Who exactly contracted for all this debt?

Editor's note: Please go to and have a listen to the discussion posted at Negotiating tax value outside of the law in order to get a grasp of where Americans stand considering debt and fraudulent taxation and "bond degradation." Either people responsible for this "sit down like gentlemen and negotiate an end to this" or Americans are literally going to be facing another "war of 1812." This is not an exaggeration. This kind of debt and criminally rogue taxation by governments inevitably leads to internal conflict and economic disintegration. Monetary theorists and activists know that governments should issue the currency but that is not going to happen without serious economic upheaval and central bank opposition. As it stands now whether it is Federal Reserve Notes or United States Notes, both are still Promissory Notes drawn on our credit and against our assets without our knowledge or permission.

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How to Escape the Federal Debt Trap

December 10, 2024 | by Ellen Brown

The U.S. national debt just passed $36 trillion, only four months after it passed $35 trillion and up $2 trillion for the year. Third quarter data is not yet available, but interest payments as a percent of tax receipts rose to 37.8% in the third quarter of 2024, the highest since 1996. That means interest is eating up over one-third of our tax revenues.

Total interest for the fiscal year hit $1.16 trillion, topping one trillion for the first time ever. That breaks down to $3 billion per day. For comparative purposes, an estimated $11 billion, or less than four days' federal interest, would pay the median rent for all the homeless people in America for a year. The damage from Hurricane Helene in North Carolina alone is estimated at $53.6 billion, for which the state is expected to receive only $13.6 billion in federal support. The $40 billion funding gap is a sum we pay in less than two weeks in interest on the federal debt.

The current debt trajectory is clearly unsustainable, but what can be done about it? Raising taxes and trimming the budget can slow future growth of the debt, but they are unable to fix the underlying problem — a debt grown so massive that just the interest on it is crowding out expenditures on the public goods that are the primary purpose of government.

Borrowing Is Actually More Inflationary Than Printing

Several financial commentators have suggested that we would be better off if the Treasury issued the money for the budget outright, debt-free. Martin Armstrong, an economic forecaster with a background in computer science and commodities trading, contends that if we had just done that in the first place, the national debt would be only 40% of what it is today. In fact, he argues, debt today is the same as money, except that it comes with interest. Federal securities can be posted in the repo market as collateral for an equivalent in loans, and the collateral can be "rehypothecated" (re-used) several times over, creating new money that augments the money supply just as would happen if it were issued directly.

Chris Martenson, another economic researcher and trend forecaster, asked in a Nov. 21 podcast, "What great harm would happen if the Treasury just issued its own money directly and didn't borrow it? … You're still overspending, you still probably have inflation, but now you're not paying interest on it."

The argument for borrowing rather than printing is that the government is borrowing existing money, so it will not expand the money supply. That was true when money consisted of gold and silver coins, but it is not true today. In fact borrowing the money is now more inflationary, increasing the money supply more, than if it were just issued directly, due to the way the government borrows. It issues securities (bills, bonds and notes) that are bid on at auction by selected "primary dealers" (mostly very large banks). Quoting from Investopedia:

Because most modern economies rely on fractional reserve banking, when primary dealers purchase government debt in the form of Treasury securities, they are able to increase their reserves and expand the money supply by lending it out. This is known as the money multiplier effect.

Thus, "the government increases cash reserves in the banking system," and "the increase in reserves raises the money supply in the economy." Principal and interest on the securities are paid when due, but they are paid with borrowed money. In effect, the debt is never repaid but just gets rolled over from year to year along with the interest due on it. The interest compounds, an increasing amount of debt-at-interest is generated, and the money supply and inflation go up.

U.S. Currency Should Be Issued by the U.S. Government

Well over 90% of the U.S. money supply today is issued not by the government but by private banks when they make loans. As Thomas Edison argued in 1921, "It is absurd to say that our country can issue $30 million in bonds and not $30 million in currency. Both are promises to pay, but one promise fattens the usurers and the other helps the people."

The government could avoid increasing the debt by printing the money for its budget as President Lincoln did, as U.S. Notes or "Greenbacks." Donald Trump acknowledged in 2016 that the government never has to default "because you print the money," echoing Alan Greenspan, Warren Buffett and others. So writes Prof. Stephanie Kelton in a Dec. 2, 2024 blog. Alternatively, the Treasury could mint some trillion dollar coins. The Constitution gives Congress the power to coin money and regulate its value, and no limit is put on the value of the coins it creates. In legislation initiated in 1982, Congress chose to impose limits on the amounts and denominations of most coins, but a special provision allowed the platinum coin to be minted in any amount for commemorative purposes. Philip Diehl, former head of the U.S. Mint and co-author of the platinum coin law, confirmed that the coin would be legal tender:

In minting the $1 trillion platinum coin, the Treasury Secretary would be exercising authority which Congress has granted routinely for more than 220 years … under power expressly granted to Congress in the Constitution (Article 1, Section 8).

To prevent congressional overspending, a budget ceiling could be imposed – as it is now, although the terms would probably need to be revised.

Eliminating the Debt

Those maneuvers would prevent the federal debt from growing, but it still would not eliminate the trillion dollar interest tab on the existing $36 trillion debt. The only permanent solution is to eliminate the debt itself. In ancient Mesopotamia, when the king was the creditor, this was done with periodic debt jubilees — just cancel the debt. (See Michael Hudson, And Forgive Them Their Debts.) But that is not possible today because the creditors are private banks and private investors who have a contractual right to be paid, and the U.S. Constitution requires that the government pay its debts as and when due.

Another possibility is a financial transaction tax, which could replace both income and sales taxes while still generating enough to fund the government and pay off the debt. See Scott Smith, A Tale of Two Economies: A New Financial Operating System for the American Economy (2023) and my earlier article here. But that solution has been discussed for years without gaining traction in Congress.

Please go to Web of Debt to continue reading.

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Prof. Michael Hudson: Dollar dominance fuels death and destruction:

How do you like banks now?

How the Federal Government Weaponized the Bank Secrecy Act To Spy On Americans

Monetary reform archives:

Monetary Reform

If you receive a tax bill considering all that has been discussed above and at the links here is another option to consider. Be advised, this is not legal advice but it is excellent information to know:

WeRe Bank