3. National Debt clocks, $9.3 trillion, 2008. “Debts of the federal government differ entirely from personal debts; they do not need to be repaid, are not claims on the incomes of ordinary families, and will not plague future generations.” When the government runs a deficit in its annual budget, spending more than it collects in tax revenues- it closes the gap by selling T-Bond to banks, insurance companies, pension funds, and mutual funds (this group also controls 70 percent of the wealth in the stock market). The group invests it’s cash and buys government debt in exchange for regular interest income, $9.3 trillion dollars worth. $600 billion in notes is held by the fed to back the US money supply; the Treasury extends a loan to the Fed for $600 billion; the fed uses the loan money to create more money; the fed money is sold to banks and they use the new money like a collateral asset that can be leverage to create new loans; the loans charge a premium for usage and the banks profit from the interest; consumers feel safe because their bank monies are protected by Fed insurance; Banks appreciate savings because they are loaned for interest payments returning a minimal payment back to the saver. How does the fed pay the interest payments on the notes? “The treasury roles them over an selling freshly issued notes to new buyers and using the cash to repay the maturing debt.”[Learn More ...]

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