By depositing dollars into your checking or savings account, you have forced your bank into debt. All bank deposits are bank debts. Banks love to be in debt. They actively solicit debts (deposits). Being in debt is the mission of a savings bank.
Bank deposits are not "unsustainable," nor do they cause bankruptcies. Though a bank can become bankrupt, the fault is not deposits, but rather poor business practices. No bank ever went bankrupt because its deposits were too large.
ALL FEDERAL DEBTS ARE BANK SAVINGS ACCOUNTS
All federal debt is just the total of T-security deposits (T-bills, T-notes, T-bonds) in accounts at the Federal Reserve Bank (FRB).
Today, the total federal debt is about 12 trillion dollars. This means the total of deposits in T-security accounts at the Federal Reserve Bank, is about 12 trillion dollars. When you buy a T-bond, you "lend" dollars to the Federal Reserve Bank. You deposit dollars into your T-bond account at the FRB. You are a creditor to the FRB.
Your T-security account at the FRB is essentially identical with your savings account at your local bank. You put dollars in (credit); you take dollars out (debit), and meanwhile you earn a bit of interest.
Whenever you want your dollars back from your "loan," you merely wire or mail instructions to the FRB to reduce the number in your T-bond savings account, and increase the number in your checking account. The FRB can do this all day long, in any amount. It's a simple exchange of existing balances.
WHAT IF OUR CREDITORS WANT THEIR MONEY BACK?
Debt hawks worry about what will happen if all our creditors -- China, Japan, European nations et al -- suddenly want their dollars back. No problem. The FRB simply would debit all their T-security accounts and credit all their checking accounts. Instantly, all federal debt would disappear.
So, why can't you and I pay off our loans that way? Why are our debts a burden to us, while the FRB's debts are not a burden to the federal government?
There is a fundamental difference between a loan and a deposit. You aren't the Federal Reserve Bank. When you borrow, you are not accepting a deposit. If someone lends you dollars, he is not opening a savings or checking account with you.
You borrow in order to spend, so if your creditor wants his money back, you may have spent it. But the FRB does not spend depositors' dollars. It holds 100% of those dollars in T-security accounts. The FRB always can debit T-security accounts and credit checking accounts. There never has been a time when the FRB was unable to credit checking accounts, and there never will be.
So to all you people who worry that the federal debt is too large, the debt/GDP ratio is too large, the debt is "unsustainable," China "owns" us, or somehow the U.S. government will not be able to pay its debts, I have some good news. The FRB could pay off 100% of all federal debt tomorrow, simply by transferring already existing dollars from T-security savings accounts to checking accounts.
If you are a lender to the federal government, your money is all there, right in your T-security account at the FRB. All of it. Every cent. So is China's money, Europe's money, Japan's money -- every one of those 12 trillion dollars of federal "debt," all sit safely in FRB T-security accounts.
And despite what the fear mongers tell you, you don't owe a penny of it. Nor do your children, nor do your children's children. The FRB owes it all, and it's all there in T-bill accounts.
So stop worrying about the size of the federal debt. Stop worrying that the U.S. Federal Reserve Bank has too many dollars on deposit. It's not possible for the FRB to have too many dollars on deposit.
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