Every “dollar” in circulation is created based upon debt. Congress gives T-securities (bills, bonds, or notes) to the Federal Reserve, and the Fed credits the Treasury’s account with the value of the securities. Voila !!! New fiat money. Congress can spend up to the limit of the account and the Fed will honor the checks.

The problem is that the arrangement obligates the US to pay interest on the principal thus generated. The interest has never been generated. It does not exist. It is impossible to culminate the agreement. The only way the interest can be paid is to generate more principal and pay the interest on the initial securities from the principal on the later securities. It is the classic Ponzi, par excellence.

If a Ponzi scheme does not expand, it totally collapses. Additional expanding at this time merely postpones the inevitable collapse.

Additional expounding on the mathematical rip-off by the Fed, including how the Fed obtains the ENTIRE VALUE of ALL issued securities is posted at http://www.scribd.com/doc/43482648/rip-off-by-the-FR
and http://www.scribd.com/doc/43465593/QE2-Rational-Course-of-Action