What changed your mind?
Well, because (this is painful) I am wrong in that the FED is directly buying all these new issue bonds.
But the US government is IMO somehow financing a lot of its cash needs via the FED, but in ways that are less obvious and difficult to understand. I have read that the FED is essentially selling short term bonds to buy 15-20 year bonds, maybe that works out to an accounting net. But it said that the FED has pretty much taken over the purchase of the long term stuff, that outside of other central banks, no one is buying the long term stuff.
Look, the federal government has expenses that have to be paid for every year, and keeping some of them off the books as “liabilities” may make the account ledger look better, but they still have to be financed.
I have read that the FED buys bonds through surrogates to make it appear that there is more interest in US debt than there really is. The technicalities are confusing to me, but I have no trouble believing that to be the case.
I do not believe that the US is legitimately selling the volume of Treasurys required to finance the tax shortfalls. The reported $1.3 trillion deficit is in reality much greater, as much as another $1/2 trillion.
The FED is creating gargantuan amounts of electronic money now. Some of that money must be getting used to purchase Treasurys by someone. What backroom deals are enticing other central banks to buy US bonds? Guaranteed lines of credit from the FED?
I’ll also fall back on my tin foil hat logic. If it quacks like a duck and has feathers and webbed feet, the stuff left behind isn’t cow patties.