I’m not sure I get your point when you write: “Exchanging treasuries for currency does not increase the money supply. Creating new debt does.”
Ok,but the Treasuries are new debt, aren’t they? And at this point the vast majority of them, especially the longer term ones, are bought by the Fed. So the Fed is enabling the creation of vast amounts of new debt. Not exactly a printing press, ok. But an effective currency debasement machine, no?
I'm saying that people confuse "money" and "currency". They are not the same - even though most economic courses treat them as such.
In a debt-based monetary system, "money" is the total amount of outstanding physical and verbal promissory notes. Paying off debt causes a decrease in the "money" supply. Bankruptcy causes a decrease also, since the promissory note becomes void of future repayment. This is why a debt-based society must always keep creating new debt to replace old debt - or deflation happens. Vast amounts of new debt being created can create inflation. That's why the Fed always sets a nominal 2% desired "monetary" inflation rate. Inflation is really bad, but deflation is pure evil.
By the way. I'm not sticking up for the Fed. They are the personification of evil - and intentionally brought on the monetary crisis that began in 2008 by purposefully withholding debt creation. This is why the US government has been on an absolute tear to create new debt - since the major banks won't. This is also why both Demon-rats and Republicans allow it to happen, while the Republicans give lip service to debt reduction - which won't - and can't happen without an enormous deflationary spiral. We're stuck, and the primary dealer banks are causing it.
Currency is simply a physical (or electronic) means of completing trade. we use currency instead of money - mainly so that people never learn what money truly is. Things make a lot of sense if one can correctly separate the two ideas in their mind.
Ok,but the Treasuries are new debt, aren’t they?
Maybe...A lot of Treasury auctions are used to roll over existing Treasuries that are maturing. This does not increase the "money" (debt) supply. Any Treasuries that are sold as "new" debt do indeed increase the "money" supply.
And at this point the vast majority of them, especially the longer term ones, are bought by the Fed.
Many of them are. However, replacing Treasuries with currency do not increase the "money" supply - since no new debt is being created through the action. Also, the physical currency supply is not really increasing much either, since the Fed is just electronically crediting the Primary Dealers (who they buy the Treasuries from) accounts at the Fed. The Primary Dealers are just sitting on asset and doing nothing with it (except earning a tidy 3% for their "troubles"). You can easily see this by looking at the H.4.1 report that the Fed releases each week. Do a Google search for it.
So the Fed is enabling the creation of vast amounts of new debt. No, they're not through Treasury purchases. That creates no new debt al all. They do allow the US government to get further in hock by holding Treasury auctions periodically. Any "new" debt created out of these auctions (that isn't used to roll over existing debt) does increase the money supply - but not fast enough to account for the debt that is currently being destroyed through bankruptcy and payoff.
Not exactly a printing press, ok. But an effective currency debasement machine, no?
It's not a printing press at all. And there really isn't a debasement of currency, since we still have a problem (like the rest of the world) where our outstanding debt is threatening to go negative (reduction in the money supply). Take a look at the Fed's G.19 report (Google for it). You can see that the only real new debt creation that the US government has been effective at is student loans. There are now close to $1 trillion dollars of outstanding student loans. Stupid kids...these loans can't be released through bankruptcy. The average 2013 college graduate has around $35K in outstanding loans. That's average. Some have none, many have a lot more.
Sorry for the novel, but I try to teach people how to understand debt-based money, and why deflation is so dangerous.
The bottom line is that the large banks are deliberately causing this across the world (including China). The last time this happened at this level was the Great Depression - and the banks played both sided in the ensuing world war, becoming massively wealthy in the process. Bullets and bombs are expensive.