Did the Fed take a loss on the agency paper? Was there any reason to believe it would take a loss, given the Treasury guarantee? The Fed did not step into the agencies’ shoes; it bought RMBS guaranteed by the agencies. So I think any loss of value is insignificant.

Yes, the interest that would have been paid to bondholders was paid to the Fed, and the Fed paid interest on the resulting reserves. Not exactly a wash, but close enough to dispel the notion of wholesale money creation.

You appear to be conflating TARP and QE. The Fed bought Treasuries and Agency RMBS in QE. Neither carried a meaningful risk of default. I don’t see how that provided new money to anyone. These purchases were made on the open market, which is all the law required. There was no evasion of any law.

You can only buy something out of your net worth

Defined how? Is my net worth the present value of my future cash flows? If so, lowering interest rates lowers the discount rate on my future income and makes me “worth” more. If that definition of “net worth” doesn’t work for you, then your claim is simply wrong, because we service debt out of our future cash flows, and the lower the interest rate, the more adequate those flows are to service debt. Either way, lower rates enable more people to borrow more money. At some point, lowering rates becomes pushing on a rope, as some people cannot or will not borrow at any rate.

Your final paragraph is the most wrong. Our national debt has been growing since 1789. We never pay it back, and we never will have to pay it back. Government spending is not a zero-sum event, if it is done right. What would private net worth be in the absence of the things the government borrows to do? Did Boulder Dam reduce private wealth or increase it? What did it do to real estate values? What industry did it enable? All with borrowed money.

There is good government spending, and there is bad government spending. All good spending is affordable, but it should be timed not to compete with good private spending, because government spending can be centrally timed, whereas private spending happens when it happens.