Supply of Money

I know this should be a technology oriented blog, but I am starting to be afraid, because I don't understand what is happening.

Money is intrinsically worthless:

"Paper money eventually returns to its intrinsic value - zero." ~ Voltaire - 1729

Our economy is one of exponentially increasing debt. All money (dollar) is loaned at interest from the Fed. The Fed creates money by printing it as basically zero cost. This means that to pay interest you need to borrow more money(get a loan), by so creating more money. Notice the exponential function in all of this. The US economy basically no longer produces anything, and imports everything necessary for basic survival. To import requires purchasing, to purchase requires money, money that needs to be borrowed. Borrowing requires paying interest. How does the government borrow, it borrows from the Fed, which prints more money.

The interesting thing is the bond market which acts as a money sponge. A US treasury bond pays a certain yield. Japan has historically bought billions and billions of US treasuries to the tune of 16% of all US treasury bonds. This is interesting, Japan buys a bond of $100 paying 4% yield. This means that Japan hands over 100 dollars to the US government in exchange for 4% yield. In an essence, $100 dollars disappears from circulation and was replaced by a continuous stream of $4 dollars. Now, $4 dollars has to come from somewhere, it's borrowed from the Fed. This is an ever increasing cycle, growing exponentially fast. What ever money exists in circulation was borrowed at interest. I think all this means is that money can never be destroyed. It can only ever exponentially increase.

What happens on the way back. What happens if the money was to be re-payed to the Fed. The dollar will need to traverse the entire route back. I don't understand how that's possible, but if it was to happen, money would return to its intrinsic value of 0.

A little confusing. Right now, Tokyo's interest rate is extremely low. Tokyo is also trading at about 125 yet to a dollar. Tokyo's rate is around 1 percent, while US and the rest of the western world is at 4 to 5 percent. This means you can get cheap money from Tokyo, convert it into dollars, buy US bonds, and earn a hefty 4.5 percent without doing anything. But you can also leverage your position, by taking on more risk. In this case, you don't buy more yen, but plan to buy later, but also simultaneously use what you don't own. In an essence, you've just created even more supply of money. One day, you will need to reverse you position buy actually buying the yen you promised to buy. This will cause the supply of yen to drop, the demand to sky rocket, and the price to act accordingly. The US dollar is going to continue to drop or in other words go up. The currency must continue to weaken, as it will take more dollars to service the exponentially increasing debt.

China and India will undoubtedly delay the inevitable, but the world economy must and will collapse. An exponential function cannot last indefinitely. This is the conclusion I am drawing, but I must admit I don't understand all the factors. All I know is that I am becoming increasingly uneasy.