Why does the fed keep printing money?

Question

correct me if im wrong but if they print more money does the dollar lose value. the less value the dollar has higher inflation right? if this is right why do they keep printing it off?

Answer 1

Currently, one reason may be attributed to the decrease in value of the U.S. dollar. For example, the U.S, dollar compared with the Canadian dollar has lost 50% in value. An American visiting Canada must currently pay two dollars for a purchase of a canadian commodity priced at one dollar canadian. This would result in a need for printing more paper dollars.

Answer 2

Because we have a fiat currency, the money supply MUST increase as the economy grows. Else you'll experience Deflation (too many goods chasing too few dollars).

The Fed doesn't arbitrarily create new money like they do in Zimbabwe. Even if the Congress issues new debt, the Fed can decided to buy those T-Notes and thus pump more money into the economy, or just let the existing money fund the Government's pork barrel politics.

The Fed's only mission in life is to ensure price stability and keep Inflation in check. And they very well know that excess money in the economy is inflationary. So I seriously doubt that Ole BenB is printing new money like they are in Zimbabwe.

And yes, the Bureau of Print and Engraving make the physical paper money on orders from the Federal Reserve. Same with the US Mint. Digital money is created by the Fed with a push of a button. Only about 10% of the US Money Supply consists of physical dollars and coins.

Answer 3

the fed(congress) is spending(tax payer)money that it does not have. this equals inflation, a euro dollar use to be worth less than one U.S. dollar, now the euro is worth 1.50 to 1.00 U.S. dollar.United States owes 13 trillion dollars-way too much,greed in the U.S. keeps the printing presses rolling along with war, floods,hurricanes,special programs(E-85),etc, they print money and checks left and right.This will kill the U.S.

Answer 4

The Federal Reserve does not print money--the  U.S. Bureau of Engraving and Printing along with the U.S. Mint are responsible for that. The Federal Reserve, however, is responsible for putting these notes into circulation. This can be accomplished through open-market operations, which is basically the Fed buying and selling government bonds to the public. When it buys bonds, it puts more currency into the economy, thereby increasing the money supply. When it sells bonds, it takes currency away from circulation, and, consequently, decreases money supply.

Money supply manipulation is an important mission of the Federal Reserve, which acts as a central bank for the United States. You're right in indirectly pointing out that an increase in money supply leads to an increase in price levels (inflation), a decrease in the value of money, and a decrease in the interest rates (interest rates must fall to induce people to hold the additional money). When people have more money to spend, in the short run, they can use it to purchase more goods, thereby increasing the aggregate demand and helping avert a recession.  

It's also important to realize that in the short term, inflation and unemployment are negatively related (Philips curve), so having a 0% inflation rate isn't a good idea either, as it would result in higher unemployment. Moreover, as has been already mentioned, even if you have 0% inflation, it does not mean that you have a stagnant money supply growth. Think about it this way:

M = PQ

Where M is the money supply, P is the price, and Q is the quantity of goods/services produced. Even if there is no inflation (thereby making P a constant), over time, as people become more productive (through an increase in capital stock, for example), Q increases. To keep the identity true, you need to increase M (money supply).

Answer 5

So people can buy stuff!

Answer 6

Part of the money printed replaces old money that goes out of circulation.  Bills get worn out, lost, destroyed, etc.

Part of it is accounted for the new value created when the economy grows.  Your work creates value - the new bills help account for that.