> The Fed doesn't offer anyone yield on holding dollars. You get yield from holding treasuries and interbank commercial paper. The Fed influences the yield on t

> The Fed doesn't offer anyone yield on holding dollars. You get yield from holding treasuries and interbank commercial paper. The Fed influences the yield on these instruments by buying and selling them using a theoretically infinite supply of its own dollars. i think my understanding of bond pricing is adequate. what i don't understand is how much of this yield (from treasuries, commercial paper) is achieved by simply increasing the money supply in the future -- regardless of which entity actually does that -- v.s. coming from an external source. a few hypotheticals -- based on my understanding -- for the case where none of this yield comes from commercial paper: 1. after 24 years of 3% rates, the money supply's doubled. 2. after 24 years of 3% rates, the money supply's been kept constant by levying a tax equivalent to the original money supply. in the former, nobody should care what the rate is: it's a nominal metric completely detached from anything "real". in the latter, the rate is meaningful because it's attached to something that's redistributive. introducing commercial paper: i guess this is where rates (coupled with reserve requirements) could contract the supply. if banks generally borrow more from the fed than they lend to it, then higher rates would decrease the supply over time. if the opposite, then raising rates temporarily decreases the money in circulation but inflates the supply over time. if the goal is to tighten supply, then i don't understand why the fed would ever borrow from banks, since that liability forces an increased supply in the long run. it would make more sense to me to decrease supply simply by increasing reserve requirements. but anyway, this is a complicated enough interaction for me brain that i just wish there were guides out there that set out to show the far-reaching effects of fed rates.