There is nothing magical going on. Step 1: Fed conjurs D dollars into existence Step 2: Fed trades D dollars for a stack of paper Step 3: Fed trades paper st

There is nothing magical going on. Step 1: Fed conjurs D dollars into existence Step 2: Fed trades D dollars for a stack of paper Step 3: Fed trades paper stack for (1-r)D dollars The net effect is the Fed giving away rD dollars. If the Federal government gives away any dollars, it is taxpayers footing the bill.