I have been wondering about this. Most of the “money” created, of course, is digital. It is an entry in a ledger. But obviously real money is out there too.
The best description I have found to date is here, from the Fed’s website. Go to page 34.
The way our system works is banks have to keep a certain amount of “real” money in reserve. They can either hold it in cash in their vault, or deposit it with the Federal Reserve. I think that amount is 10%, but varying required withholding is a basic feature of this cartel, where competition in that regard is formally forbidden under penalty of law.
What I think they can do is convert their reserves at the Fed to actual cash. They are also required by law–by the Fed–to keep a certain amount of cash in their vault. Obviously, that amount is not as high as the total reserves they are supposed to have.
So banks just place orders, that are filled regionally, and the cash is delivered in armored cars by men with guns. There are printing presses operated by the Fed, and paid for by interest and transaction fees system members pay. That part is interesting, too: the Fed is not tax-payer supported. If it were, funding could be cut, which would allow political pressure to be brought on it.
According to their own site, the “need” for cash grows over time, which is a function of inflation they create. Printing more physical cash, though, is a very unimportant means of this.
The other part of that table that I am still working on is what appears to be out and out accounting deception. Here is the actual text:
The amount of currency demanded tends to grow over time, in part ref lecting increases in nominal spending as the economy grows. Consequently, an increasing volume of balances would be extinguished,
and the federal funds rate would rise, if the Federal Reserve did not offset the contraction in balances by purchasing securities. Indeed, the expansion of Federal Reserve notes is the primary reason that the Federal Reserve’s holdings of securities grow over time.
What I think they are saying is that as inflation happens, money buys less, so people ask for more. If, they say, they did not inject money into the system so as to make sure there was enough, the cost of money between banks–the Federal Funds Rate, which is a means by which banks needing short term loans can get them from other banks in the system–would rise.
This appears to be bullshit. What is actually happening is the Fed buys securities, say Bear Stearns securities, for cash they don’t have. They literally just write a check, and as long as everyone agrees it was money, it will clear. This process is inflationary, since it creates money. On the back end, then, due to inflation, more people ask for cash, since the amount they hold is up, and the banks have to keep a percentage of that. So there is a relation, but as usual it is exactly backwards.
These people–well educated, wealthy, no doubt in many cases urbane, and certainly intelligent–are defrauding the American people right before our eyes. I have long ceased to wonder how people who knowingly do evil sleep at night. That is only a problem if you have a conscience. If you have no moral decency, you suffer no moral scruples, and you sleep just fine. Short of that, if you can just learn to lie to yourself, to convince yourself the bullshit you are peddling is solid gold, you can get much the same effect. People like that can and do wake up, though. We need them right now.