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Printing Money: An Overview
If you’re wondering where all the money comes from, you should know that it comes from printing plants in Washington, D.C., and Fort Worth, Texas. The plants are managed by the U.S. Bureau of Engraving and Printing. The U.S. Mint has charge of the coins. They are minted at facilities in Philadelphia, Denver, San Francisco, and West Point.
Neither department decides how much money to churn out. The U.S. Federal Reserve determines the amount of U.S. currency to be created and circulated. Another name for the U.S. dollar is the Federal Reserve note. (That’s the name printed across the top on the face of every bill.)
Key Takeaways
- The U.S. Federal Reserve controls the supply of money in the U.S.
- When it expands the money supply using monetary policy tools, it is often described as printing money.
- The Fed also determines the number of bills to be issued each year.
- The job of actually printing the bills belongs to the Treasury Department’s Bureau of Engraving and Printing.
How the Fed Affects Money Supply
When the Federal Reserve loosens monetary policy, it is often described in the media as “printing money.” This is not strictly the case.
The Fed’s policy changes increase or decrease the supply of money that is being put to use. It encourages borrowing and spending by increasing the money supply or discouraging lending by decreasing the money supply.
To increase the money supply, the Fed uses three monetary policy tools:
- It eases its cash reserve requirements for banks, which makes more money available for the banks to lend;
- It changes the discount rate at which it lends money to financial institutions, which has a ripple effect on the interest rates consumers and businesses pay for loans, or,
- It conducts open market operations where it buys back U.S. Treasury securities from financial institutions.
Steve Meyer, a former senior advisor to the Fed’s Board of Governors, explains how payment for the last is made. “You may wonder how the Fed pays for the bonds and other securities it buys,” he says. “The Fed does not pay with paper money. Instead, the Fed pays the seller’s bank using newly created electronic funds and the bank adds those funds to the seller’s account.”
Each policy tool increases the money supply, which means more money is available to lend to consumers and businesses. This is how the Fed attempts to keep inflation at an acceptable level and employment at a near-total level.
The Treasury Prints Currency
The job of actually printing the money that people withdraw from ATMs and banks belongs to the Treasury Department’s Bureau of Engraving and Printing (BEP), which designs and manufactures all paper money in the U.S. The U.S. Mint produces all coins.
The amount of currency printed by the BEP each year is determined by the Fed, which submits an order for it to the BEP. The Fed then distributes that currency via armored carrier to its 28 cash offices. In turn, that is distributed to 8,400 banks, savings and loans, and credit unions across the country.
For the 2025 fiscal year, the Fed’s Board of Governors ordered 4.1 billion to 5.9 billion Federal Reserve notes—the official name of U.S. currency bills—valued at $83.2 billion to $113 billion.
How the Fed Creates Money With Quantitative Easing
Quantitative easing (QE) is the name for the government’s large-scale purchases of various intermediate- and long-term debt securities that it has made to reduce longer-term interest rates, increase the money supply, and boost demand for loans. It has done this periodically to promote economic activity during times of crisis, such as the financial crisis of 2008.
Under its QE program, the Fed has purchased Treasury bonds, mortgage-backed securities, and corporate bonds. When it takes such action, it conveys a message of support to the markets that can result in a stabilizing effect and prevent panic.
Fast Fact
To aid an economy battered by the Great Recession, the Federal Reserve added trillions to bank reserves by purchasing long-maturity bonds, mortgages, and agency securities through its quantitative easing effort from 2009 to 2014. By 2017, bank reserves amounted to over $4 trillion.
Differing Views of QE
QE is seen as controversial by some. Critics of QE have argued it could lead to hyperinflation, while its defenders say it’s a necessary response to extraordinary economic and financial conditions.
The moderate inflation and relatively strong economic recovery in the years that followed the Great Recession were seen by many as vindicating the Fed’s approach.
Why Does the Fed Still Place Currency Orders?
The Fed continues to place currency orders because people and businesses still at times want hard cash. At the very least, they view it as proof that their money exists. The government understands that printed currency allows for, and encourages, ongoing commercial transactions.
When Does the Fed Increase the Money Supply?
Normally, you’ll see the Fed increase the money supply when economic activity slows. It does so to encourage borrowing and spending by consumers and businesses, which leads to economic growth.
Is the $2 Bill Still Printed?
Yes, $2 bills are still in circulation. In fact, due to its popularity, the Fed’s 2023 currency order was revised to include 64,000 to 128,000 $2 bills, after none had been ordered originally for the year.
The Bottom Line
When it’s said that the Fed is printing money, it really means that the Fed is increasing the amount of money available to the banks to lend out to businesses and consumers.
The Treasury Department’s Bureau of Engraving and Printing handles the printing of currency bills in the U.S., as directed by the Fed.
Correction—Sept. 19, 2023: A previous version of this article incorrectly associated Quantitative Easing with the Federal Reserve’s normal open market operations.
