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 It Is Now Mathematically Impossible To Pay Off The U.S. National Debt
COLT  [Member]
2/4/2010 9:27:17 PM EST


A lot of people are very upset about the rapidly increasing U.S. national debt these days and they are demanding a solution. What they don't realize is that there simply is not a solution under the current U.S. financial system. It is now mathematically impossible for the U.S. government to pay off the U.S. national debt. You see, the truth is that the U.S. government now owes more dollars than actually exist. If the U.S. government went out today and took every single penny from every single American bank, business and taxpayer, they still would not be able to pay off the national debt. And if they did that, obviously American society would stop functioning because nobody would have any money to buy or sell anything.

And the U.S. government would still be massively in debt.

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.

Are you starting to get the picture?

As you read this, the U.S. national debt is approximately 12 trillion dollars, although it is going up so rapidly that it is really hard to pin down an exact figure.

So how much money actually exists in the United States today?

Well, there are several ways to measure this.

The "M0" money supply is the total of all physical bills and currency, plus the money on hand in bank vaults and all of the deposits those banks have at reserve banks. As of mid-2009, the Federal Reserve said that this amount was about 908 billion dollars.

The "M1" money supply includes all of the currency in the "M0" money supply, along with all of the money held in checking accounts and other checkable accounts at banks, as well as all money contained in travelers' checks. According to the Federal Reserve, this totaled approximately 1.7 trillion dollars in December 2009, but not all of this money actually "exists" as we will see in a moment.

The "M2" money supply includes everything in the "M1" money supply plus most other savings accounts, money market accounts, retail money market mutual funds, and small denomination time deposits (certificates of deposit of under $100,000). According to the Federal Reserve, this totaled approximately 8.5 trillion dollars in December 2009, but once again, not all of this money actually "exists" as we will see in a moment.

The "M3" money supply includes everything in the "M2" money supply plus all other CDs (large time deposits and institutional money market mutual fund balances), deposits of eurodollars and repurchase agreements. The Federal Reserve does not keep track of M3 anymore, but according to ShadowStats.com it is currently somewhere in the neighborhood of 14 trillion dollars. But again, not all of this "money" actually "exists" either.

So why doesn't it exist?

It is because our financial system is based on something called fractional reserve banking.

When you go over to your local bank and deposit $100, they do not keep your $100 in the bank. Instead, they keep only a small fraction of your money there at the bank and they lend out the rest to someone else. Then, if that person deposits the money that was just borrowed at the same bank, that bank can loan out most of that money once again. In this way, the amount of "money" quickly gets multiplied. But in reality, only $100 actually exists. The system works because we do not all run down to the bank and demand all of our money at the same time.

According to the New York Federal Reserve Bank, fractional reserve banking can be explained this way....

"If the reserve requirement is 10%, for example, a bank that receives a $100 deposit may lend out $90 of that deposit. If the borrower then writes a check to someone who deposits the $90, the bank receiving that deposit can lend out $81. As the process continues, the banking system can expand the initial deposit of $100 into a maximum of $1,000 of money ($100+$90+81+$72.90+...=$1,000)."

So much of the "money" out there today is basically made up out of thin air.

In fact, most banks have no reserve requirements at all on savings deposits, CDs and certain kinds of money market accounts. Primarily, reserve requirements apply only to "transactions deposits" – essentially checking accounts.

The truth is that banks are freer today to dramatically "multiply" the amounts deposited with them than ever before. But all of this "multiplied" money is only on paper - it doesn't actually exist.

The point is that the broadest measures of the money supply (M2 and M3) vastly overstate how much "real money" actually exists in the system.

So if the U.S. government went out today and demanded every single dollar from all banks, businesses and individuals in the United States it would not be able to collect 14 trillion dollars (M3) or even 8.5 trillion dollars (M2) because those amounts are based on fractional reserve banking.

So the bottom line is this....

#1) If all money owned by all American banks, businesses and individuals was gathered up today and sent to the U.S. government, there would not be enough to pay off the U.S. national debt.

#2) The only way to create more money is to go into even more debt which makes the problem even worse.

You see, this is what the whole Federal Reserve System was designed to do. It was designed to slowly drain the massive wealth of the American people and transfer it to the elite international bankers.

It is a game that is designed so that the U.S. government cannot win. As soon as they create more money by borrowing it, the U.S. government owes more than what was created because of interest.

If you owe more money than ever was created you can never pay it back.

That means perpetual debt for as long as the system exists.

It is a system designed to force the U.S. government into ever-increasing amounts of debt because there is no escape.

Of course if we had listened to our very wise founding father Thomas Jefferson, we could have avoided this colossal mess in the first place....

"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."

But we didn't listen, did we?

We could solve this problem by shutting down the Federal Reserve and restoring the power to issue U.S. currency to the U.S. Congress (which is what the U.S. Constitution calls for). But the politicians in Washington D.C. are not about to do that.

So unless you are willing to fundamentally change the current system, you might as well quit complaining about the U.S. national debt because it is now mathematically impossible to pay it off.
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bloodsport2885  [Team Member]
2/4/2010 9:47:36 PM EST
Bravo. I actually learned a lot from this article.

Most of it was bad, though.
USMC1986  [Member]
2/5/2010 1:38:45 AM EST
Excellent explanation.

You should have included the unfunded liabilities as well (Soc. Security, Medicare). etc. The National Debt is only "one account" in the red for $12 Trillion, however unfunded liabilities are above $106 trillion. So really America is $118 Trillion in the hole and growing every second.
BJW-Bushmaster  [Member]
2/5/2010 1:44:05 AM EST
hmm... interesting
So we can't pay it in U.S. Dollars... what about Yen or Euros?
glock27bill  [Member]
2/5/2010 2:04:08 AM EST
Obama could always take the $600B-$800B in repaid TARP funds and NOT spend it.

There is a path out of this, assuming Obama's mission isn't to undermine our capitalist system.
BTurgidson  [Member]
2/5/2010 3:36:08 AM EST
The TARP funds SHALL be returned to the Treasury and applied towards the debt. That is how the law is written. It doesn't matter, they will figure a way around it.

I disagree that we cannot pay off our debt. We have 2 options.

1. We can print money and devalue it to the point that it is worthless. Hyper inflation to the point every citizen goes bankrupt. Of course, this is not really an option as it would bring about the effective destruction of our country.
or.
2. We CUT spending. We only fund defense and critical services like police, fire, etc...We then institute a 10 year ,10% Value added tax that MUST be applied to the debt. That is a 10% tax on every single transaction. Our country has a GDP of approximately $14.5 Trillion per year. If we cut or drop most of the entitlement programs, and the $120+ Trillion promised but not funded for future generations, we may be able to pull ourselves out of this. I now that an additional tax would suck, but if it was verifiable applied to the debt, I would pay it so my son might have a chance to build wealth at some point in his lifetime.

This is truly an emergency situation and our elected officials still have their collective heads in the sand, and we are right beside them, because we elected them.
Campingout  [Team Member]
2/5/2010 4:29:34 AM EST
$14 trillion. Anyone know where there might be $14 trillion laying around for the government to use?

Oh, hey, what's all this over here? $15 trillion? That'll do. What's it called? IRAs and 401Ks. OK. That'l do.

The stroke of one pen by one man.

How's that lesser of two evils voting going?
Drsalee  [Life Member]
2/5/2010 4:32:06 AM EST
Can we spend our way out of it? Or get out of it by creating more .gov jobs?
Revelation68  [Member]
2/5/2010 6:18:38 AM EST
Originally Posted By USMC1986:
Excellent explanation.

You should have included the unfunded liabilities as well (Soc. Security, Medicare). etc. The National Debt is only "one account" in the red for $12 Trillion, however unfunded liabilities are above $106 trillion. So really America is $118 Trillion in the hole and growing every second.


So does it make you made when Clinton removes money from an already underfunded Social Security program, within intergovernmental holdings on the books, and claims a surplus during a presidential term?

If it doesn't, it should.

Combat_Jack  [Team Member]
2/5/2010 6:40:00 AM EST
I get really frustrated when people complain about fractional reserve banking.

It's the reason that you get interest when you make a deposit. If it weren't for FRB then you would have to PAY banks to store your money.
LaserStain  [Member]
2/5/2010 2:55:22 PM EST
Thats why when it all comes down, and it will, people should not use banks and keep their wealth within their own home. Get a big ass Gun Safe or build one. If you have a nickel in savings it will be either worthless or seized.
Combat_Jack  [Team Member]
2/5/2010 4:23:00 PM EST
Originally Posted By LaserStain:
Thats why when it all comes down, and it will, people should not use banks and keep their wealth within their own home. Get a big ass Gun Safe or build one. If you have a nickel in savings it will be either worthless or seized.


That's stupid.
TheJammer  [Team Member]
2/6/2010 6:32:14 PM EST
Originally Posted By Combat_Jack:
Originally Posted By LaserStain:
Thats why when it all comes down, and it will, people should not use banks and keep their wealth within their own home. Get a big ass Gun Safe or build one. If you have a nickel in savings it will be either worthless or seized.


That's stupid.


I don't trust banks, but I don't put all my eggs in one basket either.

ETA: Well done reading. It is amazing how few people understand the Federal Reserve and FRB.
Combat_Jack  [Team Member]
2/6/2010 7:48:04 PM EST
The FDIC makes bank soundness a non-issue. If the FDIC insurance ever fails then currency will fail too.

Gold also will be worthless. Gasoline, ammunition, food and cigarettes at that point...
Jake-The-Snake  [Team Member]
2/6/2010 10:01:15 PM EST
Good read, but you only take into account the "green pieces of paper".

Dollars are not wealth, rather a tool to capture the value of labor(time). Trade was not taken into account.

This is not to say the current path of ever increasing deficits, and growing social programs will not be disastrous, but that we have not yet IMHO reached the point of no return, but the pain we will feel increases exponentially.
Hawken50  [Team Member]
2/6/2010 10:33:38 PM EST

Originally Posted By LaserStain:
Thats why when it all comes down, and it will, people should not use banks and keep their wealth within their own home. Get a big ass Gun Safe or build one. If you have a nickel in savings it will be either worthless or seized.

So you don't trust bank, but you trust a piece of green paper with "theoretical" value?
CharlesRyan  [Member]
2/6/2010 11:15:58 PM EST
i wonder when someone is going to want that money back.... and what are we going to do.. better learn chinese.
Master_Blaster  [Member]
2/6/2010 11:28:44 PM EST
Originally Posted By Drsalee:
Can we spend our way out of it? Or get out of it by creating more .gov jobs?


Ahh...sarcasm.

Closed-loop nodes (read: .gov jobs) don't input any credit/value to the system. The growth & sustainment of private/for-profit enterprise is the only way this country will survive - economically, socially, politically... As you well know, until fed.gov wakes up & realizes the economic hard reality, the hole-diggin trend will continue unabated.
ColtAllure  [Team Member]
2/6/2010 11:31:35 PM EST
Much as I sympathize with your dislike of the present insane levels of US sovereign debt, your argument has two flaws.

1) The money supply increases when the Fed purchases *any* asset, not just government bonds.

2) The same dollar can pay off more than one dollar of government debt. When the dollar pays off $1 of US debt, it goes to someone. This someone spends it, the next person spends it, eventually it returns to the governments as taxes, and it can pay off another dollar of debt.
In other words, money is not destroyed when it is used to pay off government debt.
Silly_Look  [Team Member]
2/6/2010 11:34:19 PM EST
We will go to war with China soon, just to clear some debts. Give Japan the Sudan so they have oil, let India take Pakistan, etc.
Dave_A  [Team Member]
2/6/2010 11:57:56 PM EST

Originally Posted By COLT:


A lot of people are very upset about the rapidly increasing U.S. national debt these days and they are demanding a solution. What they don't realize is that there simply is not a solution under the current U.S. financial system. It is now mathematically impossible for the U.S. government to pay off the U.S. national debt. You see, the truth is that the U.S. government now owes more dollars than actually exist. If the U.S. government went out today and took every single penny from every single American bank, business and taxpayer, they still would not be able to pay off the national debt. And if they did that, obviously American society would stop functioning because nobody would have any money to buy or sell anything.

And the U.S. government would still be massively in debt.

Which is due to over spending, not some bullshit conspiracy theory.

By the way, the functioning of a modern monetary system REQUIRES debt, and the 'existence of enough dollars to pay it off' is irrelevant, since if you paid off all the debt (consumer, government, and commercial), the economy would implode.


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. Yes, a very simple reason: Printing that much money would wipe out the USD.

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.

That would be you lying out your ass, troll.

The Federal Reserve is NOT operated for profit, and is a partnership between the US Government (which controls the Board of Governors) and private industry....

It is not 'owned' by 'elite international bankers'... In fact, it is not 'owned' by anyone...

Spew your populist filth over on DU.

Or if you just cut & pasted this shit without any research, then read the Federal Reserve Act & learn a thing or two...


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.

Actually, it doesn't 'belong' to anyone - the Fed is responsible for maintaining the value of the currency by adjusting the interest rate at which it lends

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

Actually, they could if they wanted to. It would wreck the economy... But they could do it...

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).

Nope... not how it works at all

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.

Are you starting to get the picture? The real picture does not involve anything you described above

As you read this, the U.S. national debt is approximately 12 trillion dollars, although it is going up so rapidly that it is really hard to pin down an exact figure.

All of the above is bullshit.

The Fed does not lend money to Congress - the Fed lends money to other banks.

Congress borrows money on it's own credit, on the open market.

The actual creation and destruction of money happens on the commercial market, as people borrow money at varying rates.


So how much money actually exists in the United States today?

Well, there are several ways to measure this.

The "M0" money supply is the total of all physical bills and currency, plus the money on hand in bank vaults and all of the deposits those banks have at reserve banks. As of mid-2009, the Federal Reserve said that this amount was about 908 billion dollars.

The "M1" money supply includes all of the currency in the "M0" money supply, along with all of the money held in checking accounts and other checkable accounts at banks, as well as all money contained in travelers' checks. According to the Federal Reserve, this totaled approximately 1.7 trillion dollars in December 2009, but not all of this money actually "exists" as we will see in a moment.

The "M2" money supply includes everything in the "M1" money supply plus most other savings accounts, money market accounts, retail money market mutual funds, and small denomination time deposits (certificates of deposit of under $100,000). According to the Federal Reserve, this totaled approximately 8.5 trillion dollars in December 2009, but once again, not all of this money actually "exists" as we will see in a moment.

The "M3" money supply includes everything in the "M2" money supply plus all other CDs (large time deposits and institutional money market mutual fund balances), deposits of eurodollars and repurchase agreements. The Federal Reserve does not keep track of M3 anymore, but according to ShadowStats.com it is currently somewhere in the neighborhood of 14 trillion dollars. But again, not all of this "money" actually "exists" either.

So why doesn't it exist?

It is because our financial system is based on something called fractional reserve banking.

ALL banking is fractional reserve banking

When you go over to your local bank and deposit $100, they do not keep your $100 in the bank. Instead, they keep only a small fraction of your money there at the bank and they lend out the rest to someone else. Then, if that person deposits the money that was just borrowed at the same bank, that bank can loan out most of that money once again. In this way, the amount of "money" quickly gets multiplied. But in reality, only $100 actually exists. The system works because we do not all run down to the bank and demand all of our money at the same time.

That is correct.

It's efficient allocation of resources, not a problem.


According to the New York Federal Reserve Bank, fractional reserve banking can be explained this way....

"If the reserve requirement is 10%, for example, a bank that receives a $100 deposit may lend out $90 of that deposit. If the borrower then writes a check to someone who deposits the $90, the bank receiving that deposit can lend out $81. As the process continues, the banking system can expand the initial deposit of $100 into a maximum of $1,000 of money ($100+$90+81+$72.90+...=$1,000)."

So much of the "money" out there today is basically made up out of thin air.

Econ 101 - everything is 'thin air' as far as value is concerned.

Value is an abstract concept, there is not such thing as 'real' value.


In fact, most banks have no reserve requirements at all on savings deposits, CDs and certain kinds of money market accounts. Primarily, reserve requirements apply only to "transactions deposits" – essentially checking accounts.

The truth is that banks are freer today to dramatically "multiply" the amounts deposited with them than ever before. But all of this "multiplied" money is only on paper - it doesn't actually exist.

It exists, for all practical purposes.

That's how economies work, and that's how we can continue to grow without running out of money


The point is that the broadest measures of the money supply (M2 and M3) vastly overstate how much "real money" actually exists in the system.

So if the U.S. government went out today and demanded every single dollar from all banks, businesses and individuals in the United States it would not be able to collect 14 trillion dollars (M3) or even 8.5 trillion dollars (M2) because those amounts are based on fractional reserve banking.

So the bottom line is this....

#1) If all money owned by all American banks, businesses and individuals was gathered up today and sent to the U.S. government, there would not be enough to pay off the U.S. national debt.

If all the paper money was gathered up, there would be 800BN or so dollars.

There is not supposed to be enough to pay off debt, because debt is a normal part of the economy - it is simply the buying and selling of money.

This allows the running of a $13TN economy, with $800BN of money.


#2) The only way to create more money is to go into even more debt which makes the problem even worse.

Well, no... They could just print more - but that would cause severe inflation....

Of course, your model is flawed, so your view of the problem will continue to be flawed


You see, this is what the whole Federal Reserve System was designed to do. It was designed to slowly drain the massive wealth of the American people and transfer it to the elite international bankers.

Pure bullshit...

It's designed to give us an adjustable money supply that can grow with the economy


It is a game that is designed so that the U.S. government cannot win. As soon as they create more money by borrowing it, the U.S. government owes more than what was created because of interest.


Bullshit.

Not how it works


If you owe more money than ever was created you can never pay it back.

That means perpetual debt for as long as the system exists.

It is a system designed to force the U.S. government into ever-increasing amounts of debt because there is no escape.

Bullshit.

Again, the Federal Reserve does NOT 'force' the government into debt, and the government does not 'issue' money.


Of course if we had listened to our very wise founding father Thomas Jefferson, we could have avoided this colossal mess in the first place....

"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."

But we didn't listen, did we?

Actually, he never said that.

The terms 'inflation' and 'deflation' did not exist while he was alive


We could solve this problem by shutting down the Federal Reserve and restoring the power to issue U.S. currency to the U.S. Congress (which is what the U.S. Constitution calls for). But the politicians in Washington D.C. are not about to do that.

Bullshit.

Giving Congress control of the money supply would destroy the US economy


So unless you are willing to fundamentally change the current system, you might as well quit complaining about the U.S. national debt because it is now mathematically impossible to pay it off.


It's mathematically impossible for the economy to operate without credit, period.

Government debt is not 'special' in that regard.


Dave_A  [Team Member]
2/6/2010 11:58:27 PM EST

Originally Posted By bloodsport2885:
Bravo. I actually learned a lot from this article.

Most of it was bad, though.

Most of it bullshit...

The OP is a simple troll, cutting and pasting spam that he does not personally understand.

He has spent his entire low-post-count existence trolling Politics & Activism, posting cut-and-paste spam...

Well... It's time to do something about that...

Bullshit must be called what it is, circle jerking broken up, etc...

Besides, my troll-kill-count hasn't gone up in a while...
Dave_A  [Team Member]
2/7/2010 12:01:00 AM EST

Originally Posted By Drsalee:
Can we spend our way out of it? Or get out of it by creating more .gov jobs?

We can continue to grow the economy, and thus continue to increase the effective money supply.

Something made possible by... The modern monetary system...

What the OP ignores, is that if we did not have a banking system, the GDP of the USA would be capped at 800BN USD.

Do you really want to run the economy of a country on $800BN? Or have the government literally print more constantly?

Instead, by being able to multiply money through credit, we can have a $13TN GDP, with $800BN of physical money.

The notion that the govt is 'in debt to the FED' or that the government 'pays interest to the FED" is bullshit...

Just like that FAKE Jefferson quote at the end of that post...
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