Printing money vs monetizing debt
I often hear the argument that the Fed is currently not monetizing debt and floating the economy with new money when it buys up Government bonds as the printed money sits in the reserves of the dealers who offload these bonds to the Fed. I don't get it.
The Fed buys Government bonds from dealers and in exchange, credits (adds) newly created money to their accounts.
With that money the dealers can go to the market and buy more bonds to hand over to the Fed.
And since the government is issuing those bonds (which are being bought up by the dealers) and uses their proceeds to finance economic programs and stimulus cheques, the Fed is indirectly monetizing Government debt.
Which point am I missing?
You are correct - the Fed is monetizing government debt when it buys Treasuries. But another way to think of it is that the Fed simply changes the composition. For example, it takes away a 10 year Treasury and gives back some cash.
Remember, government debt is a form of money. A Treasury is like a dollar bill that pays interest.