However, the Treasury debt paper sold to third parties will end up passing through the Fed as well, when it is eventually cashed in for money (dollars). Either the Treasury debt paper will be cashed eventually in at a bank, which will deposit that paper with the Federal Reserve as reserves for more money to loan out, or else that Treasury debt paper will be returned to the Treasury Department for the original money, leaving the Treasury Department back at square one, with debt paper it can either (re)sell, or immediately monetize.
By whatever circuitous path it takes, our national debt becomes dollars. It's dollars we spend and dollars that are the reserve currency of the world's financial system. The (private) Federal Reserve has the monopoly on creating dollars, and it does so, in considerable part, in exchange for Treasury debt paper. The American tax payer pays the interest on that debt.
Furthermore, the Federal Reserve in turn uses those Treasuries as reserves in its fractional reserve banking system, creating about $10 of new private debt for each $1 of reserves. So for each dollar of debt that our government has created through issuing Treasury debt paper, some ten dollars of private debt (with typically higher interest rates) are supported as well.
For those more highly leveraged institutions (which seems to include all the major banks, investment firms, insurance companies and hedge funds in the headlines these days) even more debt (and attendant income and risk) is supported.
So, yes, the Fed certainly doesn't earn all, or even most, of the interest that the government pays on its debt. Most of that interest goes to the other investors, large and small, holding that debt paper. But eventually, all that debt paper (Treasuries) is exchanged for dollars (whether actual paper dollars or electronic bank credits), and it is the Federal Reserve that has the monopoly on doing that, by the 1913 Federal Reserve Act.
So, yes, the Federal Reserve has a lot to do with our debt. It monetizes it, and also uses it as part of the asset base for its fractional reserve banking system. Sorry.
Unfortunately, of late, that wasn't nearly large enough an asset base to satisfy the greed of our fine bankers, so they set about handing out mortgages to every Tom, Dick and Harry who could fog up a mirror, and then turning that mortgage debt paper into more fictitiously rated AAA securities which could be used as reserves for more debt.
That would be OK, accept that they did it on such a grand scale as to be able to blackmail us into backing that toxic waste with yet more U.S. Treasury debt, which will eventually, as that debt paper winds through the above circuitous paths, dramatically inflate our money supply and lower further the value of our savings, investments and income streams from such programs as Social Security.
If you owe the bank a million dollars, they own you.
If you owe the bank a trillion dollars, you own them.
AIG, Fannie and Freddie p0wn3d the U.S.
No matter how many times you repeat this error, it still won't be true. The Fed does not buy securities from the Treasury. Sorry.
By whatever circuitous path it takes, our national debt becomes dollars.
The Treasury borrows dollars, so of course the debt is measured in dollars.
The (private) Federal Reserve has the monopoly on creating dollars, and it does so, in considerable part, in exchange for Treasury debt paper. The American tax payer pays the interest on that debt.
The government borrows dollars and of course pays interest on those borrowings. Which has nothing to do with the Fed. Sorry.
Furthermore, the Federal Reserve in turn uses those Treasuries as reserves in its fractional reserve banking system, creating about $10 of new private debt for each $1 of reserves.
The Federal Reserve does not create private debt. The Federal Reserve does not create public debt. Sorry.
So, yes, the Fed certainly doesn't earn all, or even most, of the interest that the government pays on its debt. Most of that interest goes to the other investors, large and small, holding that debt paper.
Glad I could straighten you out on this.
But eventually, all that debt paper (Treasuries) is exchanged for dollars
Bond buyers used dollars to buy the debt in the first place. Of course, when it matures, they receive dollars. They also receive semi-annual interest payments that are dollars.