I'm not saying the Fed buys ALL US Gov't debt - only that without the FED, the US Gov't would be subject to some severe discipline. And who will finance the next 5 years of projected Trillion-dollar-per-year deficits? Are the Chinese and Japanese suddenly going to find the desire for massive increases in US Treasury debt?
The FED is the Central Planner's dream. Accept it, and you accept the idea that a few guys in a room can manage the optimal interest rate and money amount for the US economy. We know that notion doesn't work for steel, corn or cement - why does anyone believe it works for money?
The year before the financial crisis, when the national debt was $9 trillion (Sep 30,2007), the Fed held $780 billion in Treasury debt.
At the end of the fiscal year, Sep 30, 2010, the national debt was $13.5 trillion and the Fed held $809 billion in Treasury debt. It doesn't look like there was much difficulty in borrowing an additional 50% ($4.5 TRILLION) while the Fed bought a net of $29 billion more. $29 billion is about 0.64% of total new debt over those 3 years.