Here's how it happens. They call this "quantitative easing".
1) The big banks buy the US debt. The Fed calls them "primary dealers", but they are the same "too big to fail" banks that we were forced to bail out. The banks draw interest from the US treasury -- OUR tax money.
2) The bailed-out banks then "park" the treasuries at the Fed.
3) After a few days or weeks, the banks "sell" the treasuries to the Fed.
4) The Fed gives them cash for those treasuries. But the banks continue to draw the interest.
5) The banks buy stocks, commodities, and more treasuries with the cash. Prices go forever higher.
The Fed swears that this is prosperity. It's really just permanent debt and high inflation!
Is there any difference between this process and the Fed just printing more dollars to buy the debt? Here's the slight difference:
If they just "monetize the debt", the debts are paid off and no one gets the interest. If they use quantitative easing, WE pay taxes to pay INTEREST on the debt! It's the same thing, except that the banks get paid hundreds of billions in interest payments every year from OUR pockets. This is their compensation for creating trillions in bad debt, taking undue risk, and sticking it to the taxpayers? They get bailed out of the mistakes, and PAID to do it?
So why not just monetize the debt? At least that way, we don't have to pay $300 billion in interest every year! This proves that the Fed's real razon d'etre is to keep us permanently in debt and pay the banks, NOT to create jobs or grow the economy.
