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I agree with @1muflon1, I just want to add some clarification I feel needed that from there the misunderstand stems:

The misunderstanding is that the CB does not hold any currency. So your example of $ $300.000 of CB currency holding is wrong. When the CB buys a bond from the government it holds the "object" against the money it has created out of thin air that transferred to the government. So in your numbers all stays the same except that CB has 0 and yet transferred 20.000 to the government. so the amount of money increased by 20.000. In other words the CB start with 0 and always stays with 0 curreny.

When the bond matures, the reverse happens - the government repays the loan to the CB and the created money is destroyed. This is called QT. Thus a program of QE implies that the CB needs to buy more bonds than the bonds he currently holds and set to expire.

The fact the the CB must hold an asset (bonds) against the liability of the new money created, this fact means that the CB can't "print money" (or do QE for that matter) without theoretical limit.


Edit: As of the coupon (interest) payment, I deliberately chose to leave it from the main answer because I felt this is not the crux of the matter. But since it was asked in comment here is what happens (at least in the US CB, other CBs might have act differently):

unlike the principal payment, the interest payment of treasury securities is not destroyed. According to the Fed:

The Federal Reserve does not receive funding through the congressional budgetary process. The Fed's income comes primarily from the interest on government securities that it has acquired through open market operations. After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury.

It should be noted that the Fed also pays interest (IORB) on deposits of some commercial banks and pays interest to some parties under Reverse Repo operations (RRP).

So the Fed has both interest income and expense. Usually the case has been that the Fed is profitable (and was able to return some to the treasury), but just last months the Fed has expectedly turned into losing money monthly, due the the rising interest rates it pays, while it is "stuck" with government securities whose interest coupon is lower.

I agree with @1muflon1, I just want to add some clarification I feel needed that from there the misunderstand stems:

The misunderstanding is that the CB does not hold any currency. So your example of $ $300.000 of CB currency holding is wrong. When the CB buys a bond from the government it holds the "object" against the money it has created out of thin air that transferred to the government. So in your numbers all stays the same except that CB has 0 and yet transferred 20.000 to the government. so the amount of money increased by 20.000. In other words the CB start with 0 and always stays with 0 curreny.

When the bond matures, the reverse happens - the government repays the loan to the CB and the created money is destroyed. This is called QT. Thus a program of QE implies that the CB needs to buy more bonds than the bonds he currently holds and set to expire.

The fact the the CB must hold an asset (bonds) against the liability of the new money created, this fact means that the CB can't "print money" (or do QE for that matter) without theoretical limit.

I agree with @1muflon1, I just want to add some clarification I feel needed that from there the misunderstand stems:

The misunderstanding is that the CB does not hold any currency. So your example of $ $300.000 of CB currency holding is wrong. When the CB buys a bond from the government it holds the "object" against the money it has created out of thin air that transferred to the government. So in your numbers all stays the same except that CB has 0 and yet transferred 20.000 to the government. so the amount of money increased by 20.000. In other words the CB start with 0 and always stays with 0 curreny.

When the bond matures, the reverse happens - the government repays the loan to the CB and the created money is destroyed. This is called QT. Thus a program of QE implies that the CB needs to buy more bonds than the bonds he currently holds and set to expire.

The fact the the CB must hold an asset (bonds) against the liability of the new money created, this fact means that the CB can't "print money" (or do QE for that matter) without theoretical limit.


Edit: As of the coupon (interest) payment, I deliberately chose to leave it from the main answer because I felt this is not the crux of the matter. But since it was asked in comment here is what happens (at least in the US CB, other CBs might have act differently):

unlike the principal payment, the interest payment of treasury securities is not destroyed. According to the Fed:

The Federal Reserve does not receive funding through the congressional budgetary process. The Fed's income comes primarily from the interest on government securities that it has acquired through open market operations. After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury.

It should be noted that the Fed also pays interest (IORB) on deposits of some commercial banks and pays interest to some parties under Reverse Repo operations (RRP).

So the Fed has both interest income and expense. Usually the case has been that the Fed is profitable (and was able to return some to the treasury), but just last months the Fed has expectedly turned into losing money monthly, due the the rising interest rates it pays, while it is "stuck" with government securities whose interest coupon is lower.

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I agree with @1muflon1, I just want to add some clarification I feel needed that from there the misunderstand stems:

The misunderstanding is that the CB does not hold any currency. So your example of $ $300.000 of CB currency holding is wrong. When the CB buys a bond from the government it holds the "object" against the money it has created out of thin air that transferred to the government. So in your numbers all stays the same except that CB has 0 and yet transferred 20.000 to the government. so the amount of money increased by 20.000. In other words the CB start with 0 and always stays with 0 curreny.

When the bond matures, the reverse happens - the government repays the loan to the CB and the created money is destroyed. This is called QT. Thus a program of QE implies that the CB needs to buy more bonds than the bonds he currently holds and set to expire.

The fact the the CB must hold an asset (bonds) against the liability of the new money created, this fact means that the CB can't "print money" (or do QE for that matter) without theoretical limit.

I agree with @1muflon1, I just want to add some clarification I feel needed that from there the misunderstand stems:

The misunderstanding is that the CB does not hold any currency. So your example of $ $300.000 of CB currency holding is wrong. When the CB buys a bond from the government it holds the "object" against the money it has created out of thin air that transferred to the government.

When the bond matures, the reverse happens - the government repays the loan to the CB and the created money is destroyed. This is called QT. Thus a program of QE implies that the CB needs to buy more bonds than the bonds he currently holds and set to expire.

The fact the the CB must hold an asset (bonds) against the liability of the new money created, this fact means that the CB can't "print money" (or do QE for that matter) without theoretical limit.

I agree with @1muflon1, I just want to add some clarification I feel needed that from there the misunderstand stems:

The misunderstanding is that the CB does not hold any currency. So your example of $ $300.000 of CB currency holding is wrong. When the CB buys a bond from the government it holds the "object" against the money it has created out of thin air that transferred to the government. So in your numbers all stays the same except that CB has 0 and yet transferred 20.000 to the government. so the amount of money increased by 20.000. In other words the CB start with 0 and always stays with 0 curreny.

When the bond matures, the reverse happens - the government repays the loan to the CB and the created money is destroyed. This is called QT. Thus a program of QE implies that the CB needs to buy more bonds than the bonds he currently holds and set to expire.

The fact the the CB must hold an asset (bonds) against the liability of the new money created, this fact means that the CB can't "print money" (or do QE for that matter) without theoretical limit.

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I agree with @1muflon1, I just want to add some clarification I feel needed that from there the misunderstand stems:

The misunderstanding is that the CB does not hold any currency. So your example of $ $300.000 of CB currency holding is wrong. When the CB buys a bond from the government it holds the "object" against the money it has created out of thin air that transferred to the government.

When the bond matures, the reverse happens - the government repays the loan to the CB and the created money is destroyed. This is called QT. Thus a program of QE implies that the CB needs to buy more bonds than the bonds he currently holds and set to expire.

The fact the the CB must hold an asset (bonds) against the liability of the new money created, this fact means that the CB can't "print money" (or do QE for that matter) without theoretical limit.