How does the [USA] fed increase or decrease the amount of cash in circulation?

Question

I’ve heard that this happens through banks, but what financial mechanism is used to do this? It can’t simply be “Hey Chase Bank, here’s $100 million for free”.

In: 14

Answer 1

They print money and then they use that money to buy treasury bonds from banks. The money goes to the banks and the t-bills come back to the fed, badda bing badda boom, and when they want to decrease the money supply, they sell the t-bills to the banks and money comes back/out. And the US Treasury decides how many t-bills there are. This system provides a lot of control, from the public sector, over these operations while also having them take place in the open market.