[kabar]

Instead of borrowing money, they are simply expanding the money supply

So why has our national debt increased by $6 trillion since Obama took office? Why are we paying debt servicing costs of about $200 billion a year?

[Hoodat]

Most of the $6 trillion we have 'borrowed' since Obama took office is new money that has been issued by the Fed. We supposedly now owe this money to the Fed at an interest rate that is virtually zero. When it comes time to pay it back, the Treasury will supposedly turn that money back over to the Fed (i.e. take that money out of circulation) which effectively means that the money will be destroyed.

Of course you know and I know that the government would not dare destroy money that it has when it could spend it instead, so that money will never be paid back. Seriously, what's going to happen? The Fed is going to demand their money back? What for? They can simply print up more.

As for your $200 billion, that is money that is needed to retire existing debt that becomes due each year. This is money that is owed to bond holders who actually do want their money back - primarily foreign investors. Right now, the government handles these repayments by telling the Fed to issue more money. So the Fed adds more money to the money supply, and the government is the first to get their hands on it.

This should explain it better: Quantitative Easing Explained