the us is now issuing treasuries to pay interest on treasuries. the federal reserve is now operating like a hedge fund, financing long term assets with short term liabilities. <<<-the nyfeds primary dealers benefit from both liabilities and assets of the federal reserves balance sheet, aka the soma (system open market account). the nyfed creates reserves out of thin air and uses these reserves to purchase treasuries from its primary dealers (this is the asset side of the feds balance sheet). the primary dealers then earn interest on these reserves (called interest on reserve balances, aka iorb) at the nyfed (this is the liabilities side of the feds balance sheet).
United States