Not literally, of course. The point is that once the bonds are in the possession of the Fed, they have ZERO effect on the private sector's ability to spend. They might as well have been burned...or buried in a hole.Libertarian666 wrote:So the Fed burns the bonds that they buy?
Think of it this way...
If you walked into a laundromat and stuck a $20 T-Bond into a change machine, and a whole bunch of quarters started pouring out everywhere, I suppose you might believe that you just hit the jackpot. Yippee! High-fives all around. Drinks on the house.
But, the fact of the matter is that despite all the quarters spilling onto the floor, all the people in the laundromat — including yourself — are no richer. And that T-Bond you stuck in the machine can no longer be used to barter for anything in the laundromat. For all practical purposes, the change machine might as well have burned the T-Bond. No inflation takes place within the laundromat.
Make sense?
Oh and the T-Bond you stuck in the machine no longer provides you with any future interest income. You just have a bunch of lousy quarters. Oh well.