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Step 1. The Fed Open Market Committee approves the purchase of U.S. Bonds(government issuing debt) on the open market.

Step 2. The bonds are purchased by the New York Fed Bank from whomever is offering them for sale on the open market.

Step 3. The Fed pays for the bonds with electronic credits to the seller’s bank, which in turn credits the seller’s bank account. These credits are based on nothing tangible. The Fed just creates them.

Step 4. The banks use these deposits as reserves. Most banks may loan out ten times (10x) the amount of their reserves to new borrowers, all at interest.

In this way, a Fed purchase of, say a million dollars worth of bonds, gets turned into over 10 million dollars in bank deposits. The Fed, in effect, creates 10% of this totally new money and the banks create the other 90%.

Our national debt props up and makes the investment banks richer. They get to create funny money out of thin air and charge interest on it.
The country hasn’t got richer, the banks have, but the the private debt is 57 trillion, 79% of which has been created since 1990, so the public has gotten poorer and more in debt. The American people don’t have the money to pay off these private debt, that amount of money simply isn’t available.

GDP is decreasing now. Also, I just found the stats for the US GDP 2000-2007:
Average 2.7% per year.That’s about a quarter of that of China’s for the same period, our largest foreign creditor. Our GDP has been growing at a slower rate or decreasing since we signed free trade treaties in the late 80s and early 90s.

I think we should cut spending, however, money is money, there is no reason to borrow and force the taxpayers to foot a higher bill through taxes and inflation when our treasury could issue it’s own money. A National debt is illogical, and taxes should be much lower.