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Fed Set To Expand Its Monetary Stimulus

Wednesday, December 12, 2012 - 8:50 AM
WASHINGTON (Reuters) – The Federal Reserve is expected to announce a fresh round of bond buying on Wednesday as part of its efforts to support a fragile economic recovery threatened by political wrangling over the government’s budget.

Fed set to expand its monetary stimulus : The Fiscal Times

Where does the Federal Reserve get the money with which to create bank reserves?

It doesn’t “get” the money, it creates it. When the Federal Reserve writes a check, it is creating money. This can result in an increase in bank reserves—a demand deposit—or in cash; if the customer prefers cash he can demand Federal Reserve notes, and the Federal Reserve will have the Treasury Department print them. The Federal Reserve is a total moneymaking machine. It can issue money or checks. And it never has a problem of making its checks good because it can obtain the $5 and $10 bills necessary to cover its check simply by asking the Treasury Department’s Bureau of Engraving to print them.

MONEY FACTS - Chapter 3
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