Friday, February 05, 2010

Mathematically Impossible to Pay Off United States of America's Debts!

I was a great math student in the primary grades and in college, so I am confident in my abilities to understand some figures and numbers. Even without that analytical education, it is not difficult to see that America's monetary system may not survive in its current form, because paying off the country's existing debts may be an impossibility under the Federal Reserve banking system.

Why? Short answer --> The current Federal Reserve system is really nothing more than an old-fashioned pyramid scheme where only the top players make any profits.

Congress assigns monetary rights to the Federal Reserve. The Federal Reserve lends money to the Treasury. The Federal Reserve also charges interest on the money it prints and lends to the Treasury, but these interest costs are NOT included in the Fed's loan money.

For example, if the Federal Reserve charges someone 10% on a loan and lends them $1, this $1 will be printed up by the Federal Reserve and added to the existing monetary supply by the Treasury. When the Fed is paid back the $1, there is no net difference in the monetary supply because the $1 printed by the Fed and placed into monetary circulation is equalized when the Treasury pays back the $1 to the Fed.

However, the additional 10 cents (10% interest) must also be paid to Federal Reserve and the Fed's $1 loan does not include this 10% interest. Because the Fed did not print up this 10% with the loan, this 10% interest must be paid from or taken from the existing monetary supply (or other assets) by the Treasury to satisfy the loan interest repayment obligations to the Fed

As more and more interest is charged, the more money that must be paid from the existing supply in circulation -- until eventually, there will be no money left and the Federal Reserve will hold all the money in the world!

So why doesn't the U.S. government just fire up the printing presses and print a bunch of money to pay off the debt?

Well, for one very simple reason.

That is not the way our system works.

You see, for more dollars to enter the system, the U.S. government has to go into more debt.

The U.S. government does not issue U.S. currency - the Federal Reserve does.

The Federal Reserve is a private bank owned and operated for profit by a very powerful group of elite international bankers.

If you will pull a dollar bill out and take a look at it, you will notice that it says "Federal Reserve Note" at the top.

It belongs to the Federal Reserve.

The U.S. government cannot simply go out and create new money whenever it wants under our current system.

Instead, it must get it from the Federal Reserve.

So, when the U.S. government needs to borrow more money (which happens a lot these days) it goes over to the Federal Reserve and asks them for some more green pieces of paper called Federal Reserve Notes.

The Federal Reserve swaps these green pieces of paper for pink pieces of paper called U.S. Treasury bonds. The Federal Reserve either sells these U.S. Treasury bonds or they keep the bonds for themselves (which happens a lot these days).

So that is how the U.S. government gets more green pieces of paper called "U.S. dollars" to put into circulation. But by doing so, they get themselves into even more debt which they will owe even more interest on.

So every time the U.S. government does this, the national debt gets even bigger and the interest on that debt gets even bigger.

Source: The Economic Collapse

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