🤔 monetizing the debt…. Government Debt The U.S. government often spends more money than it collects in taxes. To cover this gap, it borrows money by issuing Treasury bonds (a type of IOU). These bonds promise to pay back the money with interest in the future. Selling Bonds Typically, the government sells these bonds to investors, such as banks, other countries, and individuals. The Fed Buys Bonds When the Fed decides to monetize the debt, it buys some of these Treasury bonds. But here's the catch: instead of using existing money, the Fed creates new money for this purpose. Creating Money The Fed has the unique power to create money out of thin air. So, when it buys the bonds, it credits the banks' accounts with new money that didn't exist before. …. in summary, monetizing the debt means the Fed is buying government debt with newly created money, which can help boost the economy but also carries risks like inflation. https://image.nostr.build/e2fd914a8761c51952032238a0fb895ccdd0932cec0ae880b27ba67cdf55e2d6.jpg
But what happens with the interest on the bonds?
And from who does the gov't borrow The bonds? From the treasury? So eventually the treasury needs to get that bond back with interest? But the fed is paying for that bond? And is there an maximum amount of days after which it HAS to be printed? And why would the fed pay that bond? It now has a bond, with the promised printed money. But they already printed the money right? So does this bond cease to exist? Or does it need to get back to the treasury itself to get destroyed?