When the government prints new currency, how do they get it into circulation?
The new currency is issued to banks, who pay for it. They may pay for it by exchanging it for old notes, but more often they will pay for it by the same kind of electronic transfer many of us use to pay our bills. However, printing new money is not the way that the total amount of money in circulation is increased. The amount of money in cash is a very tiny fraction of the total amount of money that “exists”, and the central banks print/mint enough portable money to ensure that shops and users have enough change for their everyday needs. However, these physical representations of money are exchanged for purely logical representations of the same amount, held on the computers of the banks. “New” money is actually created by the banks. Suppose you borrow $10,000, to buy a car, a house, or start your business. You don’t leave the bank with a huge bundle of notes; all that has happened is that the bank has put a debit on your loan account of $10,000 and credit on your current account of $1
