The Three Biggest Lies the Government Is Telling You

The Three Biggest Lies the Government Is Telling You

by Charles Goyette


Government lies are legion.

So many are its lies, that narrowing them down to three of the most important is a demanding task. But our current crisis has been chiefly enabled by monetary policy, fiscal policy, and the global military empire. So I have chosen to focus on lies about each: the Federal Reserve, the orchestrator of monetary policy; the U.S. budget, the accounting of government fiscal policy; and a few of the Empire’s war lies. I am sharing just a smattering of this astonishing record of duplicity in these areas, for life is short, or at least far too short to recount all of the state’s lies about each.

Lie #1: The Federal Reserve Is a Bank

Practically everything the government says about banking is a lie. Central banks are not banks. The Federal Reserve, the central bank of the United States, is not a bank.

A bank is a company in the free economy that competes with other banks offering willing customers a safe place to make deposits and earn an interest rate return, while also competing to offer loans from those deposits to willing borrowers.

Central banks are government-created bureaucracies that do nothing of the sort.

The Federal Reserve is typical of central banks. It is not a free market institution in which people willingly make deposits. Instead, it wields monopoly power over actual banks. In place of managing deposits and loans of its own, it creates money out of nothing by a variety of means including debt monetization, in which it buys government debt by simply creating a credit in the account of a commercial bank with nothing more than a booking entry. This is an act made possible only by the state’s grant of a legal monopoly empowering the central bank to do what, if done by a private bank, would be a crime called counterfeiting.

Central banks thus have the ability to unilaterally boom and bust their economies at will. And they have done so throughout their history, either to the benefit of the commercial bank cartels, in response to political pressure, or because of outright economic ineptitude .

Writing at Lew Rockwell.com about the myth that the Federal Reserve is a "bank," and independent, finance professor Michael Rozeff describes a central bank as a government’s "fiat money bureau." "It is held up by the force of government law and power. It is imposed on the public."

The representation of them as actual banks produces confusion in which central banks are said to earn "profits." For example, a January, 2012 Federal Reserve press release reporting its "earnings," announced $76.9 billion in 2011 net income. This was described in the New York Times and the Financial Times as the Fed’s "profits," just as though it were the annual report of any commercial bank’s profits.

Yet in what sense does the Fed show a "profit" or have "earnings"? It is as inappropriate as describing the collections of the Internal Revenue Service as "profits."

Where are these Federal Reserve "profits" derived? They are the result of printing new dollars to buy assets; that is, they are the result of diluting the purchasing power of every dollar you or anyone else has. It is not any different than a dairy watering down 100 gallons of milk to sell 110 gallons. It is fraud. But it is a fraud legalized by act of Congress.

But the Federal Reserve is not alone. Another non-bank is the World Bank which loans money to governments and government enterprises. The World Bank has been a useful place to pasture failed U.S. government warmongers like the disastrous Vietnam War Secretary of Defense Robert Strange McNamara and Iraq war co-author Paul Wolfowitz. Both were named World Bank presidents even as their deadly wars raged on.

The World Bank gets almost all of its money by way of the International Bank for Reconstruction and Development (IBRD),( also not a bank), which gets its money from taxes, the largest share coming from the American people. The IBRD also sells World Bank bonds, but they too are guaranteed by taxpayers.

American tax dollars go to other multi-national organizations such as the Asian Development Bank, the African Development Bank and the Inter-American Development Bank.

None of which are banks.

Lie #2: War Lies

Governments and politicians lies incessantly about war. They lie about the cause of war. They lie about the threat of war. They lie about the cost of war. And they lie about their lies about war.

Governments lie relentlessly about war. Just in the last fifty years the people have been lied to about U.S. government wars from Vietnam to Iraq.

The Gulf of Tonkin incident, a purported attack on U.S. ships by North Vietnam off its coast, was used by President Johnson (an "unprovoked" attack he told the nation) to win legislative authority, the Gulf of Tonkin Resolution, for a war in Vietnam. But it was an incident that did not happen and Johnson knew it even as he escalated Vietnam into the full-blown blood bath it became. "Hell," he told his secretary of state just a few days after the resolution passed, "those dumb, stupid sailors were just shooting at flying fish!"

Lying is so intrinsic to the nature of government, that even the truth about old lies is concealed to protect new lies. In 2001, a National Security Agency study found that officials had actually doctored documents in covering up the truth about the Tonkin Gulf incident, the bogus war pretext that led to the needless deaths of millions of human beings. But the new report of that old cover-up was itself delayed for years for fear that it’s release would cast doubt on the intelligence that the Bush administrations was using to justify an invasion of Iraq.

In the case of the Iraq war, not only did defense Secretary Donald Rumsfeld lie about knowing where the non-existent weapons of mass destruction were in Iraq ("We know where they are. They're in the area around Tikrit and Baghdad and east, west, south and north somewhat."), in a later exchange with my friend former CIA senior analyst Ray McGovern, Rumsfeld even denied he had made such a claim.

"Simply stated," Dick Cheney said of the mythical WMDs in August of 2002, "there is no doubt that Saddam Hussein now has weapons of mass destruction." "We know for a fact," said White House Press Secretary Ari Fleischer in January of 2003, "that there are weapons there." "We know that Saddam Hussein is determined to keep his weapons of mass destruction," said Colin Powell in February of 2003, "is determined to make more."

The government can be counted on to lie about the costs of war. Lawrence Lindsey, a Bush administration economist, was fired for suggesting in advance that the Iraq war would cost $100 billion to $200 billion. Although estimates in the trillions of dollars would have been closer, Rumsfeld called Lindsey’s estimate "baloney."

The government tries to conceal spending by keeping it off the budget books with supplementary, appropriations and emergency measures. It even spreads war costs off of the defense department budget and into the budget of other departments such as state and energy.


I have written more about government’s war lies in my new book Red and Blue and Broke All Over: Restoring America’s Free Economy, but must finish the point here with a reminder of the government’s lies about the case of Jessica Lynch, and about the way the government lied about the killing of Pat Tillman and even lied about lying about its lies about his death.

Private Lynch was a 19-year-old clerk when her company was ambushed in Iraq after taking a wrong turn. She suffered injuries when her Humvee overturned and was taken by Iraqi soldiers to a nearby hospital. Although she suffered injuries when her Humvee overturned, "U.S. officials" reported that Lynch had gone down fighting and had been both shot and stabbed in action, and later even slapped around as he was interrogated on her hospital bed.

The truth is she had no such wounds. She had never fired her weapon, and, by her own account, was well cared for in the Iraqi hospital. Although the Iraqi doctor who had cared for her tried himself to turn her over to the Americans, the Pentagon, with a propaganda campaign in mind and camera’s rolling, staged a dramatic raid from helicopters to "rescue" Lynch. The video was edited up in no time and released by a Pentagon anxious to have a heroic feel-good war narrative to relate. But of course the Pentagon refused a request to release the full video of the "rescue" to clear up discrepancies in its account.

While the Pentagon is perfectly capable of lying on its own initiative, members of congress pressured the Pentagon to award Lynch the Medal of Honor, even before an investigation was complete, saying it would be "good for women in the military."

Pat Tillman, killed in action in Afghanistan, was posthumously awarded the Silver Star, a combat honor given for valor in action against an enemy. But there was no encounter with the enemy. Tillman was shot to death by his fellow soldiers. This was carefully concealed with fraudulent accounts of the incident.

Senior commanders’ prints were all over the cover-up about Tillman’s death. General John Abizaid approved the Silver Star despite knowing within days of Tillman’s death that he had been shot by "friendly fire." Lieutenant General Stanley McChrystal cited Tillman for actions "in the line of devastating enemy fire," but the very next day sent a confidential memo about the fratricide to senior government officials including Abizaid warning them to protect themselves and President Bush from embarrassment in the episode.

Tillman’s family charged the military with repeatedly lying to them about his death and about its investigation, as it delayed accounts of his friendly fire death until after a nationally televised memorial service orchestrated by the Bush administration. By one account, his fellow soldiers were even told to lie to the family at Tillman’s funeral.

Tillman’s enlistment in the army after the 9/11 attacks was a national sensation. A good looking NFL player, Tillman gave up a multi-million dollar football career to join up. Thanks to his popularity, he was like a recruiting poster for the military. His father claimed that it was this usefulness to the military that helped drive the cover-up. "They purposely interfered with the investigation, they covered it up. I think they thought they could control it, and they realized that their recruiting efforts were going to go to hell in a handbasket if the truth about his death got out. They blew up their poster boy."

Apparently the original cover-up, in which his comrades even burned the evidence of his body armor and uniform, was itself covered up. Lt. Gen. Philip Kensinger was censured by the army for lying to investigators about Tillman’s death. Pat’s mother, Mary Tillman, said that Kensinger was just a scapegoat. "There are a lot of people who played a role in this and they are getting off without any punishment." She singled out Lt. Gen. Stanley McChrystal and Gen. John Abizaid by name.

The government not only lies about war, it routinely lies about its lies about war.


Lie #3: The Real U.S. Debt

This may be the most brazen and transparent lie of all, the one about the U.S. national debt, now over $15 trillion dollars. It is a number that hides the severity of our situation.

Washington acts as though that is the real debt of the nation. Politicians posture for weeks at a time about it, devoting long debates to raising the ceiling on this visible portion of the national debt.

And yet the real federal debt is much, much larger and like an iceberg below the water line, most of it is hidden out of sight. And like the Titanic, Republicans and Democrats have the country headed for a tragic collision with economic reality.

Each year the federal government makes new promises and takes on trillions in new financial obligations that do not show up in the visible, official national debt. The persistent growth of these hidden debts each year far outpaces the increases in the visible debt. In 2010 for example, the visible federal debt grew by an astonishing $1.5 trillion. But the hidden debt – out of sight and without debate – grew by more than $5 trillion!

When a private business takes on an obligation to pay something, it is required to report it as a liability. It shows up on the books. Not so for the state. This allows politicians to blithely make promises without adequate revenue to pay for them. It is easy to understand why this practice should persist. Giving things to constituents feels good. Making them pay for those things causes politicians to suffer pain. Like most living creatures, politicians like to feel good and avoid pain. So when they add to the obligations of the state, when politicians make commitments for the future or promise entitlements like Social Security and Medicare to win re-election, the means to pay are often inadequate. But there is no such thing as a free lunch, which is to say, that the cost will have to be borne eventually by somebody. For the time being though, the preferred political expediency is keeping the costs, the liabilities, off the books.

Unfunded liabilities are the difference between a program’s projected costs and its projected revenues, both valued in today’s dollars.

Medicare and Social Security both have promised benefits that outrace revenue streams. They are the largest components of the government’s unfunded liabilities, the hidden debt of the nation. But there are other federal retirement programs with not merely inadequate funding like Medicare and Social Security, but with no revenue streams of their own at all. Among them are retirement programs for military and federal workers.

In September 2011, USA Today analyzed dozens of overlapping programs for retired federal workers. It reported that despite the existing debt crisis, Congress continues to add to the promised benefits, so that retirement programs now have a $5.7 trillion unfunded liability.

The newspaper sums up its report on the retirement programs this way:

Private employers are legally required to put money into pension funds to match retirement promises. Private pensions have $2.3 trillion in stocks, bonds, real estate and other assets. State and local governments have $3 trillion in retirement funds.

The federal government has nothing set aside.

The total unfunded liabilities of the U.S. government have been calculated with a number of present value and discount models. Results of the shortfall from these methods range from about $70 trillion to $120 trillion dollars. For a family of four this represents a liability between $900,000 and $1.5 million. (You can follow the debt as it adds up at www.USdebt.org.)

What does the state say about its unfunded liabilities? Here’s a response from the Congressional Budget Office, which answers, "… no government obligation can be truly considered ‘unfunded’ because of the U.S. government's sovereign power to tax – which is the ultimate resource to meet its obligations."

That is utter hooey. It conjures up an absurdity in which the government could meet its obligation by sending you a Social Security check, even as it raises a tax to take 100 percent of everything you get from Social Security. The reason that is an absurdity is that it is a two-step process to do what the government will do in just one step. By means either overt (legislative act) or covert (currency destruction), it will unilaterally reduce its "obligation," leaving millions of people betrayed.

Because it is the government. And it lies about its obligations.

Just like it lies about everything else.

January 27, 2012

Charles Goyette [send him mail] is the author of the New York Times bestseller The Dollar Meltdown: Surviving the Impending Currency Crisis with Gold, Oil, and Other Unconventional Investments, now available in paperback. And coming in February 2012, Charles Goyette's Freedom & Prosperity Letter. His new book Red and Blue and Broke All Over: Restoring America’s Free Economy will be released March 15.

Copyright © 2012 Charles Goyette