| The article doesn't say what you think it says. >One of the most common questions about the Federal Reserve is this: Does the Fed print money? >There are really two ways to address this question. In terms of the actual, physical printing, no, the Fed doesn’t actually print or produce money in any form. Coins come from the U.S. Mint, and paper currency comes from the U.S. Treasury’s Bureau of Engraving and Printing. The Fed distributes currency after it’s printed. >However, what many questioners might really be asking is whether the Fed has the ability to control how much money is in our economy. That’s a different story. >The Fed adds to (or subtracts from) the amount of money in the economy by buying (or selling) U.S. Treasury securities and other financial instruments. This is referred to as “open market operations,” since these transactions take place in the open market. (The Fed isn’t allowed to buy securities directly from the U.S. Treasury.) >The Fed pays for those securities by crediting funds to the reserves that banks are required to hold, either cash in their vaults or deposits at a Reserve bank. >“So, in that sense, we can think of ‘printing money’ as adding reserves to the banking system,” said David Wheelock, vice president and deputy director of research. |