Forgive us our Debts... As we forgive those with Debts against us...

Perhaps the most controversial position I have taken where backlash seems the strongest in both emails and in public discourse is The Great RE-Boot. Where I simply stated that, "...the FED will simply forgive the USG of its debt obligations...The US dollar will remain the world's reserve currency, US debt to GDP ratio takes a multiple order of magnitude leap to the positive and no body gets hurt."

Much has happened since my posting of October and I present to you additional data from the recent Federal Reserve release to further the conversation:

Click to Enlarge

As you can see, the Federal Reserve of the United States now owns over 1/3 of the total debt obligations of the United States of America.  They have rapidly moved from #3 to #1 in the space of 3 short months!

The Argument:

1. The Federal Reserve creates US Dollars and gives them to the US Treasury to spend on the operations of the US Government.
2. The Federal Reserve accepts Treasury Bonds from the US Treasury.
3. The US Treasury is obligated to pay back the Federal Reserve the face value of the Treasury Bond plus interest.  This is how Government Debt is created.
4. Now if you loaned me money and I never pay you pack you lost your hard earned dollars.  However, if the US Government never pays back the Federal Reserve, the Fed loses nothing because they printed the dollars out of thin air.
5. When Federal Reserve forgives the US Treasury of its debt obligations there is an immediate and significant improvement in the US Debt to GDP ratio which strengthens the country financially.
6. And, more importantly, nothing bad happens to the US debt held by China, Japan, etc. because the US Government still will pay back the interest and principle on the bonds they hold.  IN FACT... they are in a better position to do so.

It's a great plan, and they are going to do it.  But not yet.  So don't worry and don't bet against America.