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I confess I haven't watched it (sounds painful), since the basic premise is wrong. The US Treasury borrows money by issuing Treasuries, yes. It then pays interest on those, yes. The Federal Reserve creates money, and then injects it by buying Treasuries (or, recently, MBS's and agency debt, I believe, as well). The vast majority of Treasury notes, agency debt, MBS's, etc. are NOT held by the Federal Reserve. So the amount outstanding does not pose any significant constraint on the Federal Reserve's injection of money. Even if /all/ outstanding Treasury debt were eliminated, that'd just mean the Fed would have to purchase other bonds. Also, when the Federal Reserve buys Treasuries, it receives the interest payments. What does it do with that money? Well, it turns it over to the Treasury. (If you look at the Fed's annual reports, this is actually many billions) So the T-notes held by the Fed to inject the money essentially don't have interest paid on them, because the Treasury is paying the interest to itself, indirectly. |