Answer: It’s distributed by banks, who get it from the Federal Reserve. Most of a bank’s money is just a number in their books, but when they need more cash to distribute to customers who want it, they buy the cash from the Federal Reserve, and it gets physically delivered in armored trucks. Banks also collect older, damaged currency and return it to the Federal Reserve to be destroyed.
Okay yeah that definitely makes sense, I just was curious about the process cause that seems like a hell of a lot of cash to print and then distribute to the population
Keep in mind a lot of it is basically replacing existing bills, and a lot of it leaves the US. You think that’s a lot of cash? https://www.uscurrency.gov/life-cycle/data/circulation there’s about $2 trillion out there worldwide.
I'm not against making new money, I'm against the volume and degree of fueling artificial, brittle and unsustainable economic 'growth' that becomes less and less tied to actual output and more to printing paper every year
This 100 percent, and banks at a glance are a smart idea, instead of just throwing money into the market, let’s give it to some smart people who have a better ability to distribute that capital into actual growth and advancement. It’s just banks have spent the last 100+ years just greedily taking more and more, instead of distributing it like they should. On top of that money they take, they are no longer smart arbiters of the cash, they make terribly malignant investments that self perpetuate until they fail and stocks crash and the cycle starts again. At this point we need more regulation on banking, much more.
Actually, if a bank collects damaged/mutated/contaminated money they have to send it to The Bureau of Printing and Engraving to be destroyed. However, the Fed, where shipped money typically goes, will sort through notes to see if any need to come out of circulation.
I was doing remodeling work at a garbage transfer station in Chicago . The place where garbage trucks dump their loads when the trucks are full, and then it is loaded into a semi and taken to the dump miles away.
One truck came in and dumped his load. It was finely shredded money that had been pressed into 2” diameter tubes under high pressure. You could barely pull apart the small pieces as they were so tightly packed. The money itself was in pieces 1/16” wide and about 1/2” long. There was no mistake that it was money.
The guys who worked there all the time said that they get one truck a week like that. There was other office trash mixed in the truck, but 90% was the shredded money. I brought some home to show my family. It is tucked away somewhere.
If you're going to be pedantic, you should at least be correct. The Federal Reserve buys them from the Treasury, the Fed's member banks buy it from the Federal Reserve.
Yes, when they buy cash, it’s 1-to-1. An electronic dollar and a paper dollar are equivalent.
But cash is not how the government adds more money to the economy. That is done just electronically. When the fed “prints” more money, really they are just increasing the balance in electronic accounts of the bank. It’s up to the bank if it wants to convert some of that to paper money.
In the US, the money supply is managed by the Federal Reserve, or The Fed for short.
A guy named [Jerry](https://en.wikipedia.org/wiki/Jerome_Powell) works at The Fed. Jerry has a big Notebook, where every day he writes down how much money each bank has.
Jerry's Notebook is very special, because the numbers in Jerry's Notebook don't *keep track of* money. The numbers *are* money.
If too many people are withdrawing, and the Bank of Bob is running low on cash, Bob can phone The Fed and say, "Hi Jerry, this is Bob. I need $1 million in cash please, I'll send an armored car to pick it up." Jerry subtracts $1 million from Bob's Notebook entry, prints off a big stack of crisp new bills that didn't exist before, and gives them to Bob.
It works in the other direction too. If too many people are depositing, and the Bank of Bob has too much cash, Bob can call Jerry and say, "Hi Jerry, I'm sending you $1 million in cash by armored car. Please shred the bills into confetti." The bills cease to exist, and Jerry adds $1 million to Bob's Notebook entry.
Since Jerry at The Fed can print and destroy bills (always according to strict rules to keep them in balance with The Notebook), the numbers in The Notebook are exchangeable for cash 1-to-1 in both directions. So the numbers *are* money.
In fact, most transactions are done through The Notebook, without anybody needing to deal with armored cars full of $100 bills at all. For example: You're a customer of the Bank of Bob, and Lisa Landlord is a customer of the Bank of Susan. When you pay Lisa $1000 for rent, Bob can just phone The Fed and say, "Hey Jerry, can you increase Susan's number by $1000? Thanks." Then Jerry subtracts $1000 from Bob and adds $1000 to Susan. Bob then calls Susan separately: "Hey Susan, this is Bob. When you get your next report on Notebook activity from Jerry, you'll see I've given you $1000. That's for Lisa, please increase her account value by $1000. Thanks."
The Fed's rules for Jerry's job say "Addition (or printing cash) must be exactly balanced by subtraction (or shredding cash). *Except* if The Committee decides otherwise." So unbalanced addition or subtraction is allowed -- if The Committee gives permission.
Unbalanced addition (quantative easing / QE) increases employment -- more money in the banking sector making it easier for companies to get loans, and mild inflation that encourages everyone to spend money instead of sitting on it, which helps give businesses more customers / orders, which they'll need more employees to fill. QE encourages healthy companies to hire / expand, and can help unhealthy companies survive a temporary downturn. QE isn't all good, too much QE and you get runaway inflation that unnecessarily wrecks the economy.
Unbalanced subtraction (quantative tightening / QT) fights inflation -- less money chasing the same amount of goods makes prices go down, or at least not rise so quickly. QT encourages people and businesses to think twice about whether they really need to buy stuff or hire employees, short-circuiting bidding wars where a bunch of people all try to buy stuff that's in too limited supply to really satisfy everybody. QT isn't all good, too much QT and you get a recession that unnecessarily wipes out jobs and companies.
The Committee is a bunch of technical experts who make a judgment call using data and formulas to balance the risks of inflation against the risks of unemployment, and decide what's best: QE, QT or neither.
If The Committee decides The Notebook should increase, Jerry creates new money by unbalanced addition in The Notebook, then gives it out in exchange for an IOU. For example, maybe Jerry trades $20 billion of money created by unbalanced addition today, in exchange for an IOU from Janet [1] [2], who promises to give The Fed $1 billion a year for the next 30 years.
When each IOU payment arrives, it's removed from The Notebook by unbalanced subtraction. So Janet's IOU will increase The Notebook's total by $20 billion today -- but The Notebook will end up decreasing by $1 billion a year for the next 30 years, ending up with a net decrease of $10 billion.
So as long as The Fed has IOU's that are receiving payments, The Notebook will tend to constantly decrease. This natural decrease is called "runoff". Unless The Committee has authorized QT, Jerry is always constantly buying more IOU's just to fight runoff and keep The Notebook's total from decreasing.
> larger than it was 50 years ago
50 years ago? It may be shocking to see increases compared to even 5 years ago.
Here's The Fed's [official chart](https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm). The Notebook was hovering around $900 (billion) before 2008, and nearly got over $9000 at its peak in 2022. Due to inflation there's been some pretty sharp QT since, putting us around $7400 today -- but still nowhere near the pre-pandemic level, which was around $4200.
This chart is a major clue why prices in the past were so shockingly low (Subway's $5 footlong promotion ran from 2008-2012; today my local Subway sells the same sandwich as a $6 six-inch).
In my humble opinion, the Committee is a bit too willing to let unbalanced math slide into The Notebook.
[1] [Janet](https://en.wikipedia.org/wiki/Janet_Yellen) is in charge of The Treasury, the government department in charge of taxes and spending. Basically, in exchange for a long-term obligation -- Janet's promise the taxpayers will pay The Fed $1 billion a year for the next 30 years -- Jerry uses unbalanced addition to give Janet's department $20 billion today, which she uses to send retirees their Social Security payments, buy spaceships for NASA, pay the Army soldiers and the Navy sailors, etc.
[2] Normally, The Fed *only* buys IOU's from The Treasury. But during the 2008 and 2020 crises, The Fed also bought mortgage backed securities. Basically The Fed offered cash (created by unbalanced addition) to banks in exchange for the banks giving up future money (income streams from millions of peoples' mortgages).
Key takeaway, QE in prosperous times just for the sake of growth is reckless, but that spending during downturns can keep things alive long enough, we are starting to see some of the effects of the end of that runway with too much QE.
QE/QT isn't really unbalanced though - it's the same operation as the "shred cash for numbers" in your example above, but with a broader asset assets accepted as well. Eg "put aside these Treasuries for numbers" - with QT being the reverse, the Fed selling the Treasuries again.
> QE/QT isn't really unbalanced though
I needed a short word to mean "changes The Notebook's total." I chose "unbalanced."
> it's the same operation
QE/QT has a fundamental difference. It *changes the total*.
> "shred cash for numbers" in your example above, but with a broader asset assets accepted
Bonds (Treasury or MBS) are not money. They are promises to pay money in the future.
Turning cash into numbers is turning money into money. It doesn't change the total amount of money in existence.
Turning bonds into numbers is turning not-money into money. It changes the total amount of money in existence.
Private banks like Bob's can borrow money from the Federal Reserve at a key interest rate set by the Fed, which is based on inflation, the economy, and, in the US, the job market. In general, the central bank's job is to limit inflation (for example at 2%) while supplying the economy with money. Currently, interest rates rise in order to combat inflation. At other times, when inflation is low and sometimes below the goal of 2%, interest rates become very low.
You‘re right the value of all money in circulation is rising. Especially after the last global economic crisis. Thats because Banks have the privilege to borrow money and thereby creating new money and because of the low interest rates we had for years.
[This](https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy) explanation by the Bank of England (UKs Central Bank) explains the Creation of Money
If you are asking about actual paper bills then it is ordered from the federal reserve by banks like any store orders product. The money is packaged in bundles of 100 bills and then those are wrapped into bundles of 1000 bills, this is the amount the bank can order. So a bank will write up an order for 10000 $1 bills, 50000 $100 bills, etc. and an armored truck will drive them from one of the reserve banks and deliver them. Fun fact is you can actually go to your bank and order cash for yourself if you so choose. Though really the only reason that you would need to is if you want to give your local area a huge influx of $2 (which I did one summer) but you have to “buy” $2000 because banks hate them.
Keeping with the bank of bob theme.
George goes into the bank of bob and deposits 1 million dollars
Joe the builder comes in and wants a 800,000 loan Bank of bob goes great. Here’s 800,000 of George’s cash.
Now Joe the builder has an asset of 800,000 cash and George has a cash equivalent balance 1,000,000. Total cash in the economy is 1.8 million. Remember George can withdraw his money at any time
Government pays people to do work. Those people buy goods/services from civilians.
Those civilians then use that money.
Also, banks purchase printed money and smelted coins from the government to distribute when civilians or government workers request them based upon their available funds.
See I thought that, but I mean the govt has approximately 2-3 million employees and there’s ≈300 million people in the US, so i dont think that gets all of 287 billion dollars cash into circulation unless they payed every single govt employee just under 100,000 a year which they definitely dont
It’s an easily traceable part of the money. We know it went to someone, and that someone spends it like a normal person on everyday things. Less traceable things have some more layers. Like if government buys cars from Ford and then Ford pays the money to workers. This money is traceable because it does not have to be returned to the government.
Other comments are talking about lending via banks. Loans have to be repaid, so it’s less obvious if the money actually sticks around in circulation. (It usually does)
There are a couple different ways the federal reserve effectively creates money. The biggest is that they purchase bonds from banks. The federal reserve has as much money as they want. So if they want more money in the system, they create it, take ownership of the bonds they purchase, and deposit the money into the bank.
Answer: It’s distributed by banks, who get it from the Federal Reserve. Most of a bank’s money is just a number in their books, but when they need more cash to distribute to customers who want it, they buy the cash from the Federal Reserve, and it gets physically delivered in armored trucks. Banks also collect older, damaged currency and return it to the Federal Reserve to be destroyed.
Okay yeah that definitely makes sense, I just was curious about the process cause that seems like a hell of a lot of cash to print and then distribute to the population
Keep in mind a lot of it is basically replacing existing bills, and a lot of it leaves the US. You think that’s a lot of cash? https://www.uscurrency.gov/life-cycle/data/circulation there’s about $2 trillion out there worldwide.
Oh it's definitely still just as reckless destructive and idiotic as it sounds the banks don't change that part of the process
If you don't make new money then you get deflation which is far worse than inflation
I'm not against making new money, I'm against the volume and degree of fueling artificial, brittle and unsustainable economic 'growth' that becomes less and less tied to actual output and more to printing paper every year
This 100 percent, and banks at a glance are a smart idea, instead of just throwing money into the market, let’s give it to some smart people who have a better ability to distribute that capital into actual growth and advancement. It’s just banks have spent the last 100+ years just greedily taking more and more, instead of distributing it like they should. On top of that money they take, they are no longer smart arbiters of the cash, they make terribly malignant investments that self perpetuate until they fail and stocks crash and the cycle starts again. At this point we need more regulation on banking, much more.
Actually, if a bank collects damaged/mutated/contaminated money they have to send it to The Bureau of Printing and Engraving to be destroyed. However, the Fed, where shipped money typically goes, will sort through notes to see if any need to come out of circulation.
I was doing remodeling work at a garbage transfer station in Chicago . The place where garbage trucks dump their loads when the trucks are full, and then it is loaded into a semi and taken to the dump miles away. One truck came in and dumped his load. It was finely shredded money that had been pressed into 2” diameter tubes under high pressure. You could barely pull apart the small pieces as they were so tightly packed. The money itself was in pieces 1/16” wide and about 1/2” long. There was no mistake that it was money. The guys who worked there all the time said that they get one truck a week like that. There was other office trash mixed in the truck, but 90% was the shredded money. I brought some home to show my family. It is tucked away somewhere.
To be pedantic, notes and coins are purchased from the Treasury not the Federal Reserve.
If you're going to be pedantic, you should at least be correct. The Federal Reserve buys them from the Treasury, the Fed's member banks buy it from the Federal Reserve.
But if the banks buy the cash...so the money circulating are the same, if not they are not buying the money with 1to1 value. Where am I wrong?
Yes, when they buy cash, it’s 1-to-1. An electronic dollar and a paper dollar are equivalent. But cash is not how the government adds more money to the economy. That is done just electronically. When the fed “prints” more money, really they are just increasing the balance in electronic accounts of the bank. It’s up to the bank if it wants to convert some of that to paper money.
Does something like $5,000,000 in brand new bills cost more than $5,000,000 to get delivered? Is there like a delivery fee from the government?
Thats a good question, I don’t know. Someone must pay the delivery fee, but I don’t know who.
In the US, the money supply is managed by the Federal Reserve, or The Fed for short. A guy named [Jerry](https://en.wikipedia.org/wiki/Jerome_Powell) works at The Fed. Jerry has a big Notebook, where every day he writes down how much money each bank has. Jerry's Notebook is very special, because the numbers in Jerry's Notebook don't *keep track of* money. The numbers *are* money. If too many people are withdrawing, and the Bank of Bob is running low on cash, Bob can phone The Fed and say, "Hi Jerry, this is Bob. I need $1 million in cash please, I'll send an armored car to pick it up." Jerry subtracts $1 million from Bob's Notebook entry, prints off a big stack of crisp new bills that didn't exist before, and gives them to Bob. It works in the other direction too. If too many people are depositing, and the Bank of Bob has too much cash, Bob can call Jerry and say, "Hi Jerry, I'm sending you $1 million in cash by armored car. Please shred the bills into confetti." The bills cease to exist, and Jerry adds $1 million to Bob's Notebook entry. Since Jerry at The Fed can print and destroy bills (always according to strict rules to keep them in balance with The Notebook), the numbers in The Notebook are exchangeable for cash 1-to-1 in both directions. So the numbers *are* money. In fact, most transactions are done through The Notebook, without anybody needing to deal with armored cars full of $100 bills at all. For example: You're a customer of the Bank of Bob, and Lisa Landlord is a customer of the Bank of Susan. When you pay Lisa $1000 for rent, Bob can just phone The Fed and say, "Hey Jerry, can you increase Susan's number by $1000? Thanks." Then Jerry subtracts $1000 from Bob and adds $1000 to Susan. Bob then calls Susan separately: "Hey Susan, this is Bob. When you get your next report on Notebook activity from Jerry, you'll see I've given you $1000. That's for Lisa, please increase her account value by $1000. Thanks."
How does the Fed increase the total value of all the numbers in The Notebook? I assume it's larger than it was 50 years ago.
The Fed's rules for Jerry's job say "Addition (or printing cash) must be exactly balanced by subtraction (or shredding cash). *Except* if The Committee decides otherwise." So unbalanced addition or subtraction is allowed -- if The Committee gives permission. Unbalanced addition (quantative easing / QE) increases employment -- more money in the banking sector making it easier for companies to get loans, and mild inflation that encourages everyone to spend money instead of sitting on it, which helps give businesses more customers / orders, which they'll need more employees to fill. QE encourages healthy companies to hire / expand, and can help unhealthy companies survive a temporary downturn. QE isn't all good, too much QE and you get runaway inflation that unnecessarily wrecks the economy. Unbalanced subtraction (quantative tightening / QT) fights inflation -- less money chasing the same amount of goods makes prices go down, or at least not rise so quickly. QT encourages people and businesses to think twice about whether they really need to buy stuff or hire employees, short-circuiting bidding wars where a bunch of people all try to buy stuff that's in too limited supply to really satisfy everybody. QT isn't all good, too much QT and you get a recession that unnecessarily wipes out jobs and companies. The Committee is a bunch of technical experts who make a judgment call using data and formulas to balance the risks of inflation against the risks of unemployment, and decide what's best: QE, QT or neither. If The Committee decides The Notebook should increase, Jerry creates new money by unbalanced addition in The Notebook, then gives it out in exchange for an IOU. For example, maybe Jerry trades $20 billion of money created by unbalanced addition today, in exchange for an IOU from Janet [1] [2], who promises to give The Fed $1 billion a year for the next 30 years. When each IOU payment arrives, it's removed from The Notebook by unbalanced subtraction. So Janet's IOU will increase The Notebook's total by $20 billion today -- but The Notebook will end up decreasing by $1 billion a year for the next 30 years, ending up with a net decrease of $10 billion. So as long as The Fed has IOU's that are receiving payments, The Notebook will tend to constantly decrease. This natural decrease is called "runoff". Unless The Committee has authorized QT, Jerry is always constantly buying more IOU's just to fight runoff and keep The Notebook's total from decreasing. > larger than it was 50 years ago 50 years ago? It may be shocking to see increases compared to even 5 years ago. Here's The Fed's [official chart](https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm). The Notebook was hovering around $900 (billion) before 2008, and nearly got over $9000 at its peak in 2022. Due to inflation there's been some pretty sharp QT since, putting us around $7400 today -- but still nowhere near the pre-pandemic level, which was around $4200. This chart is a major clue why prices in the past were so shockingly low (Subway's $5 footlong promotion ran from 2008-2012; today my local Subway sells the same sandwich as a $6 six-inch). In my humble opinion, the Committee is a bit too willing to let unbalanced math slide into The Notebook. [1] [Janet](https://en.wikipedia.org/wiki/Janet_Yellen) is in charge of The Treasury, the government department in charge of taxes and spending. Basically, in exchange for a long-term obligation -- Janet's promise the taxpayers will pay The Fed $1 billion a year for the next 30 years -- Jerry uses unbalanced addition to give Janet's department $20 billion today, which she uses to send retirees their Social Security payments, buy spaceships for NASA, pay the Army soldiers and the Navy sailors, etc. [2] Normally, The Fed *only* buys IOU's from The Treasury. But during the 2008 and 2020 crises, The Fed also bought mortgage backed securities. Basically The Fed offered cash (created by unbalanced addition) to banks in exchange for the banks giving up future money (income streams from millions of peoples' mortgages).
Key takeaway, QE in prosperous times just for the sake of growth is reckless, but that spending during downturns can keep things alive long enough, we are starting to see some of the effects of the end of that runway with too much QE.
QE/QT isn't really unbalanced though - it's the same operation as the "shred cash for numbers" in your example above, but with a broader asset assets accepted as well. Eg "put aside these Treasuries for numbers" - with QT being the reverse, the Fed selling the Treasuries again.
> QE/QT isn't really unbalanced though I needed a short word to mean "changes The Notebook's total." I chose "unbalanced." > it's the same operation QE/QT has a fundamental difference. It *changes the total*. > "shred cash for numbers" in your example above, but with a broader asset assets accepted Bonds (Treasury or MBS) are not money. They are promises to pay money in the future. Turning cash into numbers is turning money into money. It doesn't change the total amount of money in existence. Turning bonds into numbers is turning not-money into money. It changes the total amount of money in existence.
And yet if I had $1mn in bonds I'd feel just as rich as if I had $1mn in cash, and could buy a $1mn house with pretty much the same ease.
Why should Janet give back that money? Wouldn't it be smarter to give it to the State and let it join the real economy?
Private banks like Bob's can borrow money from the Federal Reserve at a key interest rate set by the Fed, which is based on inflation, the economy, and, in the US, the job market. In general, the central bank's job is to limit inflation (for example at 2%) while supplying the economy with money. Currently, interest rates rise in order to combat inflation. At other times, when inflation is low and sometimes below the goal of 2%, interest rates become very low. You‘re right the value of all money in circulation is rising. Especially after the last global economic crisis. Thats because Banks have the privilege to borrow money and thereby creating new money and because of the low interest rates we had for years. [This](https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy) explanation by the Bank of England (UKs Central Bank) explains the Creation of Money
If you are asking about actual paper bills then it is ordered from the federal reserve by banks like any store orders product. The money is packaged in bundles of 100 bills and then those are wrapped into bundles of 1000 bills, this is the amount the bank can order. So a bank will write up an order for 10000 $1 bills, 50000 $100 bills, etc. and an armored truck will drive them from one of the reserve banks and deliver them. Fun fact is you can actually go to your bank and order cash for yourself if you so choose. Though really the only reason that you would need to is if you want to give your local area a huge influx of $2 (which I did one summer) but you have to “buy” $2000 because banks hate them.
Keeping with the bank of bob theme. George goes into the bank of bob and deposits 1 million dollars Joe the builder comes in and wants a 800,000 loan Bank of bob goes great. Here’s 800,000 of George’s cash. Now Joe the builder has an asset of 800,000 cash and George has a cash equivalent balance 1,000,000. Total cash in the economy is 1.8 million. Remember George can withdraw his money at any time
Government pays people to do work. Those people buy goods/services from civilians. Those civilians then use that money. Also, banks purchase printed money and smelted coins from the government to distribute when civilians or government workers request them based upon their available funds.
See I thought that, but I mean the govt has approximately 2-3 million employees and there’s ≈300 million people in the US, so i dont think that gets all of 287 billion dollars cash into circulation unless they payed every single govt employee just under 100,000 a year which they definitely dont
It’s an easily traceable part of the money. We know it went to someone, and that someone spends it like a normal person on everyday things. Less traceable things have some more layers. Like if government buys cars from Ford and then Ford pays the money to workers. This money is traceable because it does not have to be returned to the government. Other comments are talking about lending via banks. Loans have to be repaid, so it’s less obvious if the money actually sticks around in circulation. (It usually does)
Banks are not GIVEN the paper currency or coins. They have to be purchased from the Treasury. Perhaps that is what you meant.
There are a couple different ways the federal reserve effectively creates money. The biggest is that they purchase bonds from banks. The federal reserve has as much money as they want. So if they want more money in the system, they create it, take ownership of the bonds they purchase, and deposit the money into the bank.
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That’s not the question
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The question was about bills. Like, the paper cash.
Money printer goes brrrrr
He wants to know how physical bills get into circulation as $267 billion is a large number and volume.