Strange friendship: why the Fed cannot forgive the debt to the US government

Strange friendship: why the Fed cannot forgive the debt to the US government A regular debt crisis has long been an American tradition. And now there are about two weeks left before the technical bankruptcy. Fed owns almost 17% of the total US government debt, and if Powell forgives the debt of the Biden administration, then the US government will again be considered solvent. So why don't the partners come to an agreement?In fact, no one even tries to return the real money - when the old bonds expire, Fed simply buys new paper, that is, constantly extends the debt repayment period. But why is that? Fed operates as an independent bank and is not subject to any government. Fed finances the US government through the purchase of government bonds on the open market. Process began back in 2008, accelerated during the pandemic, and now the monetary regulator has about $5.3 trln worth of government bonds on its balance sheet. The government finances Fed by paying interest on these government bonds, which is what generates the Fed's profits. Then the same profit is sent back to the US Treasury as a loan - and ... everything repeats.If the bonds are denominated (written off) from the balance sheet, Fed will lose income and will have to look for options for direct financing through the US Treasury. In this case, Fed loses its independence and will no longer be able to perform the functions of a reserve.But the main thing is that in order to forgive the US national debt, it is necessary to change the legislation. And if US government bonds can potentially be devalued by some administrative decision, then their credibility and their market value will drop to zero at the moment. Investors will simply arrange a short-term panic and get rid of the US Treasury. And after such a crisis of confidence, who would risk borrowing from the United States? That's right, nobody.So it's much easier for the Fed to continually adjust its borrowing ceiling than it is to write off the debt of any government. So let's see what Biden and Congressmen will agree on today.Profits to yall!