The Fed on the other hand, generates an electronic entry on its books and then transfers the electronic entry to a bond holder, inreasing the money supply.
In the final analysis this is the point. They are increasing the money supply, which is or leads to inflation, depending on who's definition you use.
When the Fed sells the bond the electronic money used to buy the asset just disappears and the money supply decreases.
If they can sell it at the same price they bought it at. As the economy improves and interest rates rise to their historical levels, it becomes time to pull money out of the system by selling those bonds. The problem is they will have to be discounted to make their yield match the going rates, otherwise no one will buy them. So in effect they can't really pull the same amount of money out of the system that they injected. Therefore the dollar is permanently diluted as someone here put it, and our(the people holding dollars) buying power is reduced.
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