To find the answer, you need to act like any good detective and simply follow the money.
The Fed prints the money and buys the US treasury bonds; however, the Fed does not buy them from the US treasury, it buys them from Goldman Sachs.
Stop and think about this for a minute. If you or I wanted to buy US treasuries we could buy them directly from the US treasury department at cost. If we went through a middleman there would be some form of compensation to the middleman for processing the transaction. The Fed also has the option of buying them directly from the US treasury department but instead it buys them through Goldman Sachs.
The Fed announces what it’s going to buy and when it’s going to buy and then Goldman Sachs front runs the Fed and gives them the worst possible price on the bonds.
The real issue is why the Fed is OK spending the peoples money in this manner.
Why does it do this you might ask? The answer might surprise you.
It turns out that the person in charge of buying the bonds was actually a partner at Goldman Sachs before going to work for the New York branch of the Federal Reserve.
This sounds like something right out of bizarro world but it’s actually true! The person responsible for spending the American tax payer’s money is actually doing it in a manner that benefits greatly his old business partners. He does this even though buying the bonds directly from the treasury would be in the taxpayers best interest!….. The tax payers be dammed, I guess.