Questions about the mint and currency...?
And how does the new money get introduced into the economy? Does it get exchanged for old, worn out money? Who is doing the exchanging?
Answer:
The amount of actual currency in circulation is only a small part of the total money supply. Most 'cash' is sitting in checking accounts, brokerage accounts, etc.
Banks actually create cash (not currency) by loaning out money. The Fed Resv controls their ability to do this by requiring them to keep some cash in reserve at the Fed Bank.
When the Fed wants to increase th money supply they buy US gov't bonds off the open market - releaseing cash into the system.
the governments usually know that by knowing the rate of gold in the country every year and same government do the exchanging
1. The mint usually will print out how is needed to be replaced (worn out money, lost money, etc) and how much the Federal Reserve calls for.
2. Yes if they printed out how much they wanted it would cause inflation (the money has less buying power)
3. The new money it introduce into the economy at the Federal reserve banks. From there they lend money to your local bank.
4. Usually the money that is worn out is replace with new notes by the US Treasury.
The Federal Reserve sets interest rate targets and then makes sure that there is enough reserves in financial institutions to match that interest rate. If the key interest rate (The Fed Funds rate) rises beyond that target, then the Federal Reserve buys securities from banks or the public and pumps out more money. They usually buy up securities with new currency so there is no immediate cost to do this. The Fed is of course conscious not to overdo it. If they pump out to much money and keep interest rates too low too low then they will create excess money and it will result in the devaluation of the dollar.
Because the economy needs to grow, there naturally needs to be more money. So money growth in the 3-5% range is probably the rule though it is not exceptional to have money growth in the USA at 10% in a year. 10% would probably not be sustainable for very long and would eventually result in inflation.
Zimbabwe is a country that has printed money endlessly resulting in 1500 percent inflation or more a year. If you want to learn more about money take some economics.
Worn out money is easy. Banks collect it and exchange it for new currency. Worn out money does nothing to the money supply and really is a non-event.
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