The Financial Times, the UK's great economic newspaper, noted last week that the U.S. government maintains two set of books. And the secret set now suggests that the U.S. owes $79 trillion, that's only $12 trillion more than the St. Louis Federal Reserve Report said, when it concluded that the total U.S. debt was $67 trillion. But perhaps the smaller number was a few months old. The times also noted the the president's reported deficit for 2005 was $319 billion, while the "secret" report of the U.S. treasury said it was more like $760 billion. According to U.S.A. Today, the US has lost about $40 trillion over the last 9 years alone, just based upon generally accept accounting principles. To me, deflation is absolutely unacceptable, because the U.S. Debt would be worth more. In fact, Richard Russell, who's been writing a newsletter since the 1950s, says that there is no way the problem can be handled in a sane and honest way." Thus, our government has two choices -- we can avoid paying many of our future debts such as social security and we can inflate that debt so that it is almost worthless. Both scenarios are very bad if you are not prepared.

I think it's quite ironic that we really don't see this reflected in the economy yet. But what happens when it does?