the email content from Mish Shedlock:
The Fed prints money by Buying Treasuries from banks. The treasuries go on to the balance sheet of the Fed while banks get the freshly printed money.
To drain money the Fed Sells treasuries to banks and the banks whether they like it or not have to participate.
The Fed can either defend a currency target or an interest rate. It cannot do both. If it wants to lower short term rates it has to supply enough money to do so. If it wants to raise rates to some target it has to drain money.
http://globaleconomicanalysis.blogspot.com/2007/03/is-fed-really-pumping-money.html
The Fed has a problem at 0% because if it wants to lower rates it cannot, no matter how much it prints.
Mish
