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Three Pieces of Information Are Required:

In order to make an accurate assessment regarding who pays the bills when the government engages in deficit financing, three factors must be considered -- principle, interest, and where the value in the loaned-money comes from. 

Withholding the Truth:

With regard to who pays the bills for government deficit financing, the standard message   reads like this:  "If the government borrows money, our children and grandchildren will have to pay it back."   On the surface, this statement sound like we, of this generation, are getting a free ride at the expense of our children and grandchildren.  

But that statement is only partially true.   Vital pieces of information are left out. ^**1   It gives a false impression because it speaks only a portion of the truth and it reports that partial truth as if it were the complete truth.   

Is the cost of deficit financing really 
   transferred to the future generations?   

The answer depends upon where the money comes from.   If the money is borrowed in the form of a long-term loan and if it's from a person or an organization that actually has money to loan,  then the principle must be paid back by future generations.   The interest is usually paid back regularly (monthly, quarterly, annually) starting immediately and continuing until the loan is fully paid off.   The money to pay the interest comes out of the pockets of the present generation and from future generations.

In this type of loan, the purchasing power of the borrowed money comes from those who lent it.   The lender can no longer spend the money.   The lender has transferred his/her/its money (his/her/its goods and services)  (his/her/its purchasing power)   to the borrower (in this example, the government) with the expectation that it will get the principle back plus interest.  The lender's expectation is that he/she/it will be wealthier at the end of the lending period than he/she/it is at the time the loan was made.    

There are two factors in this process which, all too often turn, the lender into a looser.   One is the tax that the government extracts form the interest and the second is inflation which underhandedly pulls the value out of the lender's money.   We'll cover both of these factors in text below,  but first, let's look a what happens when the Government deficit finances.    When the Government wants to borrow money one of the major lenders is the Federal Reserve.

Money from the Federal Reserve:

When borrowed money comes from the Federal Reserve, is the cost really transferred to the future generations?   The answer is also partially "yes,"  but mostly "no."  When the Federal Reserve (which is made up of twelve private banks) loans money to the federal government it doesn't really loan anything.   It simply makes an entry in its computer ledger saying in essence:  We, the twelve banks of the Federal Reserve, loan you, the Unites Sates federal government,  XXXX billion dollars.   In return, you, the U. S. Government must pay us, the banks,  five  percent interest in the loan.  (The rate of interest varies.  On average, its about five percent.)    

Regarding the Federal Reserve, let's examine each of the three factors.   First is the return of the principle -- the borrowed money.  The way the law is designed, the federal government can't do as the Federal Reserve does and simply make an entry in its ledger and claim the debt repaid.   It must pay back the loan (the principle) out of the government's income.  ^**2   That income comes from taxes.   Taxes come from you and me and from future generations.    This portion of the bill will be paid by future generations.  

Payment of The interest  on loans to the Federal Reserve begins  immediately and continuing until the loan is fully paid off.   That money to pay the interest comes out of the pockets of the present generation and from future generations.

Here's the Catch 22:   One cannot borrow or lend something that doesn't exist.   When the government borrows money it's actually creating receipts for goods and services that it doesn't have.   So where do those goods and services come from.   They are taken out of the existing economy.   

The bill for money borrowed from the Federal Reserve is not paid by future generations.   It's paid by you and me.   It's paid almost immediately and it's paid in the form of higher prices for gasoline, food, rent, medicine, and everything else we buy.  ^**4     

The Tax & Inflation deceptions:   

Two additional, hidden-in-plain-site deceptions are  the tax on the interest from money loaned to the government   and   the loss in value (loss in purchasing power)  of the loaned money.  The actual numbers change regularly, but here's an example of how the public is milked for money.  

Taxes:   If you loan $10,000 to the Government and you receive five percent in interest, at the end of the year, you have $500 in interest.   The Government claims that you owe taxes on that $500.   If the tax rate if 20%, you must give $100 back to the government.   

Inflation:   The government's stated inflation rate is another act of deception.   This may have changed, but for years, they excluded the cost of gasoline and food and who knows what all else from their published rate of inflation.   They claim that the present inflation rate is about 4%,  (April 2009)  but in terms of what you and I are actually paying for goods and services the inflation rate is more like ten percent.   If the effective  inflation rate is ten percent, at the end of the year, it will cost you $11,000 to buy what you could buy a year ago for $10,000.   Your original $10,000 will then buy only $9,090 worth of goods and services.  [10 divided by 11 = 0.9090]   Add the $400 you earned in interest, and, at the end of the year,  your combined principle and interest is only $9,490 in purchasing power.   Even if the inflation rate were only five percent, you'd still have only $9,990 in purchasing power.   

The Bottom Line:   Considering these factors, who would loan money to the U.S. federal government?  Three classes of people:   1)  Those who have not studies these issues and believe the government's stories.   These people have no idea of what's happening to their money  2)  An economic idiot, and  3)  Someone whose intention was to deceive the public; someone who  would intentionally loan something that has no value and charge interest on a make-believe loan.   

What All This Means to You

What this means to you:   Inflation increases the price you pay for goods and services.   If you are on a fixed income, such as social security, the number of dollars you have has stayed almost the same while the price you pay for goods and services has increased dramatically.   You paid into that system with expensive dollars and now you are getting paid back with deflated (cheap)  dollars.   

For example, a dollar you paid into the Social Security system  in 1950 was worth about ten times a much as the dollar you are getting back today.   A loaf of bread in 1950 costs nineteen cents.   Today, you pay close to about dollars for an equivalent amount of bread.   

Where did all that purchasing power go?   The Government took it through a secret tax.   That secret tax is government deficit financing.   The result is called inflation.  ^**4  

Who Would Lend 480 billion dollars to the U. S. Government?

This brings up the question:  "Where did Bush and Company get the 480 billion dollars that they've 'borrowed' to murder people in Iraq?" ^**6    Most of the money came from the Federal Reserve.   But as you can see by the information above, the government didn't borrow real money from the Federal Reserve.   It borrowed make-believe money.  It borrowed Fiat Money. ^**3    Fiat money is a legalized form of counterfeit money.   It's designed to give the public the illusion that the government simply borrowed money to be paid back later by our children and grandchildren.   

The Bottom Line Truth:

The federal government is controlled by the super-wealthy, Money & Profit/Dopamine addicts.   You and I are being forced into playing the losers in a huge,  out-of control,  national-level,  ponzie scheme.  If the scam continues as is, a major, financial  Crash & Burn is inevitable.   Fortunately there's an incredible simply way out ot this mess.   You can find that way at:  http://www.TLC333.com/npo.html