A common term used when the money supply is being increased is "printing money". Presumably at some point in the distant past, currency was actually printed to increase the money supply. Of course for a long time it's just been a number in a computer (and I assume even before that it may have been a number in a ledger or such).

It made me wonder though: historically, in the U.S., when was the last time the phrase was literally true? Or has it never been (perhaps it predates the country)?

EDIT: Apparently there was some level of misunderstanding: When I say "literally true" that would only be the case if money supply increases are 100% due to currency printing. I assume that not even 50% of increases are due to printing.


2 Answers 2


Printing Greenbacks During the Civil War

Lincoln’s Greenback Mill: Civil War Financing and the Start of the Bureau of Engraving and Printing, 1861–1863


Faced with a breakdown of its war financing scheme because of the failure of bank note companies to produce the needed currency and bonds, the Treasury Department was forced on an ad hoc basis to enter the printing business to meet its needs.

Historically during the Free Banking era gold and silver were specified as money. In theory any private or public institution could mint gold and silver coins. Also in theory anyone could issue currency notes provided others would accept the notes instead of payment in silver and/or gold. Banks would order their own brand of currency notes from private bank note printing companies. During the Civil War the government finance concerns drastically altered both the government customs and financial customs because the Treasury became an even more dominant institution in the financial system.

How Currency Gets Into Circulation


The public typically obtains its cash from banks by withdrawing cash from automated teller machines (ATMs) or by cashing checks.

To meet the demands of their customers, banks get cash from Federal Reserve Banks. Most medium- and large-sized banks maintain reserve accounts at one of the 12 regional Federal Reserve Banks, and they pay for the cash they get from the Fed by having those accounts debited. Some smaller banks maintain their required reserves at larger, "correspondent," banks. The smaller banks get cash through the correspondent banks, which charge a fee for the service. The larger banks get currency from the Fed and pass it on to the smaller banks.

When the public's demand for cash declines—after the holiday season, for example—banks find they have more cash than they need and they deposit the excess at the Fed. Because banks pay the Fed for cash by having their reserve accounts debited, the level of reserves in the nation's banking system drops when the public's demand for cash rises; similarly, the level rises again when the public's demand for cash subsides and banks ship cash back to the Fed. The Fed offsets variations in the public's demand for cash that could introduce volatility into credit markets by implementing open market operations.

The Federal Reserve orders new currency from the Bureau of Engraving and Printing, which produces the appropriate denominations and ships them directly to the Reserve Banks. Each note costs about four cents to produce, though the cost varies slightly by denomination.

Virtually all of currency notes in use are Federal Reserve notes. Each Federal Reserve Bank is required by law to pledge collateral at least equal to the amount of currency it has issued into circulation. The bulk of the collateral pledged is in the form of U.S. Government securities and gold certificates owned by the Federal Reserve Banks.


Financial assets:

  1. Vault cash
  2. Reserve balances
  3. Currency outside banks
  4. Transaction deposits
  5. Treasury securities

The M1 money supply consists mostly of transaction accounts in the aggregate bank and Federal Reserve Notes in circulation.

Banks use vault cash to service withdrawal of currency by their customers. Banks use reserve balances at Fed to clear interbank payments and payments with Fed and/or other government agencies kept in the books of the Treasury Department. The government and non-banks clear payment using reserve balances and transaction deposits which is a two-tier payment clearing system.

The M1 money supply does not increase by the government printing money to deficit spend because the federal government issues net new Treasury securities to cover the deficit. Treasuries are considered to be risk-free financial assets which exchange easily for money so the money markets are made more liquid via the increase of Treasuries when the government pays for the deficit via the issue of Treasuries.

The state and federal governments enable the bank sector, via the banking franchise, to provide the elastic money supply by making credit entries to bank deposit accounts. A liability account increases by a credit entry; deposits are liabilities of the bank and bank sector; when net new credit entries are made on the books of the aggregate bank sector the money supply increases via the customs of double-entry accounting and via the legal recognition of finance relations. If these credit entries are made in paper ledgers or books, then money supply increases via recording such symbols in books. If these credit entries are made in electronic storage media then the money supply increases electronically. However the money is printed and/or otherwise issued via the debtor-creditor laws and accounting customs. The means of printing notes or keeping records of money as an accounting symbol rather than as a tangible symbol in token form (notes, coins) is just part of the financial game.

So banks increase the money supply when they issue net new loans to non-bank customers or purchase securities from non-bank sellers. If bank customers withdraw funds over time then this would drain reserve balances of the bank sector held at the Fed because banks pay the Fed for currency using reserve balances. If Fed purchases securities from non-banks in the open market, however, to hold as assets equal to the amount of currency in circulation, then Fed would be putting reserve balances and deposits back into the aggregate bank sector, meaning the withdrawal of currency would increase the currency portion of M1 money without reducing the deposit portion of M1 money other factors being equal. However other factors are not equal because non-banks can convert deposits in M1 to saving or time deposits in M2 money supply or into other bank liabilities or equity via portfolio allocation decisions.

Therefore banks increase the money supply via the increase of bank assets, if Fed offsets the currency drain then banks do not have to decrease the aggregate bank balance sheet to service this drain, and the mix of currency and deposits in M1 money supply is a non-bank portfolio allocation decision enabled by the system where Fed purchases money from the Mint for distribution to the banks for distribution to bank customers.

  • $\begingroup$ I feel like this directly answers my question. Thank you! $\endgroup$
    – user37681
    Aug 11, 2021 at 22:00

When was the last time printing money involved actual printing?

In the US probably today. With certainty last month.

While it is true that most of the money supply is created electronically people still use physical currency and those notes have to be still printed. In addition old notes have to be continuously replaced as they wear down, or as people accidentally wash them or tear them down.

In the US the printing of money is done by Bureau of Engraving and Printing. As the production report on the website of the Bureau of Engraving and Printing shows according to their production schedule they created the following quantities of the various notes in June (see table below). Also, mints/printing presses usually tend to work most working days, so likely they were printing some money also today.

enter image description here

Also these are not just replacement notes as FRED data clearly show the amount of coins and notes in circulation grows virtually every month.

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When I say "literally true" that would only be the case if money supply increases are 100% due to currency printing

  1. This is false statement, since the question "When was the last time printing money involved actual printing?" does not require all money supply expansion to be done by printing for to be literally true.
  2. However, to answer question whether there was any time when 100% of money supply was literally increased by printing, since broad money supply includes short term debt instruments and other liquid assets and short term debt predates paper currency in the west (see Ferguson The Ascent of Money), there was never time when all money supply increase over any extended period of time was 100% due to printing (if for nothing else, virtually all countries have some coins in parallel to notes).
  • $\begingroup$ This is quite interesting, but I can't help but feel that this isn't yet a complete answer to my question. Unless it's your claim that all money supply increases today are due to currency printing? Could you greatly expand your answer to detail the history of the switchover from printing money to ledgers or computers? I was hoping that the history surrounding that, and details of how, when, and why that occurred would be the main focus of an answer to my question. If it was a gradual process, when did currency printing account for less than 50% of money supply increases? $\endgroup$
    – user37681
    Aug 9, 2021 at 21:32
  • 1
    $\begingroup$ @calamari 1. I did not claimed all money supply increase is done by printing. In fact I even explicitly stated "most of the money supply is created electronically". But portion of it is done by printing. 2. Thats completely different question than the one you asked. Consider opening that as a new question, also such question would be probably too broad for SE so in order for avoiding it to be closed as too broad try to narrow it down to maybe asking when the most money was created electronically instead of physically or something like that instead of asking for detailed history $\endgroup$
    – 1muflon1
    Aug 9, 2021 at 21:49
  • $\begingroup$ I disagree, it's exactly the question I asked. $\endgroup$
    – user37681
    Aug 9, 2021 at 21:50
  • 1
    $\begingroup$ you asked: "When was the last time printing money involved actual printing? A common term used when the money supply is being increased is "printing money". ... It made me wonder though: historically, in the U.S., when was the last time the phrase was literally true? Or has it never been (perhaps it predates the country)?", the above answer addresses that. $\endgroup$
    – 1muflon1
    Aug 9, 2021 at 21:52
  • 1
    $\begingroup$ @calamari 1. I edited my answer. 2. Note from purely logical standpoint "When was the last time printing money involved actual printing?" does not require 100\% money supply increase to be made by printing... just convert the statement into symbolic logic if its not clear, anyway I also provided answer for the different question whether all money was ever created by printing $\endgroup$
    – 1muflon1
    Aug 9, 2021 at 22:06

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