I think I'm starting to get it.
<So, everything starts with the Federal Reserve. They are the "bank" of the U.S. who are suppose to be in control of all the government's non-tradeable assets (Originally, this was gold).
https://archive.ph/EdPb9
The government wants to access and/or disperse those assets, so the Treasury "sells" a bond to the Fed in exchange for access to those assets. Then those assets that the Treasury has access to, they proceed to use some of the value of those assets on government projects, and/or send the money to the banks controlled by the Fed in the form of currency notes.
https://archive.ph/jZxQ
Then, those notes that the Fed banks receive are then loaned out to the public, with interest due, for the public to do whatever project they want with it.
But, wait a second, if that's how the system works, then that means that whoever takes out the loan, needs to pay the Fed banks back with
both the currency they were originally issued
AND an additional asset that equals the value of the interest due (
For example, they give me $100, and I need to pay back $120, so I give them the $100 plus a coin of silver that equals $20). No matter how you get by it, even when sticking with a gold standard, such a monetary system would demand an ever increasing supply of assets in order to maintain the economy. In addition to that, there's also the fact that the government needs to spend money on projects that result in the government
earning money so that they can pay off the bonds due to the Fed. And, the grand scheme of this is that the Fed receives a constantly increasing amount of assets (
That they cannot do anything with as the assets just sit there).
In some ways, I can see how a bunch of economists reached the conclusion of this kind of system working. First of all, it would require that people would only ever do work that results in their personal wealth increasing, that they would then begin acquiring assets that are worth more than the money they started with. In addition, it would also require that the government only ever spend money on projects that would result in the net wealth of the nation increasing. On top of all that, it relies upon the theory of infinite resources, which holds true when you take all the unexplored terrains of the sea and space into account.
However, there are two immediate downsides to this type of system if not careful. First of all, it would require that a nation either participate in international trade (
So as to bring in assets from outside of your country's borders) or begin colonization efforts in unclaimed territory. The second is that it would require that the bonds and loans never outpace the growth and speed of the economy itself. Now, if neither of these aspects of the country's economy is carefully controlled and monitored, then it will result in the crisis that we have now where too much money exists in comparison to our assets, going towards projects that don't make any money, and expanded beyond what our supply chains can withstand with too much foreign intervention ensuring that more money is leaving the country than coming into it.
Like I said, I cannot fault them for the idea, as it is sound and does appear possible, but such a system is extremely fragile if someone screws up one too many of the processes.