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How does new money get into the public money supply and stay there?


I understand that the Federal Reserve (FEDS) controls the money supply and interest rates. Whatever new money enters our economy, it is done through money transfers to member banks who in turn make the new money available to businesses and individuals in the form of loans. But when the loans are paid off, I assume the money then goes back to the FEDS. Therefore, how has new money been entered into the private sector if the new money made a round trip back to the FEDS?

 

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John D Wilson (claptona) says

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2 years ago
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  • hardlymoving profile image

    hardlymoving 2 years ago

    I'm still confused. I thought the FEDS increases the money supply by ordering the Treasury to "print money" so to speak. The money becomes a IOU owed by the citizens of the US in the form of treasury notes or bonds ?