Quick follow-up to my previous post. Here’s commenter Danyzn, with an excellent analogy:
Here’s an analogy which may be helpful. Think of the Fed not as a counterparty at all, but as a kind of Walrasian auctioneer whose job is to clear the market for orange futures. Unlike a normal auctioneer, it does so not by adjusting the price (that is pegged) but by planting and destroying orange trees (over which it has a monopoly).