This is also not accurate. The Fed returns interest on bonds back to the Treasury. So once the Fed owns Govt Debt the debt has for all practical purposes been monetised. The Fed is not some external entity. It is basically a dept of the Treasury. Don't confuse form with substance.
And
you clearly don't know what you're talking about.
Read past all the fancy text, and look at the bare facts of how things work. The Federal Reserve System is in fact a bunch of carefully set up loopholes.
First, there
is Federal Reserve
stock, and this stock pays
dividends. The stock is held by
banks. This stock does not grant the power to the stockholders to elect members of the board of governors (this is done by Congress), but instead it gives them a power worth much more: The power to manage, as shareholders, the 'district' Reserve Bank in which they operate. For example, if I'm a california bank, I, along with other shareholders in District 12, will have the power to manage The Federal Reserve Bank of San Francisco. Now, what happens if I am bought out by bank from New York? Then the New York bank gets represented in both District 12, and District 1. Through such a gradual accumulation of power, the stock of the Federal Reserve Bank has accumulated into the control of the few.
The Fed does return interest on bonds back to the Treasury... wait for it... after paying all expenses. Dividends are treated as expenses. As such, all the Federal Reserve has to do in order to make sure that it constantly sucks money out of the government, rather than ever contribute any to it, is manage their balance sheets that they never make too big of a profit and instead stick to a 6% profit each year (6% is the rate paid out in dividends). Since the Fed's balance sheets are never audited because, obviously, it is controlled by the banks and why would they want to audit themselves, this is an extremely easy thing to do.
What you have to understand is that this debt, by definition, can never be monetized. You see, in order for a new dollar to come into existence, it has to be done so with the authority of the fed. But the fed won't just make the dollar and give it to the Government, it will only lend it to the government, at interest. In order to pay back that debt, they would have to return all dollars in existence to the Federal Reserve, because thats how many dollars the Federal Reserve lent to them, because they can never make their own money. But, hold up! There is also interest on that debt. Since there is no more dollars in existence to pay back this interest, the only way to avoid default is to borrow MORE from the fed, just to pay back the existing debt. The entire debt can never, ever, be paid off. The Federal Reserve just keeps on collecting on its always-increasing debt. These interest payments are passed on to the American people in the form of Income Tax, a tax which never existed before the Federal Reserve was formed.
Then, why doesn't the Federal Reserve show up as having made a huge profit and have to return some of that to the Treasury? Simple, because it uses the excess money to buy even more bonds, at even higher prices. The Treasury never sells bonds directly to the Federal Reserve. Instead, it sells bonds to the banks that own the Federal Reserve. The banks take a cut, and raise the prices of the bonds, and re-sell them to the Federal Reserve. That's why interest rates are so low, because the debt has increased so much, that if interest rates were any higher, then the Federal Reserve might have to return some of its profits to the Treasury. But they keep it low enough so that they are always able to 'leak' some of the excess profits back to the banks through bond mark-ups.
