When the federal government wants to spend more money than it has it can sell treasuries to citizens, sell treasuries to foreign governments, or have the Fed monetize the difference.
Monetization is printing money out of thin air. AKA inflation.
1) The Fed has printed every dollar in circulation. To repay the debt in full, there would be no money left in circulation.
2) When the Fed prints and loans money to the government, only the principal is created. The interest hasn't been created. How can the loan's principal and interest be repaid when that amount of money doesn't even exist?
It meant no more going hat in hand to the people arguing why they should give the government their money. When gold and silver are currency it is an automatic restraint of the people on unchecked government spending and growth. Now, the citizen is removed from the decision making process.
The government now spends what it wants and prints the difference between what it has and what it wants to spend. You are left with the bill each April 15th, and your money devalued every time a dollar is printed. It is an invisible confiscation of your property.
So what did the private Federal Reserve Bank get out of it? So far they are just out TRILLIONS of dollars, right? The nation is off the gold standard, but banks still demand hard assets for "collateral" on loans for paper money. The Federal Reserve no doubt has collateralized the largest debt in history with real assets of the United States. Whether it is gold, real estate, or a combination of things, the debt is collateralized, and the U.S. is bankrupt. There was never any possibility for repayment right from the conception of the scheme. So what did the bankers get out of it? Looks like they are going to get the United States, as that can be the only objective by entering into an arrangement like this.
great explanation by "The Economic Collapse"