“In Congressional testimony last week, Fed Chairman Ben Bernanke slipped something in that no one much noticed. He said that the Fed might eventually  choose to exit from its current monetary expansion binge, not by selling US government securities, but by letting them mature.  So what happens if the Fed holds a bond to maturity? In that case, the Fed presumably receives the principal payment from the Treasury and then sends that back to the Treasury too. In effect, the government has simply canceled its own debt.  Bernanke has in effect announced an intention to cancel US bonds, and it doesn’t cause a ripple.”

http://bastiat.mises.org/2013/03/lets-look-a-little-more-closely-at-what-bernanke-told-congress/

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