Thanks for the details again! The phrase "selling your soul" has a new meaning to it now :)
> Normally this takes the form of buying Treasury Bonds back from the public
This is the scary part though. The major way "new money" comes into existence is by the pledge of the government (and thus citizens) to pay the Fed back.
Extrapolating my earlier example, If citizen 1 is US Treasury and citizen 2 is a real person, the only way citizen 1's (US treasury) debt can be repaid is if citizen 2 (real person with no assets besides intrinsic productivity) borrows at least as much and pays to citizen 1 or produces a child who also takes a loan and pays to citizen 1(setting the debt into perpetuity for all US citizens).
The alternative to paying US dollar denominated debt seems to be taking all US citizens' intrinsic productivity (assuming all collateral is already taken away)
Is there any money that is not debt to the Fed? I'm not saying Fed is evil but I don't see the sustainability of this system unless there is a "constantly increasing supply" (not gold, land which are limited) of wealth that is not debt or falling back to some form of slavery.
Another way to look at this is: Even if I am prudent and don't take on any debt but bootstrapped myself into wealth, I'm subject to debt to the Fed simply because the treasury owes money to the Fed, simply because that's how money was created in the first place.
I don't believe the situation you outline is the case in reality. Dollars are not, in a sense, "debt" to the Fed. I don't owe the Fed a dollar because I have a dollar (you could make an argument that inflation actually makes this statement false, but that's a different argument outside the realm of Debt).
A Treasury Bond is more the opposite; its a debt where the treasury is the borrower. The simple goal of T-Bonds is such that the government makes an assumption: the rate of GDP growth (and thus taxes) will outpace the rate at which they have to pay back their interest. This has almost always been the case, including today.
> I don't see the sustainability of this system unless there is a "constantly increasing supply" of wealth
There is a constantly increasing supply of wealth (lets call it by its real term: Productivity). Our population is increasing. And we're getting better at building technology. These are the two primary sources of increased productivity. When Productivity goes up, GDP goes up, and taxes go up. Debts get repaid.
Maybe this isn't sustainable over the long term. But nothing is sustainable over the long term. That's not the point of an economy. If you like toilets, and iPhones, and $5 shirts from H&M, and HackerNews, then you have to respect that it works for us. And it'll probably work for our children too, because as long as we keep having children Productivity will increase.
Here's another way to think about it: We are on this planet for 80 years. That's it. We need to engineer systems that maximize those 80 years for every interval of 80 years every person has. That's why we have Debt; otherwise our only Wealth would come from (1) inheritances, and (2) our intrinsic Productivity. That doesn't sound like a great system to me.
> I don't believe the situation you outline is the case in reality. Dollars are not, in a sense, "debt" to the Fed.
But they are. The origin of fiat currency is exactly that. Historically, dollars were backed by something (gold, assets) held by central banks from citizen deposits.
But today, they are backed by nothing. Fiat dollars are simply loans taken by US govt and private citizens.
While that does keep the economic engine running, it's all running on debt. Debt by citizen 1 creates money. Citizen 2 sells them corn to get that money. Citizen 2 takes that money and more debt to buy a tractor from citizen 1. Then time comes to repay money and one of them defaults. Central bank seizes assets of the defaulter for not returning the money they printed out of thin air in the first place.
That system is great if there was some base backing so that savers are not disproportionaly affected. But todays massive boom busts take down the whole world except the 1%.
I mean, why should a newborn baby pay more taxes for the debt of Citizen 1 (US govt)?
> Normally this takes the form of buying Treasury Bonds back from the public
This is the scary part though. The major way "new money" comes into existence is by the pledge of the government (and thus citizens) to pay the Fed back.
Extrapolating my earlier example, If citizen 1 is US Treasury and citizen 2 is a real person, the only way citizen 1's (US treasury) debt can be repaid is if citizen 2 (real person with no assets besides intrinsic productivity) borrows at least as much and pays to citizen 1 or produces a child who also takes a loan and pays to citizen 1(setting the debt into perpetuity for all US citizens).
The alternative to paying US dollar denominated debt seems to be taking all US citizens' intrinsic productivity (assuming all collateral is already taken away)
Is there any money that is not debt to the Fed? I'm not saying Fed is evil but I don't see the sustainability of this system unless there is a "constantly increasing supply" (not gold, land which are limited) of wealth that is not debt or falling back to some form of slavery.
Another way to look at this is: Even if I am prudent and don't take on any debt but bootstrapped myself into wealth, I'm subject to debt to the Fed simply because the treasury owes money to the Fed, simply because that's how money was created in the first place.