No, the Fed Does NOT ‘Print Money’: Just Explain It By Aaron Task [View all]

[mfcorey1]

The Fed starts a two-day meeting Tuesday. And while Ben Bernanke isn't expected to change rates, a lot is on the line.

You probably have a sense the Fed is super important and powerful, but here's something you probably don't know: The Fed doesn't print money.

Yes, that's right. Despite all the chatter on the campaign trail (hello, Ron Paul) and on cable TV, the Fed is actually not in the business of printing money.

In America, the actual, physical printing presses are owned and operated by the Treasury Department...not the Fed.

A lot of people are confused about this. That's probably because the Fed does control the money supply. But "money supply' is not the same as actual physical dollars — and yet another reason why economics is known as "the dismal science".

The money supply equals the amount of physical cash plus the amount of credit circulating throughout the economy, which is where the Fed comes in a very big way.

Think of the Fed as a bank — but just for other banks. The Fed lends money to banks, which determines the rate which banks charge the rest of us for everything from car loans to mortgages to credit card rates and pretty much every other loan you can think of (and some fees only a banker can dream up.)

http://finance.yahoo.com/blogs/daily-ticker/no-fed-does-not-print-money-just-explain-150433185.html