How Does the Government Put Cash Money into Circulation?
Have you ever wondered how the government gets all that cash money into circulation? It’s an interesting process that involves printing billions of dollars each year and then distributing it across the country. Let’s break it down:
### Printing Cash Money
– The government prints billions of dollars in cash money each year, with $267 billion printed in 2022.
– Various security features are incorporated into the bills to prevent counterfeiting.
### Distributing Cash Money
– The Federal Reserve is responsible for distributing cash money to banks and financial institutions.
– Banks then distribute the cash to businesses and individuals through ATM withdrawals, bank withdrawals, and cash transactions.
### Circulation Process
– After the cash is distributed, it circulates through the economy, passing from person to person in exchange for goods and services.
– Eventually, the cash may end up in your hands through various transactions.
So next time you use cash to make a purchase, remember that it’s all part of the government’s effort to keep the economy flowing with physical currency. #GovernmentCash #MoneyCirculation #CashDistribution
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.
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.
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.”
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.
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
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.