No do not confuse this with the popular term “print it”. If you’re not familiar, according to the Urban dictionary “print it” means, “who cares or so what?”

When the term “printing money” is used, you should most certainly care. Let’s discuss why.

Q&A Session

Q: Why does the U.S. need money?

A: Multiple reasons. A few examples include funding social services (Medicare), funding wars and stabilizing the financial system (aka the mortgage lenders in 2008 like Fannie and Freddy).

Q: We pay taxes, right? Shouldn’t they have enough money from that?

A: No. Sometimes imbalances occur and we do not have as many dollars coming in as we do going out.

Q: Interesting, so what do we do when we don’t have enough money?

A: We print money!

Q: We just turn on the printing press?

A: Sort of. It’s a bit more formal than that. The U.S. government petitions the Federal Reserve Bank (the Fed) for a loan. The Feds lends it to the government. The amount of this loan plus the interest on it becomes part of the national debt.

Q: Why even bother collecting taxes if we could just print money?

A: It would devalue the dollar; that would create inflation.

For example, if everyone in the U.S. has $1, that dollar has a certain value. Then, the Fed prints one billion more dollars. What happens? Your $1 becomes less valuable. You need more dollars to buy the same thing you could buy yesterday for $1. That is called inflation. And nobody likes inflation.

If the United States Owns the Fed, Why Bother Asking for Money? Why Not Demand it?

1. We do not demand things. We have moved beyond the days where we would lay down in pencil formation on the grocery store floor and howl until Mom bought us the 25-cent plastic egg mystery surprise.

2. The United States doesn’t own the Fed. No one “owns” the Fed.

3. There’s a law against this. The government is not allowed to simply issue (print) money. As such, the government must borrow the funds it needs. The law that dictates this is The Federal Reserve Act, which created the Fed. Congress passed it back in 1913.

When the U.S. Needs Money, They Go to the Fed, Correct?

Correct.

When a “normal” person needs money they go to a bank, such as Wells Fargo or JPMorgan. When the U.S. government needs to borrow money, the sum is so large that the only bank that can lend to them is the Federal Reserve Bank (the Fed). So now you know.