What you need to know
Our currency is created through public government and private bank debt issuance.
Debt comes with strings attached! –A promise to repay the amount borrowed (principal), and extra (interest).
When commercial banks lend currency into existence roughly 90% of the amount lent (principal) is created out of thin air.
When governments borrow currency into existence 100% of the principal is created out of thin air.
The interest doesn’t even exist yet! At any given time there is never enough debt currency in circulation to pay all debt out standing.
This is a fundamental flaw in our currency system. Unless there is constant expansion there is a contraction.
Here is how Robert Hemphill a Credit Manager at the Atlanta FED explained it in 1939
If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash, or credit. If the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless situation is almost incredible — but there it is.
When debt is paid back currency is taken out of circulation and out of existence.