It’s Not the Debt. It’s Where the Money Goes.
Why UNFTR’s excellent crisis analysis leads to the wrong solution—and what government ‘debt’ actually means
UNFTR’s recent video on the MeidasTouch Network, “Trump Hits PANIC BUTTON and Falls Into DEATH SPIRAL,” documenting Trump’s economic policies and the private credit crisis is excellent research. Max’s BlackRock bankruptcy analysis is devastating. His identification of corporate extraction is spot-on.
But he doesn’t understand what government “debt” actually is.
This misunderstanding leads him to see symptoms correctly while prescribing solutions that would make the crisis worse.
If you’re familiar with Modern Monetary Theory, you’ll recognize some of these concepts. If not, don’t worry—I’m going to walk through exactly how fiat currency works, because getting this right changes everything about how we interpret Max’s evidence.
Here’s why.
What UNFTR Gets Right
The Private Credit Seizure: A BlackRock-backed home renovation company files Chapter 7 with $100-500 million in liabilities, under $100K in assets. All of it owed to BlackRock at 13-15% interest (SOFR + 11%). This is wealth extraction documented in bankruptcy court.
SOFR Above Fed Targets: Overnight lending rates trading above the Fed’s 4% ceiling means the Fed has “lost control.” Market participants don’t trust Fed guidance—they’re demanding higher risk premiums regardless of policy. This means businesses like the one Max documents can’t access credit below 15%, choking the real economy regardless of what the Fed does.
Treasury Account Paradox: Nearly $1 trillion idle in Treasury’s checking account (highest outside COVID) while rates stay high and private sector struggles for liquidity. This shouldn’t be possible.
Corporate Extraction: 40% of post-COVID inflation came from corporations raising prices beyond actual costs—not genuine cost increases. Government put money in pockets, corporations extracted it through price hikes.
We Never Left 2008: The central thesis that America never truly emerged from the Great Financial Crisis is correct. We’ve papered over structural collapse with monetary policy while the real economy stagnated for everyone outside the top 10%.
All solid evidence. So where does the framework break?
The Framework Failure: Misunderstanding Government “Debt”
Throughout the video, Max references the $38 trillion in government debt as a problem requiring solutions. He discusses Treasury auctions, debt service costs approaching $1 trillion annually (15% of GDP), and the need to “fill the treasury” through constant borrowing.
The implication—never quite stated but clearly present—is that government debt is like household debt: borrowed from someone, must be paid back, interest is a burden, too much is dangerous.
This is completely wrong.
Here’s what government “debt” actually is:
Government debt is untaxed currency.
Let me explain this carefully because once you understand it, the entire economic framework changes.
How Fiat Currency Actually Works
Nixon took us off the gold standard in 1971. The system changed. Our policy debates still operate as if we’re constrained by gold.
Here’s reality:
Government spending creates money. It doesn’t borrow it. It credits bank accounts. Money appears.
Taxation destroys money. Dollars return to Treasury and cease to exist.
The “deficit” is money created minus money destroyed in a period.
The “national debt” is cumulative: all money spent into existence but not yet taxed back.
Example:
Government spends $100 billion, taxes back $80 billion
Deficit: $20 billion
That $20 billion exists in the economy (or as Treasury bonds)
“National debt” increases by $20 billion
The debt isn’t owed TO anyone external. It’s money that exists.
You might object: “But bondholders expect their money back!”
They do—and government simply credits their accounts when bonds mature. No external source needed. The “repayment” is just more government spending (creating new dollars), which only becomes a problem if that spending causes inflation by exceeding real resource capacity.
What About Treasury Bonds?
Treasury bonds aren’t borrowing. When someone buys a bond, they exchange dollars (that government already spent into existence) for an interest-bearing savings account. The interest payments are just more government spending—creating new dollars.
Max’s $38 trillion in government debt?
That’s $38 trillion spent into the economy but not taxed back. It’s circulating or parked in bonds. Not owed to China or your grandchildren. Just existing dollars.
Those $1 trillion annual interest payments?
Government spending flowing mostly to wealthy bondholders, who then invest it in assets like stocks and real estate (inflating asset prices without creating jobs) or buy more bonds (keeping money in low-velocity storage), rather than spending on goods and services that would circulate in the real economy. Creating more “debt” because we don’t tax it back sufficiently.
The Visibility Function of Treasury Bonds (That Nobody Discusses)
To understand why the Fed has “lost control” of rates—the SOFR blowout Max documents—we need to examine a critical aspect of Treasury bonds that gets zero attention in orthodox economics: their visibility function.
Think about what happens when someone buys a Treasury bond:
The government knows:
Exactly how much money is parked (to the penny)
Exactly when it will re-enter circulation (maturity date)
Exactly how much interest will be paid (new money creation)
Exactly who holds it (for taxation and tracking)
This allows precise currency management.
When the Fed is deciding how much new money to create, they can account for bonded money. If $10 trillion is parked in bonds with known maturity schedules, they can model exactly when that money returns to circulation and plan accordingly.
The early withdrawal penalties on bonds and CDs aren’t primarily punitive—they serve a predictability function. When money enters and exits circulation on known schedules, currency management becomes possible. The system can breathe predictably.
Now contrast this with money parked in the Cayman Islands, Panama, or other offshore tax havens.
The Fed has absolutely no idea:
How much is actually there
Who controls it
When (or if) it will return to circulation
Whether it’s being used for transactions (velocity) or just sitting dormant
If it even exists anymore or has been moved
This is why offshore tax havens aren’t just “tax avoidance”—they’re active sabotage of currency management.
When wealthy individuals and corporations extract wealth from the productive economy and hide it offshore:
It leaves circulation (reducing velocity, starving the real economy)
It becomes invisible (Fed can’t account for it in money supply calculations)
It evades taxation (can’t be destroyed to control inflation or extraction)
It stays extracted permanently (no known return date, no accountability)
This creates a measurement crisis that makes coherent monetary policy nearly impossible.
If the Fed thinks there’s $X in circulation but there’s actually $X + $trillions hidden offshore, their policy decisions are based on fundamentally incomplete data. They might:
Create too much money (because they can’t see the hidden money)
Keep rates too low (because measured velocity appears lower than reality)
Miss inflation signals (because extraction is invisible)
Lose control of key rates (hello, SOFR blowout)
Remember Max’s documentation that SOFR is trading above Fed targets?
That the Fed has “lost control” of overnight lending rates? That private credit is seizing at 15% while the Fed’s target ceiling is 4%?
Part of the reason is they’re flying blind.
They’re trying to manage visible money while vast invisible sums distort every signal. It’s like trying to navigate using instruments that only show you 60% of the aircraft’s actual position and velocity.
The bond “penalty” for early withdrawal isn’t punitive—it’s about preserving system predictability.
When you lock money in a 10-year Treasury:
Government knows it’s not circulating for 10 years
Can plan new money creation accordingly
Knows exactly when it returns to circulation
Can see and tax the interest when paid
When you hide money in a numbered Cayman account:
Government has no idea it exists
Can’t plan around its impact on money supply
Has no idea if/when it returns
Can’t tax it because it’s unreported
This is why those benefiting from extraction LOVE offshore tax havens and HATE financial transparency.
Offshore havens allow:
✓ Extraction without taxation
✓ Hoarding without visibility
✓ Sabotage of currency management
✓ Plausible deniability (”we don’t know how much is there”)
✓ Permanent removal from productive economy
Bonds require:
✗ Declared ownership (can be taxed)
✗ Visible amounts (can be tracked)
✗ Known maturity schedules (can be planned around)
✗ Domestic custody (can’t hide it)
✗ Reported interest (must declare income)
When someone reports bond interest on their tax return, the government can cross-reference holdings and verify amounts. When someone doesn’t report Cayman holdings, there’s no cross-check mechanism unless they volunteer the information—which they don’t, because that’s the entire point.
This explains another dimension of the extraction mechanism:
The wealthy don’t just avoid taxes on their extracted wealth—they make that wealth invisible to monetary management itself. They force the Fed to operate with corrupted instruments while claiming the Fed is “incompetent” or has “lost control.”
It’s like sabotaging someone’s GPS, then mocking them for getting lost.
When Max documents SOFR blowing out and the Fed losing control, this invisibility is part of why:
The Fed is trying to manage currency velocity and credit conditions based on incomplete data because vast extracted sums are hidden offshore—invisible to their measurements, unaccountable to taxation, and permanently removed from circulation.
The difference is system-critical:
Bonds = visible, managed, predictable money storage
Enables: Accurate money supply measurement, planned policy responses, taxation of returns, predictable circulation patterns
Tax havens = invisible, unmanaged, unpredictable extraction
Enables: Extraction sabotage, policy blindness, tax evasion, permanent velocity destruction
One enables functional currency management.
The other actively sabotages it while enabling permanent wealth extraction.
When commentators wonder why the Fed “can’t control” rates anymore, or why SOFR blows out despite “loose” policy, or why velocity keeps declining despite stimulus—this is part of why.
Massive extracted wealth has been made invisible to the very systems designed to manage currency. The instruments are broken by design.
And those who broke them are the same ones screaming about government debt and demanding austerity.
Applying the Correct Framework to UNFTR’s Evidence
Now here’s why this reframing matters: When you misunderstand what government debt is, you misdiagnose where money is actually going. The problem isn’t that $38 trillion exists—it’s that wealth extraction concentrates it at the top, removing it from circulation while forcing government to spend more just to maintain economic activity.
Let’s revisit Max’s evidence with this understanding.
The BlackRock Bankruptcy
Company drowning in 15% debt, owing $150M with no assets. Loans structured as SOFR + 11%.
Max’s implicit framework: Market dysfunction related to government debt.
Correct framework: Wealth extraction operating as designed. BlackRock lends at extractive rates, wealth flows from productive businesses to financial asset managers, real economy deteriorates.
Solution: Tax BlackRock’s interest income at 80%. Suddenly 15% lending generates 3% after-tax—not worth the risk. Capital seeks productive uses. Companies get better terms. Workers keep jobs.
But only if you understand taxes prevent extraction, not that they “collect revenue.”
The SOFR Blowout
SOFR trading above Fed’s 4% ceiling = Fed “lost control.”
Max’s framework: System stress from debt burdens.
Correct framework: Wealth hoarded rather than circulating. Banks don’t trust counterparties because assets at inflated valuations. Credit tight despite “loose” policy because extracted wealth isn’t circulating.
Solution: Tax hoarded wealth. Force circulation. When money pools in asset markets, it’s not available for productive lending. Progressive taxation forces that money back or destroys it, lowering risk premium.
Corporate Inflation Extraction
40% of inflation = corporations raising prices beyond costs.
Max concludes: Don’t send money to people.
Correct framework: Problem wasn’t sending money—it was not taxing back corporate windfall.
Solution: Tax excess corporate profits heavily. Either discourages price hikes or claws back excess. Maintains velocity, prevents extraction.
Government spending + progressive taxation = stable prices. Government spending + insufficient taxation = inflation.
But orthodox economics taught us spending causes inflation, so cut spending rather than tax extraction.
The Treasury General Account
Max shows nearly $1 trillion sitting idle in the Treasury’s checking account—highest outside COVID—while rates stay high and credit stays tight.
His implicit framework: The government is hoarding reserves while the economy struggles, and soon this will empty out to pay bills from the shutdown.
The correct framework: This shows extraction is so severe that even massive government reserves don’t ease credit conditions. The money isn’t the constraint—distribution is.
When wealth is extracted and concentrated at the top, adding more money to the system doesn’t help because it gets extracted immediately. The TGA could be $5 trillion and rates would still blow out because the problem is extraction velocity, not money supply.
What’s the solution?
Spend that money on infrastructure and social programs (creating jobs and activity), AND tax the extraction that follows. Break the extraction cycle rather than just adding more money for corporations to extract.
But if you think government spending must be “paid for” by taxation or borrowing, you can’t see that spending creates money and taxation destroys extraction—they’re two parts of one currency management system.
Why Trump’s Policies Are Inflationary
Max correctly identifies Trump’s proposals—50-year mortgages, tariff dividends, direct healthcare subsidies—as inflationary disasters. But let’s examine why with the correct framework.
The 50-Year Mortgage:
Average first-time buyer is 40. Mortgage payoff at 90. Front-loaded interest means no principal paydown for 15-20 years. Lower payments mean sellers raise prices.
This isn’t bad policy. It’s the system adapting to maintain extraction. When workers can’t afford homes, you don’t raise wages or build affordable housing—you extend extraction. Longer mortgages = more lifetime interest payments to financial institutions.
The solution: Tax land value. Tax speculation. Tax second homes heavily. Destroy the extracted wealth to reduce asset inflation and force housing toward use-value rather than speculation.
The Tariff Dividend:
Trump suggests $2,000 to every American from tariff revenue. Bessent stammers because there’s no plan.
Why inflationary? Corporations would immediately raise prices (extraction), that extraction wouldn’t be taxed back (velocity drops, inflation rises), and the “revenue” already came from consumers paying higher prices due to tariffs.
The solution: Don’t send $2,000 once. Ensure wages rise with productivity through strong labor law and progressive taxation preventing price gouging.
Direct Healthcare Subsidies:
Same thing as ACA subsidies but unmoored from insurance mandate. Many wouldn’t buy insurance, premiums spike, corporations extract through various price increases.
The actual solution: Medicare for All. Single-payer, everyone covered, cost controls through negotiating power.
“But how do we pay for it?”
Wrong question. Right question: Do we have the real resources? Doctors, nurses, hospitals, medical technology? Yes. If real resources exist, government spending mobilizes them. Progressive taxation prevents extraction of excess profits.
The Debt That Isn’t Debt
Let’s return to the core issue: Max references $38 trillion in government debt throughout his analysis as if it’s a constraint or problem requiring solutions.
It’s not.
That $38 trillion represents money that has been spent into the American economy over decades and hasn’t been taxed back. It’s in bank accounts, it’s circulating as commerce, it’s parked in Treasury bonds.
Is all that money circulating productively?
No. Much of it has been extracted and is hoarded in asset markets—stocks, real estate, financial instruments. This is why we have:
Asset price inflation (stocks, housing) decoupled from wage growth
Wealth concentration (top 10% own 70% of wealth)
Declining velocity (money isn’t circulating, it’s accumulated)
Is that a problem?
Yes! But the problem isn’t the $38 trillion. The problem is extraction and hoarding.
What’s the solution?
Progressive taxation that prevents extraction and forces circulation. Tax wealth, tax capital gains as ordinary income, tax excess corporate profits, tax land value, tax financial transactions.
This doesn’t “raise revenue to pay for spending.” It destroys hoarded money or forces it back into circulation, maintaining velocity and preventing asset bubbles.
But Max’s framework—like most orthodox economics—sees debt as the problem and taxation as a burden.
So he implicitly prescribes austerity (cut spending, reduce debt) when the actual solution is aggressive progressive taxation to prevent extraction.
The Interest Payment Red Herring
Max notes that debt service is approaching $1 trillion annually—roughly 15% of GDP—and frames this as a “cash flow problem.”
Let’s examine this with the correct framework.
Where do those interest payments go?
Mostly to wealthy bondholders—individuals, institutions, foreign governments with excess dollars to save. The interest payment is government spending flowing to entities that generally... save it or invest it in assets.
So what actually happens?
Government pays $1 trillion in interest
That money flows to wealthy bondholders
They invest it in assets or save it (low velocity)
It doesn’t circulate in the real economy
Government must spend more to maintain economic activity
This creates more “debt”
Which generates more interest payments
Which flow to wealthy bondholders
Cycle continues
What’s the problem?
It’s not the interest payments themselves. It’s that we’re not taxing back the interest income paid to wealthy bondholders.
If we taxed bond interest income at 70-80% for high earners (like we did in the 1950s—the actual golden age of American growth), that money would either:
Be destroyed (reducing inflationary pressure)
Force bondholders to seek productive investments instead (increasing velocity)
The “debt service burden” is a feature, not a bug, of insufficient progressive taxation.
But if you think of taxes as “revenue” rather than “extraction prevention,” you can’t see this.
Why Even Smart People Miss This
UNFTR documents:
Private credit seizing at 15%+
Corporate extraction of 40% of inflation
Wealth concentration accelerating
Fed losing control of rates
Systemic fragility across dimensions
We never recovered from 2008
All correct. All pointing to extraction.
But when someone concludes “we have a debt problem,” the implicit prescription is always austerity: cut spending, reduce deficits, pay down debt. This would drain money from an economy already starved by extraction, worsening the crisis Max documents.
Orthodox economics leads toward austerity when the solution is progressive taxation (prevent extraction, maintain velocity).
Understanding fiat currency correctly requires accepting five uncomfortable truths:
Government “debt” isn’t like household debt
Deficits maintain activity during extraction
Taxes control extraction, not collect revenue
Inflation control is about taxation, not spending cuts
People screaming about “debt crisis” are often the extractors
This is massive cognitive restructuring. Easier to see symptoms while maintaining orthodox prescriptions than rebuild your entire framework.
But the prescriptions don’t work when the framework is wrong.
Two Types of Velocity Death
The offshore haven problem is part of a broader issue: money that stops circulating.
Tax havens represent invisible hoarding—money the Fed can’t see, measure, or account for. But there’s also visible hoarding that’s equally destructive to velocity, even though the Fed can see it:
Stock portfolios held for decades → Money locked in shares, not circulating in real economy
Real estate speculation → Wealth stored in property, extracted from productive use
Corporate cash hoards → Profits sitting on balance sheets instead of wages or investment
Cryptocurrency wallets → Digital hoarding rewarded with appreciation (and completely outside traditional financial measurement)
The critical difference from savings accounts:
When you put $10,000 in a savings account:
Bank can lend $9,000 through fractional reserve
That $9,000 circulates in the economy
You’ll eventually spend it (saving FOR something)
It remains visible and available
When you lock $10 million in a stock portfolio:
Can’t be lent by banks
Doesn’t circulate in real economy
Held indefinitely (buy-and-hold)
Rewarded with appreciation (incentivizes more hoarding)
Both types—invisible and visible hoarding—kill velocity. But they require different solutions:
Invisible hoarding (tax havens): Transparency, reporting requirements, international coordination
Visible hoarding (portfolios, assets): Progressive wealth taxes, capital gains as ordinary income, corporate profit taxes
The Fed can see visible hoarding but has no tools to force circulation. That requires fiscal policy—exactly what orthodox economics says we can’t afford because of the “debt.”
When Max documents that 40% of inflation came from corporate price gouging, where did those profits go? Not to workers (would circulate). Not to R&D (would circulate). To stock buybacks and shareholder portfolios—visible velocity death that the Fed can measure but can’t fix without progressive taxation.
Conclusion
UNFTR has assembled the evidence brilliantly. The final step is recognizing what government debt actually represents: not a burden we owe, but extraction we haven’t yet clawed back.
The problem isn’t too much government spending.
The problem is too much extraction that hasn’t been taxed back.
The solution isn’t austerity.
The solution is progressive taxation preventing extraction while government spending maintains activity.
The $38 trillion “debt” isn’t a constraint. It’s untaxed wealth that’s been extracted and hoarded.
Tax the extraction. Maintain the velocity. Fund the activity.
That’s how fiat currency actually works.
Kailey Wyatt writes about economics, systems, and structural dynamics. Previous articles include “Why This IS a Systemic Crisis,” “The Dollar Illusion,” “Bitcoin: The Misdirection Economy,” and “The Pattern.”