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I could agree with the last part.

...since Federal Reserve Banks return all income above operating costs to the Treasury account and presently hold more than enough Treasury bonds to cover their costs, the interest rate does not matter...

When the Fed buys the bonds directly from the Treasury ~ which would be a change to current policy but not unprecedented ~ it actually is the government paying for important needs without financing through debt. One arm of the government "owes" interest to another arm of the government that is required to hand the interest right back again ...

Could you elaborate here further? Who decides the operating costs, in what paper are they paid? If the interest rate does not matter, why it is there?

Do you mean, the Fed is a government arm without profit interests? What is the current policy?

by das monde on Thu Oct 14th, 2010 at 06:06:41 AM EST
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