Guest Post by Mark Nestmann
You’ve just arrived home from work. As you walk through your front door, your wife hands you a cocktail.
“Honey, we’ve got to talk,” she tells you as she pours herself a double. “I was balancing the checkbook today, and guess what. We’re missing $6.5 trillion from our account.”
“No problem,” you respond, as you take a sip from your cocktail. “I’ll just call up Federal Reserve Chairman Janet Yellen tomorrow. I’m sure she can help us make good on the shortfall. After all, the Fed has the authority to create money out of thin air.”
Of course, this scenario would never occur. While the Fed can create monetary reserves “ex nihilo” – literally, “out of nothing” – it acts on behalf of the US Treasury, not private citizens.
On the other hand, if you’re the Pentagon, losing $6.5 trillion is just another day at the office. Indeed, in a report released in June, the Defense Department’s inspector general admitted that just one branch of the military, the Army, made $6.5 trillion in wrongful adjustments to accounting entries. In many cases, the Army had no receipts or even invoices to support those expenditures. Incredibly, according to the report, in some cases the Army simply invented the adjustments out of thin air.
Continue reading “What Would the IRS Do if This Happened to You?”