Who decides how much money prints?

The Federal Reserve is there to make sure it doesn’t disappear. The Fed and Treasury don’t print money and then give it to the banks. The government keeps its hands on the money supply, and it can’t give money to the banks.

The money supply is the market economy’s best predictor of the money supply. It can tell us that the Fed is printing as much money as needed, but the government still has to spend money on the things it owns, like Social Security, Medicare, and defense.

How much does the Fed print each month? In September 2009, the Federal Reserve released its statement of monetary policy. The statement said the primary goal of that statement was to stabilize the money supply so that interest rates don’t rise any faster than they already have.

However, the actual monetary policy actions of the Fed are not published as a press release. Instead, the Fed makes its monetary policy decisions by announcing them at its Jackson Hole, Wyoming, conference. Those meetings are usually more public than the Fed’s press releases, if they are announced at all.
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The Jackson Hole annual conference announced its policy statement for October 2, 2009. What it didn’t make clear is that it was saying it would be taking away from its existing mandate to “preserve wage gains” by “temporarily” raising short-term interest rates from their current levels.

The announcement said that in addition to that decision, the Fed would have to set some kind of “target” for short-term interest rates — the short-term interest rate would have to stay lower than the level it has now for three months.

That kind of target does not exist, because the Fed doesn’t want to give the Bank of England and the Bank of Japan a “backdoor” way to manipulate short-term interest rates when they have more influence on monetary policy.

What really happened: The Fed’s announcement reduced the Federal funds rate by 0.25 percent, putting the actual, market-based target rate under the $85 level.

Why it matters: The Fed is not allowed to increase or decrease the rate it lowers for monetary policy purposes. Since it is not allowed to change that rate, the Fed has to lower the dollar to keep the long-term interest rate low. (The Federal funds rate is the short-term interest rate minus the Fed’s target rate.)

So when the Fed says it will be taking away from the Fed’s target rate, it is actually taking away from