Does not make any sense at all.
When US Treasury issues new debts through the Treasury auctions, it collects US dollar in exchange for IOU to pay back at maturity, in 2, 5, 10 years etc. Treasury also pays coupons. Of course this is borrowing. Even a high school kid would know that.
What is not so clear?
It sure looks like borrowing, doesn't it! But it is not. By the time the Treasury auctions securities the new money needed to pay them off has already been created and spent into the economy. Thus when the Treasury sells securities, the I.O.U.s, it has already acquired the assets the government desired to purchase from the private sector using newly created money and is simply exchanging one form of money for another when it sells securities.
To understand this operation correctly it helps to also understand what happens on the Central Bank side when it later exchanges dollars for some of the Treasury securities that are held by the private sector. It can do this, in theory, up to the limit of the total of Treasuries held in the private sector. This operation of the Central Bank alters the ration of money in the form of Treasuries to money in the form of dollars. But it does not change the total amount of outside money in the economy.
Neither the Treasury nor the Central Bank can change the total of private sector, U.S. money in its two forms, Treasuries and dollars. Only Congress can do that!
To understand these operations correctly you have to understand: 1) The total outside money in the private sector economy at any time is partly in the form of Treasuries and partly in the form of dollars, and the ration of these two forms is readily altered by the Central Bank as it sees fit. 2) The money creation step occurs when the Central Bank covers a net Treasury overdraft, but the Central Bank does
not decide how much new money should be created. Only Congress can make that decision. It does this when it decides how much to spend. 3) When the Central Bank buys Treasuries, although it can do this in any amount up to the limit of the amount of outstanding Treasuries in the world, it is
not, contrary to the appearance, creating any additional new money ("printing"). To understand why this is the case requires a rather in depth understanding of Treasury-- Central Bank bookkeeping. The absence of net "printing" from this particular standard Central bank operation is fundamentally the result of the proceeds from maturation of Treasuries while on the Central Bank side of the ledger flowing directly back to the Treasury side of the ledger.
People often confuse the finances of countries that don't borrow (U.S., Japan, etc.) with those that do (Russia,Argentina, etc.). Countries that are forced to sell securities denominated in another countries currency have real debt. The U.S., on the other hand, only sells securities denominated in the currency it itself issues. Therefore the U.S. does not really borrow even though it appears to, and it has no real debt. Like all countries, however, the U.S. can destroy the buying power of its currency through financial mismanagement, i.e., issuing too much new money relative to its own productivity.
