How does the Fed determine how much money to print every year? - San Francisco Fed (2024)
7.2 billion. That is how many Federal Reserve Notes the Board of Governors ordered with the Treasury’s Bureau of Engraving and Printing (BEP) in 2015. What factors influence the Board’s decision when calculating how much new U.S. currency to order every year?
Mr. Lambert said the Board begins its evaluation process every spring by looking at policy and operational factors that affect the demand for cash. At the operational level, the Board considers the amount of currency that the Federal Reserve Banks destroy because the notes are no longer fit for recirculation.
As the Reserve Banks process deposits of currency from financial institutions, they use specialized processing equipment to determine if the currency is genuine and fit. If it meets both of those criteria, then the currency is returned to circulation. Currency notes that are too damaged or soiled are removed from circulation, and Reserve Banks shred the notes to ensure they are properly destroyed.
This destruction of currency is the biggest factor that the Board uses to determine how many notes they include in the annual print order. Another factor is the growth in demand for each denomination, which is assessed by looking at payments and receipts data.
Using this data, we know that the number of notes in circulation increased 4.2 percent from 2013 to 2014, and the total value of currency in circulation increased 7.6 percent over a 5-year period to nearly $1.3 trillion.
In essence, it is the Growth Rate + Destruction Rate that drives the overall print order. Historically, the destruction rate accounts for an average of 90 percent of the overall order that the Board places with the BEP every year.
With currency in circulation continuing to rise, the Federal Reserve monitors cash trends to ensure we meet public demand. To learn more about the print order process, view the Board’s video or the Currency Print Orders web page.
To learn about what happens after the print order is placed, watch our Cash Lifecycle video.
The views expressed here do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or of the Board of Governors of the Federal Reserve System.
Currency notes that are too damaged or soiled are removed from circulation, and Reserve Banks
Reserve Banks
The Board of Governors of the Federal Reserve System, commonly known as the Federal Reserve Board, is the main governing body of the Federal Reserve System. It is charged with overseeing the Federal Reserve Banks and with helping implement the monetary policy of the United States.
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shred the notes to ensure they are properly destroyed. This destruction of currency is the biggest factor that the Board uses to determine how many notes they include in the annual print order.
Each year, the FRB places a print order with the BEP to produce new banknotes. The order is based on the FRB's estimate of public demand of currency for the upcoming year and how much currency they estimate will be destroyed because it is unfit to circulate.
The job of actually printing bills belongs to the Treasury Department's Bureau of Engraving and Printing based on how many bills the Fed determines should be issued each year. Quantitative easing, an asset-purchase program, is one way the Fed increases the money supply in times of financial crisis.
Each year, the Federal Reserve Board projects the likely demand for new currency, and places an order with the Department of the Treasury's Bureau of Engraving and Printing, which produces U.S. currency and charges the Board for the cost of production. The 2023 currency operating budget is $931.4 million.
The Bureau of Engraving and Printing (BEP) produces United States currency notes, operates as the nation's central bank, and serves to ensure that adequate amounts of currency and coin are in circulation.
Currency notes that are too damaged or soiled are removed from circulation, and Reserve Banks shred the notes to ensure they are properly destroyed. This destruction of currency is the biggest factor that the Board uses to determine how many notes they include in the annual print order.
The new bill costs 12.6 cents to produce and has a blue ribbon woven into the center of the currency with "100" and Liberty Bells, alternating, that appear when the bill is tilted.
Printing more money is a non-starter because it'd break our economy. “It would take care of the debt but at a price that's far too high to pay,” Snaith says. So what is going to happen with the debt ceiling? Snaith predicts that, after a few more weeks of infighting, lawmakers will eventually agree to raise the limit.
How can it be dangerous? If the government prints too much money, people who sell things for money raise the prices for their goods, services and labor. This lowers the purchasing power and value of the money being printed. In fact, if the government prints too much money, the money becomes worthless.
It wouldn't be historically unprecedented. In fact, it's been done many times in the past. But nothing comes free, and though printing more money would avoid higher taxes, it would also create a problem of its own: inflation. Inflation is a general increase in the prices of goods and services throughout an economy.
You can purchase uncut currency in sheets of 4, 5, 8, 10, 16, 20, 25, 32, and 50 notes per sheet. Not all notes, however, are available as uncut currency in all of these sheet sizes. Smaller sheet sizes are cut out of the original full-size sheets.
The Federal Reserve creates money when it decides that the economy would benefit by it doing so. It creates money not by printing currency but by effectively adding funds to the money supply. The Fed does this in various ways, including changing the target fed funds rate with the goal of affecting other interest rates.
The Constitution gives Congress the power over the currency of the United States including the power to coin money and regulate its value. Congress also has the power to charter banks to circulate money. The converse power of the creation of currency is to regulate any and all counterfeit currency.
The Federal Reserve is not funded by congressional appropriations. Its operations are financed primarily from the interest earned on the securities it owns—securities acquired in the course of the Federal Reserve's open market operations.
It wouldn't be historically unprecedented. In fact, it's been done many times in the past. But nothing comes free, and though printing more money would avoid higher taxes, it would also create a problem of its own: inflation. Inflation is a general increase in the prices of goods and services throughout an economy.
How much money is printed each day? The Bureau of Engraving and Printing produces 38 million notes a day with a face value of approximately $541 million.
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