The Government's Cooked Books
Should the United States ever adopt the same accounting standards for itself that it foists upon private enterprise, its financial reports would leave the majority of Americans in a state of shock. Americans would have tremendous difficulty recovering from the magnitude of misrepresentation that is going on now. Accounting isn't just a game either; there are material, legal, and ethical consequences when it's done wrong.
As an example of the accounting fictions used daily to dupe the public, consider the US dollars the United States claims to own in the Treasury "coffers." Now brace yourself, because this explanation is going to remind many readers of Alice tumbling down the rabbit hole. All of the interests the United States has in US dollars are cancelled out by liabilities on the Federal Reserve Balance Sheet, so that they have no effect of ownership. The United States owns no domestic money when its off-budget entities are incorporated into its balance sheet. The Treasury general fund is an accounting fantasy. So this begs the question; what happens to tax dollars?
The tax collectors do the accounting equivalent of putting all the collected tax money in a pit and setting it on fire. There is consequently never any taxpayer money in the US treasury coffers. More concretely speaking, when taxpayer checks are cleared by the IRS and the Fed, the tax money ceases to exist in any accounting or legal sense. The fiat money is sent back into the accounting vacuum from whence it came.
How is such an absurd thing possible? Through the sham of fiat currency, of course! While the US dollar used to be a certain weight of metal, or a credit instrument entitling its owner to a best effort attempt to produce that same metal on demand, it has been transformed over the years into a mere credit instrument, with no link to metal at all.
Why is it legitimate for me to consider the US dollar to be a credit instrument? If we set aside for the moment the issue of just exactly to what credit a dollar owner is entitled and the issue of what frauds have been committed in developing the US dollar, we can see that the US dollar is considered a credit instrument by the Fed itself. The Fed has listed a liability for all issued Fed notes on its balance sheet, in accordance with standard procedure in fractional reserve banking.
It has also issued similar liabilities in the form of reserve balances for private banks. A private bank can convert its credit balance with the Fed into paper currency upon request. Even if we were to accept the popular circular reasoning and consider dollars to merely entitle their owners to Fed notes and not to any interests in metal, a dollar is still a credit instrument guaranteed by the United States; and the claims I make in this article are still maintained.
A distinguishing feature of a credit instrument is that it cannot be owned by the debtor it would otherwise bind. For example, if I write myself a signed and sealed letter saying that I owe myself $1,000,000 by next year, that letter does not constitute a contract, a credit instrument, or any legal claim whatsoever. I cannot reasonably claim that I'm managing a million-dollar asset. It cannot properly be placed on my balance sheet as an asset or a liability. Yet the United States handles its accounts in just this way.
The same situation of cancelling self-debt exists with the dollars claimed to be held by the United States. The general treasury account is currently recorded as an asset which is offset by a liability in the Federal Reserve balance sheet. This is similar to how I record my personal checking account as an asset and the local bank records it as a liability. The dollars in my wallet and in my bank's reserve account at the Fed are themselves liabilities of the United States. In the words of the Federal Reserve, "Federal Reserve notes are liabilities on the Federal Reserve's balance sheet." Also, "Coin, however, is an asset on the Federal Reserve's balance sheet, and is a direct obligation of the U.S. Treasury."
The important difference, however, is that unlike me, the United States has total legal control of the operations of its bank. That means that if the United States was willing to eat its own dog food by writing GAAP-compliant financial reports, they would be forced to consolidate the Federal Reserve balance sheet with the general balance sheet.
In the process, several accounting fictions would annihilate each other. The Treasury bonds held on the asset side of the Fed's sheet would cancel with the corresponding debt obligations on the liability side of the Treasury's sheet. The credit balances for the United States and for its off-budget entities on the liability side of the Fed's sheet would cancel with the debit balances (the General Fund) on the asset side of the Treasury sheet and the off-budget entity sheets. The bonds owned by the Social Security Trust Fund would be cancelled by the corresponding obligations on the Treasury sheet.
Why would this consolidation be required? Accounting standards note that
Ownership does not signify control, especially when … another party has the ability to dominate the board of directors of the entity.… Control can exist even when an entity owns less than 50% of an entity's voting share capital (or equity capital) when … [there exists a] power to govern the financial and operating policies of the entity under a statute or an agreement.
This condition is clearly satisfied by the Fed and the United States. Even though bankers own stock in the Fed and vote in some managers of the Fed, the United States reserves the right to appoint major monetary policy makers. Furthermore, if Congress passed a law forcing the Fed to buy a certain amount of Treasury bonds at a certain price, the law could not be successfully contested in court by the Fed's stockholders. That ability signifies most clearly that the Fed is a public sector entity and not a private one. If Congress dictated which specific purchases a particular private company could make, that company would be able to contest the law in court.
Now some readers are probably thinking "Ok, so the United States owns no US money. Who cares? This is just accounting garbage!" But they're forgetting an important thing: accounting is essential to figuring out who can be sued and what they can be sued for. If a court held wasting taxpayer money to be illegal, then to successfully sue someone for that you would have to show that he spent taxpayer money.
But since every person who has cleared a government check has been issued new money, none of them can be correctly accused of handling taxpayer money by clearing a government check. That means that people who are traditionally considered to be tax consumers, such as non-IRS federal employees and defense contractors, in fact are not tax consumers. Not a single one has wasted taxpayer money while engaged in the acts of receiving and spending money from the state, because the taxpayer money cannot be traced or followed to any of these recipients!
In cases where recovery of misappropriated goods is sought, a tradition in common law is to consider certain assets of a misappropriator to be held on constructive trust for the benefit of the victim so that the victim can claim subsequent investments the misappropriator makes with his ill-gotten gains. This style of claim is sometimes used to protect the victim's claim from the misappropriator's debt collectors in a bankruptcy proceeding. If the stolen assets can be uniquely identified and located (the process of "following") then they can be repossessed by the victim.
But if they cannot be followed, then the victim can repossess related assets of the misappropriator (identified by the process of "tracing"). It is common to trace a misappropriated good to the money gained when the misappropriator sold it, and to any durable assets the misappropriator purchased with that money. It is reasonable to trace unidentifiable fungible goods like US dollars to any USD currency and USD bank account holdings of the misappropriator first, and then if the claim still isn't satisfied, to trace to other assets of the misappropriator.
But what if the misappropriator is a banker, and he has stolen checkbook money that he himself issued, so that it is extinguished as it is stolen, due to the money's nature as a fungible credit instrument? The case law on this issue is to trace the checkbook money to its associated economic benefit when extinguished: the bank's increase in equity as it extinguishes its liability. Thus judges have sometimes charged the general assets of the bank in this situation.
So if tax collection is considered theft in part or in whole, then the US taxpayer can at most trace his taxes to a general claim against the assets of the United States, which does not include any US dollars. In practice, extinguishing the US liability will increase the US equity from extremely negative to slightly less negative, but that's still an economic benefit for the United States.
So the question must be asked, have the people who lobby for government bailouts and the technocrats who handed out the money committed any moral crimes in those acts? It appears from this article that they in fact are innocent. However, there are a few considerations that could make them guilty of other crimes against taxpayers:
The government workers might have a fiduciary duty to keep the US equity high enough to pay for reasonably anticipated future judgments against the United States. This duty would fall under the heading of capitalization requirements.
The government workers might have a fiduciary duty to not increase the supply of money in certain situations, as it would generally be considered an abuse of the government monopoly on issuance of legal tender.
Everyone has a duty to not bribe people into subverting a fiduciary duty which is owed to a third party. Such subversion amounts to theft from the third party.
The real culprit behind this behemoth accounting and moral outrage is not the Fed but the legal tender laws. These laws preserve the United States' domestic monopoly on currency issue by forcing courts to abrogate contracts demanding payment in private currencies. Clearly, one of the top priorities of every libertarian should be ending the legal tender laws.
 The metal and weight thereof have changed frequently.
 Though they certainly don't seem to exercise it often.
 Barring some kind of Communist takeover that throws away all Constitutional law.