.
This year’s report is no exception, save for one humorous anecdote: they -just- released it. In other words, they’re a month and a half LATE (given that the report is typically released in mid-February).
I actually CALLED the Treasury Department myself in early March, asking when they would publish the report.
The bewildered individual on the other end of the line said that he had no earthly idea, given that the government had been shut down for so long earlier this year.
Anyhow, if you want to see the report for yourself, you can download it here.
But I thought I would take the liberty of providing a few highlights--
In Fiscal Year 2018, the government’s total net loss was $1.16 TRILLION.
Uncle Sam collected $3.4 trillion in tax revenue in FY18. But they spent over $4.5 trillion.
Of that $4.5 trillion spent, nearly HALF went to Social Security and Medicare. (They also spent a record $523 billion just on interest payments on the national debt!)
This is extraordinary given that the Social Security and Medicare trust funds are set to run out of money within the next 15 years.
In other words, despite spending almost HALF the federal budget on Social Security and Medicare, both programs are effectively insolvent.
As a matter of fact, on page 10 of the report, the government estimates Social Security’s long-term funding gap to be a mind-blowing $53.8 TRILLION (which is almost 10% worse than last year).
To put that number in context, $53.8 trillion is roughly 70% of the entire world economy. That’s how bad the Social Security funding gap is.
But it gets worse.
As part of the report, the federal government also tallies up its assets and liabilities, just like any individual or company would do.
If you have assets (like houses, cars, cash, investments) worth $1 million, and liabilities (credit card debt, mortgages) worth $300,000, your net worth is $700,000.
The government has assets as well: a total of $3.8 trillion. The single largest component of that-- $1.08 trillion-- is STUDENT DEBT.
In other words, the government’s #1 asset is the debt owed to it by young people across America. That’s pretty sad.
The next biggest asset is what accountants call “property, plant, and equipment”, or PP&E. That’s the sum total of all the land, government buildings, tanks, aircraft carriers, military bases, etc.
For Fiscal Year 2018, the government reported $581 billion in equipment (mostly military), and about $500 billion in real estate.
In total, the government’s $3.8 trillion in assets sounds like a lot.
Except that the government’s liabilities, i.e. the national debt, etc., totaled more than $25 trillion.
That makes the government’s net worth an unbelievable NEGATIVE $21.5 TRILLION.
And that’s a lot worse than the government’s negative net worth of -20.3 trillion in 2017, -19.3 trillion in 2016, -18.2 trillion in 2015, -17.7 trillion in 2014…
Notice the pattern?
If you add their own estimate of Social Security’s unfunded liability, Uncle Sam’s total net worth is NEGATIVE $75 TRILLION… which is almost precisely the size of the entire global economy.
What could possibly go wrong?
Look, I am not in any way suggesting there’s some imminent financial Armageddon. The sky is not falling, and the world is not coming to an end.
But let’s be honest: these numbers are beyond appalling. And they get worse every year.
So it would be completely absurd to believe that, with such pitiful finances, there will never, ever be any negative consequences, ever. Give me a break.
Throughout history, there has never been any nation or empire that has been immune to the basic financial laws of the universe. Egypt, Rome, the Ottoman Empire… they all suffered the same fate. Too much spending and too much debt led to their eventual demise.
It’s pure insanity to believe that this time is different… that we’re different… we’re special.
And sure, hope for the best if you like. But there’s no downside to considering the long-term risks and taking sensible steps to ensure you’re not exposed to the potential consequences.
Consider Social Security: the Social Security Administration itself says that the trust funds will run out of money in 2034, at which point they will have no choice but to slash benefits.
They literally put that in black and white for anyone in the world to read.
Knowing this information, doesn’t it make sense to independently set aside money for your own retirement, in the most tax efficient manner possible?
Knowing that the national debt is $22 trillion, and they spent over half a trillion just paying interest on that debt, doesn’t it make sense to diversify your savings?
After all, history shows that heavily indebted governments almost invariably resort to printing money and debasing the currency.
Owning real assets (especially those that are portable, like gold and silver, or international, like foreign real estate), can greatly protect against this risk.
There are always solutions. But it starts with recognizing that there’s a problem.
And that’s probably the biggest challenge-- no one seems to care.
Think about it-- the federal government just announced a net worth of MINUS $75 trillion. How is this not front page news in every newspaper in America?
But it’s shrugged off by intellectual zombies who may acknowledge-- ‘sure, it’s bad’-- but still do nothing because they cling to a belief that there won’t be any consequences.
That’s a high-risk bet based on deeply flawed logic.
To your freedom, Signature Simon Black, Founder, SovereignMan.com
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