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How is the US Dollar Made?

Everything you need to know about money.

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Whether you have a $5 banknote in your wallet or you are carrying around a smartphone with a digital payment app, you may have wondered about the complexities behind money. What assigns the money you use daily any value? How is this money made? Who prints it? These questions are often ignored in the classroom, but monetary policy is an important issue that deserves greater attention, since what the Federal Reserve System does matters to every American and his or her wealth.

What are Money and the Dollar?

Money is an efficient medium of exchange that allows you to swap it for goods and services. It is also a store of value, meaning that you can save this money until you want to use it at a later date. The United States uses the Federal Reserve Note, also known as the dollar, as its unit of money.

What Determines the Dollar’s Value?

How do you determine the value of the money in your wallet? The main factor is demand. Similar to how goods and services have value, money can only have a worth based on who wants it. If nobody showed interest in Big Macs or iPhones, then they would have little to no value in the open market. The same principle applies to money: If nobody wanted US dollars, euros, or Japanese yen, then they would be worthless.

Some primary measurements to value the dollar include:

  • How much the dollar can purchase in foreign currencies.
  • Amount of dollars held by foreign governments.

How Money is Made and Who Prints It

The Federal Reserve, America’s central bank, is responsible for determining how much money is in the national economy. While the Treasury Department’s Bureau of Engraving and Printing (BEP) possesses the printing press to create paper currency and the US Mint produces coins, the Fed decides what should be the appropriate supply of money in the United States.

The Money Supply

The United States money supply is all the physical cash in circulation and money held in checking and savings accounts across the nation. It should be noted that this does not include investments, credit, or home equity.

The Fed uses four ways to measure the money supply:

  • M1: This includes currency in circulation, traveler’s checks, and US checking account deposits. The M1 does not include currency held in the Treasury, Federal Reserve banks, or bank vaults.
  • M2: This includes everything in M1, in addition to savings accounts, money market mutual funds, money market accounts, time deposits under $100,000.
  • M3: This includes everything in M2, plus long-term time deposits and money market funds.
  • M4: This includes everything in M3, as well as all other deposits.

According to the St. Louis Fed Bank, the M1 and M2 money stock totaled $3.890 trillion and $15.011 trillion, respectively, as of September 2019.

When critics of the Federal Reserve System say that the central bank is printing money out of thin air, they are not saying so in a literal sense. But this might be the easiest way to convey the message that the Fed can either increase the currency’s value or diminish its worth.

Andrew Moran

Economics Correspondent at and Andrew has written extensively on economics, business, and political subjects for the last decade. He also writes about economics at Economic Collapse News and commodities at He is the author of “The War on Cash.” You can learn more at

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