Since the Federal Reserve Notes are evidence of debt how is it possible to be free of debt?

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And if the Federal Reserve is all notes evident of debt,and all they have are debts,how do they operate? And what is their collateral?

  1. Reply
    July 21, 2011 at 4:05 am

    Yes FRN are debt notes. The only way to not be exposed to the system is to deal in barter or gold on the black market – and as you know, that’s impossible if you want to get along in this society, pay your bills, have a job, etc. Just like when you borrow money from a bank – they give it to you on the promise you will pay it back. The Fed Govt has borrowed money from many countries and at any time the debt could be called in and our economy would be on its knees – like when Confederate bank notes were declared worthless around the time of the Civil War.

    The collateral is US bank holdings and precious metal stores, natural resources, etc.

    It won’t to any good to worry about it. There is nothing we can do so just live your life till they make it impossible.

  2. Reply
    gray shadow
    July 21, 2011 at 4:10 am

    Federal Reserve Notes are indeed collateralized by U.S. Debt. About $ 850B worth of the total $ 9T.

    The debt owned by the Federal Reserve should not be of much concerned. All the interest earned, less Fed expense, is returned to the Treasury at the end of the year. Second, to some extent, the debt never has to be paid back since it is necessary as a collateral (as you deduced).

    The real problem is the rest of the $ 9T of debt outstanding. About half is owned by the public (mostly foreign entities), and they don’t give back any of that interest earned.

    However, if the U.S. wanted to get serious about it, it would just pass a balanced budget 10 years in a row. Why 10 years? That’s the term of maturity for most T-bonds. Which means all public debt could be paid off with that simple discipline.

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