Eye Crosser #12: Who Prints the Money? U.S. Treasury or The Fed?

Who really prints the U.S. currency: The Federal Reserve Bank (the Fed) or the U.S. Treasury? I have seen and heard writers, journalists, and others, say that the Fed prints U.S. currency. For me, this is a bit like the difference between the Federal debt vs. the Federal deficit of which I have blogged about in an earlier posting. I think I finally understand the difference but “wait a minute”, let’s look at this again???

So here are three articles concerning the relationship between the Federal Reserve Bank and the United States Treasury Department.

Courtesy of the Federal Reserve Bank of New York:  How Currency Gets into Circulation

  • Paper currency is printed by the Bureau of Engraving and Printing (a division of the Treasury Department)
  • Coins are minted by the United States Mint (a division of the Treasury Department)

Here’s a nice article written by Aaron Task in Yahoo! Finance:  No, the Fed Does NOT ‘Print Money’: Just Explain It

  • The Fed controls the money supply.
  • The Fed lends money to the banks.
  • The Fed sets the fed (federal) funds rate.

John Carney of The Atlantic puts forward an interesting argument that The U.S. Government Cannot Ever Run Out of Money! Here are three points from his article:

  • The United States enjoys unlimited overdraft protection from the Federal Reserve Bank.
  • Rejecting a check written by the government of the United States would probably violate the dual mandate of the Fed to pursue maximum employment and price stability.
  • Would having the Fed credit the account of a bank that presented a check on the U.S. Treasury Department’s empty account amount to the incurrence of new debt in violation of the debt ceiling?

So it appears that the U.S. Treasury Department prints the currency but the Federal Reserve Bank controls the flow of the money.
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Perplexed
Disagree

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2 thoughts on “Eye Crosser #12: Who Prints the Money? U.S. Treasury or The Fed?

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