[civilized]

Yes. That's how they control the money supply via Open Market Operations. They either print money from thin air to buy US Treasuries, or they sell US Treasuries and pocket the money received. The money they pocket basically ceases to exist as far as the productive economy is concerned.

[mgh2]

Do you have sources for this? Have they done this in the past?

[civilized]

Glad to help with sources - it took me a long time and many different web searches to understand this. And it still seems like kind of a Rube Goldberg machine, but at the end of the day, this is how it works.

Have a look at the following:

> Open market operations (OMO) refers to the Federal Reserve (the Fed) practice of buying and selling U.S. Treasury securities, along with other securities, on the open market in order to regulate the supply of money that is on reserve in U.S. banks. The Fed purchases Treasury securities to increase the supply of money and sells them to reduce the supply of money. The objective of OMOs is to manipulate the short-term interest rate and the supply of base money in an economy. By conducting open market operations, the Federal Reserve can achieve the desired target federal funds rate by providing or removing liquidity to commercial banks by buying or selling government bonds from or to them.

https://www.investopedia.com/terms/o/openmarketoperations.as...

> The Fed buys U.S. Treasuries and other securities from its member banks and replaces them with credit. All central banks have this unique ability to create credit out of thin air. That’s just like printing money.

> ...

> The Fed can also reverse the effects of quantitative easing (QE). It does this by selling Treasuries and mortgage-backed securities to its banks. The Fed removes dollars from the banks' balance sheets and replaces them with these securities. What happens to the dollars? They vanish. In other words, they go back into thin air, where the Fed got them in the first place.

https://www.thebalance.com/is-the-federal-reserve-printing-m...

Another insight you can get from these articles: the Fed buys US Treasuries from the US government, also with money from thin air. So it's not really possible for the government to go bankrupt or for treasury interest rates to skyrocket, because (1) the government can always raise more money by issuing treasury bonds, (2) the Fed serves as the treasury buyer of last resort, and (3) the Fed will buy the bonds at whatever interest rate it likes. Since it's the Fed's job to keep the economy stable for the US government, it will always do this if the government needs it to.

As evidence that this structure can work, check out Japan, where national debt is currently over 250% of GDP... but interest rates are extremely low. Because Japan's central bank serves as the treasury buyer of last resort, and keeps interest rates low in service to the government.