Where does new money go?


 When government prints money, how is it distributed to the rest of the world? 


As of September 26, 2012 there was $1.3 trillion in circulation and the majority is outside the United States. The process of distribution of money begins in the printing of money by the Bureau of Engraving and Printing and they package and store the money in the Federal Reserve Vault so the Federal Reserve Banks can pick them up and distribute them. The Federal Reserve is the nation’s central banking system and its goal is to sustain economic growth. The Federal Reserve Banks decide how much money to put into circulation. There are three factors in considering the amount of money in circulation:

  1. The Discount Rate: the interest rate on short-term loans the Federal Reserve charges

  2. Reserve Requirements: the percentage of cash demand from the accounts Federal Reserve Bank

  3. Open Market Operations: the Federal Reserve sells or buys U.S. Government securities (tradable assets) in the open market which influence interest rates, the growth of money, and the credit total.

Federal Reserve Bank MapThrough the selling or buying of government bonds the central bank can either increase the money supply or decrease the money supply. When it comes to how money is distributed to the world the same concept applies. But each country also carries their own currency. To physically distribute U.S. currency, all methods are used: air, land, and sea. Banks receive bulk shipments of cash ‘directly’ or ‘indirectly.’ Banks take possession of the actual shipment when receiving directly. When a shipment is received indirectly, the bank accepts an economic equivalent such as a cash letter notification.


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