# How U.S. Current gets into circulation



## Woody (Nov 11, 2008)

I know how fractional reserve banking works. I know how the FED's work. This is for people who might still not believe how the system works. It is not about fractional reserves or any other tin foil hat theories, it is about how the actual "U.S. Federal Reserve Notes" come into being. Pretty basic but still, hope it might open a few eyes. I offer it as a primer and hope to get at least one person thinking. "If there are only 1.2 TRILLION dollars of U. S FEDERAL RESERVE NOTES in existence, how can we owe 14 TRILLION in debit?"

This article is right from the NY FED.org. Many of us understand that the actual amount of 'U. S. currency' in existence is only a small fraction of the amount of 'money' available to use. We all hear about the astronomical amounts of money being mentioned in the MSM news reports. Billions here... Trillions there... National Debit.... PLEASE, in your preparations, ask yourself how can anyone owe or spend more 'money' than actually exists?
There is one paragraph that stands out, please read it carefully:
"Virtually all of currency notes in use are Federal Reserve notes. Each Federal Reserve Bank is required by law to pledge collateral at least equal to the amount of currency it has issued into circulation. The bulk of the collateral pledged is in the form of U.S. Government securities and gold certificates owned by the Federal Reserve Banks."

Think on that and read it again.

http://www.newyorkfed.org/aboutthefed/fedpoint/fed01.html
How Currency Gets into Circulation

There is about $1.2 trillion dollars of U.S. currency in circulation.
The Federal Reserve Banks distribute new currency for the U.S. Treasury Department, which prints it. 
Depository institutions buy currency from Federal Reserve Banks when they need it to meet customer demand, and they deposit cash at the Fed when they have more than they need to meet customer demand.
As of July 2013, currency in circulation-that is, U.S. coins and paper currency in the hands of the public-totaled about $1.2 trillion dollars. The amount of cash in circulation has risen rapidly in recent decades and much of the increase has been caused by demand from abroad. The Federal Reserve estimates that the majority of the cash in circulation today is outside the United States. 
Meeting the Variable Demand for Cash
The public typically obtains its cash from banks by withdrawing cash from automated teller machines (ATMs) or by cashing checks. The amount of cash that the public holds varies seasonally, by the day of the month, and even by the day of the week. For example, people demand a large amount of cash for shopping and vacations during the year-end holiday season. Also, people typically withdraw cash at ATMs over the weekend, so there is more cash in circulation on Monday than on Friday. 
To meet the demands of their customers, banks get cash from Federal Reserve Banks. Most medium- and large-sized banks maintain reserve accounts at one of the 12 regional Federal Reserve Banks, and they pay for the cash they get from the Fed by having those accounts debited. Some smaller banks maintain their required reserves at larger, "correspondent," banks. The smaller banks get cash through the correspondent banks, which charge a fee for the service. The larger banks get currency from the Fed and pass it on to the smaller banks. 
When the public's demand for cash declines-after the holiday season, for example-banks find they have more cash than they need and they deposit the excess at the Fed. Because banks pay the Fed for cash by having their reserve accounts debited, the level of reserves in the nation's banking system drops when the public's demand for cash rises; similarly, the level rises again when the public's demand for cash subsides and banks ship cash back to the Fed. The Fed offsets variations in the public's demand for cash that could introduce volatility into credit markets by implementing open market operations. 
The popularization of the ATM in recent years has increased the public's demand for currency and, in turn, the amount of currency that banks order from the Fed. Interestingly, the advent of the ATM has led some banks to request used, fit bills, rather than new bills, because the used bills often work better in the ATMs. 
Maintaining a Cash Inventory
Each of the 12 Federal Reserve Banks keeps an inventory of cash on hand to meet the needs of the depository institutions in its District. Extended custodial inventory sites in several continents promote the use of U.S. currency internationally, improve the collection of information on currency flows, and help local banks meet the public's demand for U.S. currency. Additions to that supply come directly from the two divisions of the Treasury Department that produce the cash: the Bureau of Engraving and Printing, which prints currency, and the United States Mint, which makes coins. Most of the inventory consists of deposits by banks that had more cash than they needed to serve their customers and deposited the excess at the Fed to help meet their reserve requirements. 
When a Federal Reserve Bank receives a cash deposit from a bank, it checks the individual notes to determine whether they are fit for future circulation. About one-third of the notes that the Fed receives are not fit, and the Fed destroys them. As shown in the table below, the life of a note varies according to its denomination. For example, a $1 bill, which gets the greatest use, remains in circulation an average of 5.9 years; a $100 bill lasts about 15 years.

Denomination
of Bill Life
Expectancy
(Years) 
$1	5.9 
$5	4.9 
$10	4.2 
$20	7.7 
$50	3.7 
$100	15

The Federal Reserve orders new currency from the Bureau of Engraving and Printing, which produces the appropriate denominations and ships them directly to the Reserve Banks. Each note costs about four cents to produce, though the cost varies slightly by denomination. 
Virtually all of currency notes in use are Federal Reserve notes. Each Federal Reserve Bank is required by law to pledge collateral at least equal to the amount of currency it has issued into circulation. The bulk of the collateral pledged is in the form of U.S. Government securities and gold certificates owned by the Federal Reserve Banks. 
Making U.S. Currency More Secure
In late 1996, the Treasury began issuing a series of Federal Reserve notes containing new features that make the notes harder to counterfeit. The Treasury introduced the modified notes in order of decreasing denomination-the $100 bill appeared in March 1996, the $50 bill in October 1997, the $20 bill in September 1998, and the $10 and $5 bills in May 2000. The most noticeable modification was a larger, slightly off-center portrait that incorporates more detail, thereby making the bill harder to counterfeit. For the benefit of persons with impaired vision, the back of the modified $50, $20, $10 and $5 bills features numerals larger than those on older currency. 
In October 2003, the United States issued a newly redesigned $20 note with enhanced security features and subtle background colors of blue, peach and green. A new $50 note was issued on September 28, 2004. On March 2, 2006, the new $10 note entered circulation. On March 13, 2008, the new $5 note entered circulation. The $100 note is also slated to be redesigned, but a timetable for its introduction is not yet set. 
Putting Coins into Circulation
The procedures for putting coins into circulation are similar to those for currency. The U.S. Mint produces coins in Philadelphia, Denver, and San Francisco, and ships them to the Federal Reserve Banks and to authorized armored carriers, which supply banks that need coins to meet the public's demand. 
The distribution of coins differs from that of currency in some respects. First, when the Fed receives currency from the Treasury, it pays only for the cost of printing the notes. However, coins are a direct obligation of the Treasury, so the Reserve Banks pay the Treasury the face value of the coins. Second, large banks in some Federal Reserve Districts participate in a Direct Mint Shipment Program, and receive coins directly from the Mint. In the New York area, there also is an arrangement under which banks that need coins buy them from banks that have a surplus. To promote the arrangement, the New York Fed stands ready to match banks that have excess coins with those that need coins. July 2013

Here is the "CIA" site listing world currency circulations:

https://www.cia.gov/library/publications/the-world-factbook/fields/2214.html

And one more tidbit:


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## hiwall (Jun 15, 2012)

> There is about $1.2 trillion dollars of U.S. currency in circulation.


That is just a small fraction of the 'electronic' dollars in 'circulation'.


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## Woody (Nov 11, 2008)

BINGO! Give that man a Cupie doll.

And of course all that 'electronic money' is properly recorded and accounted for, right? I mean come on now, how can you hide something that does not exist!! That is crazy talk from the Conspiracy Theorists!!!

I have a piece of paper that says I own 2,000 pounds of gold, so it is might, right? If I went to the depository and wanted to trade that piece of paper for the gold I own, they would be happy to give it to me, right? I mean, it is mine, I own it, this piece of paper says so, I bought it, I paid for it, it is mine!! Oh, how did that work out for Germany?


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## BillS (May 30, 2011)

Woody said:


> BINGO! Give that man a Cupie doll.
> 
> And of course all that 'electronic money' is properly recorded and accounted for, right? I mean come on now, how can you hide something that does not exist!! That is crazy talk from the Conspiracy Theorists!!!
> 
> I* have a piece of paper that says I own 2,000 pounds of gold, so it is might, right? If I went to the depository and wanted to trade that piece of paper for the gold I own, they would be happy to give it to me, right?* I mean, it is mine, I own it, this piece of paper says so, I bought it, I paid for it, it is mine!! Oh, how did that work out for Germany?


If you're just an average guy then forget it. But if you're part of an organized crime family you'll get your gold eventually, regardless of who they have to steal it from.


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## CrackbottomLouis (May 20, 2012)

IMO, the only true physical wealth in the world is land with water, the ability to produce goods off it in a sustainable manner, and the ability to protect it. All mediums of exchange that arent a directly usable good require faith that someone else places value on it. I hope to get to the point where I can use barter for goods as much as possible.


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## BillS (May 30, 2011)

Gold and silver are real wealth but they're only useful for those who are already fully prepared.

I see PM's as good during early hyperinflation when stores are still open and after the government regains control of the country. PM prices are suppressed so much that I expect them to go up 500% as soon as it stops. Possibly much higher. There's a good chance that the metals you paid $10,000 for would be worth enough to buy property before things totally collapse.


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