If the FED wipes out the debts on their books they are basically sending the dollar down the shitter bankrupting the banking, insurance, and the pension systems. Not to mention you will have so many nations in the world who have large holding of treasuries getting really pissed off! The only time the FED can do this is that they own all of the bonds and that is most likely hyper inflationary. Now the only way they can get away with this (maybe) if they coordinate with the ECB, BOJ, and other Central Banks where all of them buy their own country bonds slowly over time and they wipe them out together at the same time. I suspect nothing will happen to the currencies vs each other but Gold to the furthest galaxy out there :)
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Nothing at all would happen if the Fed were to just write off all the bonds on it's balance sheet.
Fed monetization of debt is deflationary. The Fed is prohibited from buying at auctions and can only purchase bonds from banks. The banks have to use REAL dollars to buy the bonds that the Fed buys from them. In return for the bonds the Fed gives banks "reserve notes" which sit in accounts at the central bank doing nothing. We can see from the data that even though the reserves on bank balance sheets have been exploding with QE, bank lending has remained flat.
Thus, all this money printing is only serving to create an even greater deflationary crisis.
None of this would change if the Fed simply wrote off the value of the bonds it owns, and never collected. All those REAL dollars used to purchase the bonds would still be converted into sterile reserve notes sitting in Fed accounts doing absolutely nothing.
This already happened because on-going QE is the same as Treasury debt jubilee. The Treasuries bought by the Fed are just rolled over every time it matures into newly issued debt. The Treasury debt bought by the Fed is essentially never repaid, just like a debt jubilee.
Massive central bank financed government spending boosts GDP/inflation, which works until the people lose confidence in the system.
One of the more interesting books in the Fiscal/Monetary policy that is often overlooked is Adam Tooze's - Wages of Destruction: The Making and Breaking of the Nazi Economy. MMT isn't actually any really new intellectual thought on the use of Monetary Policy but a re-evaluation of creative methods of debt management or even concealment first tested, implemented and refined by the German Finance Ministry under the Nazi government. The first half of the book talks all about it, and it's incredibly fascinating.