The fed controls money supply . Banks expand money supply thru lending according to reserve requirements and the fed controls the multiplier effect thru reserve requirements and by setting interest rates. Hello econ 101.
The Fed controls the "credit" supply. While that spends much like real money it is balanced by the borrowers contract to repay in "real" dollars. Credit based reserves only allow interbank transfers of the loaned funds within the Fed's bank system.
Those funds, in the macro view, cannot be net saved, used to pay federal taxes, or purchase Treasury debt. Only Congress can create high power US dollars. They also disappear as the borrower pays down the principle of the contract. Paying off a loan diminishes the money supply
By definition if the govt does not have the resources to fund expenses (deficit) it needs to borrow.
Other than the existence of an imposed legislation to create this condition, why would the monopoly issuer of a fiat currency ever need to borrow its own currency back? It always has the resources and all "new" spending is money created by Congress.
Tax "revenue" (an oximoron for regular morons) is exhausted by paying down the debt that it was created from and cannot be recycled to spending. Bonds are just a temporary form of taxation that trade reserve liquidity for interest, but they also cannot be a "funding" mechanism for spending. In fact, deficit spending "funds" the sale of Treasury bonds, not the other way around.
the fed runs the risk that the global market will not take them back if the market loses confidence in the U.S. to manage its finances.
I highly doubt it because investors at that level understand money better than the Congresscritters and sold out economists that shill for neoliberals on Wall St and bankers. When Moodys downgraded the credit of the US in '09 it actually prompted "more" investors to seek out Treasury bonds.
Also, since bonds don't "fund" the budget, who cares? We should dump Treasury bonds just beaauxe of the general misconceptions that surround them and the term "debt". There is no "debt" the private sector is responsible for, but few things have caused more misery in our economy.
Say the U.S. has a trillion dollar deficit that it has to finance with bonds. If the economy is overheating the Fed needs to sell its bonds but can't because it's competing with the government.
The US dollar is self funding and there are contracted agents that "must" buy whatever bonds Treasury issues. They can because the dollars being spent go to them first. The Fed never sells bonds except as a way to set overnight interest rates.
As I stated, deficit spending "funds" bond sales. Without a gold reserve to defend the whole system makes no real sense and is only welfare for banks and the already wealthy.
If it buys the bonds issued by the government it will worsen inflation creating an inflationary spiral.
It would appear that you're stuck in a time warp somewhere prior to '34 when we still did that whole gold nonsense and had to defend a pile of shiny metal. The only reason the Fed would buy bonds is to set their rate in the secondary market, which it can usually do simply by announcing its target rate it is willing to pay, or for QE.
True inflation is a result of supply and scarce resources, not a monetary issue with a fiat currency. The pandemic has caused some "prices" to rise and that has caused a transitory price rise that shoud resolve itself as the economy recovers. As long as resources spending is meant to deploy are available that spending will not create inflation.
You do understand that the anemic fiscal policy of Congress over decades has made it tough for the Fed to even hit its target inflation rate of two percent, right? That is what QE is mostly about. The inflation boogy man usually rears its head about the same time that a Democrat President or majority wants to present a budget or the debt ceiling is reached. It's all propoganda enabled by econ illiteracy and gold standard thinking.
