These monetary learnings allow us to formulate 2 more extremely important Key Concepts.
The first is that “All dollars are backed by debt”.
At the local bank level, all new money is loaned into existence.
At the Federal Reserve level money is simply manufactured out of thin air and then mostly exchanged for interest paying government debt.
In both cases, the money is backed by debt. Debt that pays interest. From this Key Concept we can formulate a truly profound statement which is that “At a minimum, each year enough new money must be loaned into existence to cover the interest payments on all of the past outstanding debt”.
If we flip this slightly, we can say that each year all the outstanding debt must compound by at least the rate of the interest on that debt. Each and every year it must grow by some percentage. Because our debt based money system is growing by some percentage over time, it is an exponential system by its very design.
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