This is another individual's explanation of our system - and worth dissecting by those still debunking the idea that precious metals ARE money!
"First, the U.S. government does borrow money from private banks, it sells, through the Open Market Committee, U.S. Treasuries in the form of Notes with various terms of maturity, various forms of Bonds, including Savings Bonds. It sells these security instruments to individuals, to investment houses, pension funds, foreign governments, banks, corporations,etc.
The major holders of our debt therefore, are foreign governments, and about half of our debt has been borrowed from ourselves in the from of inner-governmental purchases.
Now, since it has been very apparent from the beginning that you don't really understand the process on just how this corrupt system works, I will once again attempt to explain it again.
The system that we are now subjected to follows a basic blueprint that was laid out during the Lincoln administration, it was based upon creating an artificial market for debt securities in order to maintain a fiat currency system that could not function without it! Like the Lincoln Greenback system, the government would issue fiat bonds to sale in order to borrow, the fiat notes having no direct interest obligation in and of themselves. However, during the Lincoln administration there were about 6 different types of fiat legal tender notes put into circulation, not just the Greenbacks themselves. Some of these money notes used as circulating tender, had half-year coupons which paid interest every 6 months, some were flat 5% interest notes and then the were compound notes issued also, the entire system created a debt load for the Union that was enormous, in fact, the debt accrued during the Lincoln administration adjusted for inflation would be greater than the debt we now face in this country.
Anyway, the system we have today was based on the system that first began under Lincoln, it is set on a standard of fiat money and fiat bonds.
The United States government issues several different kinds of bonds through the Bureau of the Public Debt, an agency U.S. Department of the Treasury. Treasury debt securities are classified according to their maturities:
Treasury Bills have maturities of one year or less.
Treasury Notes have maturities of two to ten years.
Treasury Bonds have maturities greater than ten years.
Treasury Bonds, Bills, and Notes are all issued in face values of $1,000, though there are different purchase minimums for each type of security.
Investors often shorten the word Treasury to just the letter "T" when referring to these bonds. Thus, Treasury Bonds are known as T-Bonds, Treasury Notes are called T-Notes, and Treasury Bills are T-Bills.
Treasury Bills are issued in three maturities. Bills with 91-day and 182-day maturities are auctioned by the Treasury each Monday. 364-day Bills are auctioned every four weeks on Thursday, 13 times a year. The interest rate of T-Bills is determined at each auction, depending on what bidders are willing to pay. T-Bills do not make interest payments, however. Instead, they are purchased at a discount to face value. They are the only Treasury securities that sell at a discount.
U.S. Treasury Notes are issued in two-, three-, five-, and ten-year maturities. The two year and five year Notes are auctioned each month, while the three year Notes are issued quarterly, and ten year Notes are auctioned six times a year. All Notes pay interest twice a year, and expire at par value.
Treasury Bonds are usually issued in thirty-year maturities, and pay interest twice a year.
No matter what you're buying, you can often get a better deal when you buy direct. And the U.S. Treasury has a special program for individual investors to help cut out the middleman and help you to purchase T-Bonds, Bills, and Notes.
The program is called Treasury Direct, and it allows you to set up an account to make purchases of Treasury securities at auction, along with all the big guns. The main attraction of Treasury Direct is that there are no brokerage fees or other transaction charges when you buy through the program. (There is a $25 per account annual maintenance fee, but only if your account is greater than $100,000.)
To set up a Treasury Direct account, you'll need to fill out an application form that you can download from the program's web site. The minimum investments in Treasury Direct are $10,000 for bills; $5,000 for notes maturing in less than five years; and $1,000 for securities that mature in five or more years. Interest is then paid into your Treasury Direct account, as is a security's par value when it matures.
Now, the tricky part comes from the manner in which the securities are issued domestically and how the amount of that Security is associated with money creation. The FED, normally on orders from the U.S Treasury Secretary, buys a U.S. Treasury Bond by writing a "check" on a "readily liquidity account", basically it is an account that has no money in it, for the amount of the U.S. Security, that check is the deposited in the account of a Commercial Bank at the FED as a reserve, the the bank, using fractional reserve banking can make loans up to its reserve limits, multiplying the reserves several times over. (very simplified explanation here)
Essentially however, this government does not really borrow from banks, the problem with the whole dishonest system is that fiat bonds are securitized by fiat paper money substitutes which are in turn securitized by fiat bonds. The whole thing is a scam with no real asset values behind it, the debt under any fiat regime can never be repaid, the debt is only swapped because of the fact that there are no real assets involved in debt transactions, you cannot pay a debt obligation with a debt obligation, it is impossible, there are only two ultimate options under a fiat monetary system, that is default or inflate the debt away."