[cs702]

Cash received in the form of interest payments (income) is sent to the US Treasury.[a]

Cash received in the form of principal payments is "destroyed" (by debiting outstanding assets with corresponding credits to outstanding liabilities in the Fed's balance sheet).

[a] https://www.wsj.com/articles/higher-interest-rates-fuel-loss...

[landoftheice]

And if one ponders this dynamic for long enough, one realizes that there is not enough money in existence to pay all of the debt in existence. Or in other words, a pressure cooker type system of infinite growth is created. By no fault of their own, a certain number of debtors are guaranteed to default on their loans - the pressure cooker rat race. And in practice the next traunch of currency created through debt in say, a 10 year period, is necessary to pay off the previous 10 years of debt that otherwise would not have enough currency to pay off - the 'infinite' growth dynamic.

In this system the only thing worse than creating more debt (currency) is to not create more debt (currency).