Makes quite a crazy shell game, too. Don't want to play? Tough shit.
You're exactly right. It actually has to work that way. Participation has to be compulsory or the shell game fails. Every dollar created and loaned into existence comes with interest. When you pay that dollar back the balance sheet is 'zero' except that you/population also has to borrow the dollars it needs to pay that interest. Every dollar that's borrowed to pay interest ALSO comes with interest...and so on...and so on.
This is why the money supply blew up in the 1920s, after the creation of the Fed in 1914, leading to the great depression...also why it blew up in 71 (after decoupling from the gold standard) and gave us the inflation of the 70s...also the reason why 1.8 trillion dollars of "new money" had to be created in 2007/2008 to plug the liquidity problem. Without constant "new" debt the system becomes deflationary and mathematically will implode.
This is why Hank Paulson 'Secretary of the Treasury' threaten martial law and tanks in the streets if the bailout didn't happen in 2008:
http://macedoniaonline.eu/content/view/4547/61 This why the debt ceiling debate is joke every year...the debt HAS to increase or the Ponzi scheme fails.
This is why the Fed publicly states that inflation of 2-4% a year is their goal. Inflation is an increase in the supply of money.