The claim in the TV commercial that “the Fed prints $500 million a day in money out of thin air, with no backing” is a significant oversimplification and somewhat misleading, though it contains elements of truth about how modern central banking works.
Does the Fed Print $500 Million a Day?
- Physical Printing: The actual physical printing of dollar bills is handled by the U.S. Treasury’s Bureau of Engraving and Printing, not the Federal Reserve. For 2025, the total value of all new bills ordered for the entire year is between $83 billion and $113 billion, which averages to roughly $227 million to $310 million per day—not $500 million. However, most of this is to replace old, worn-out notes, not to expand the money supply.
- Electronic Money Creation: When people say the Fed “prints money,” they usually refer to the Fed’s ability to create new money electronically. The Fed does this by buying government securities or other assets from banks, crediting those banks’ accounts with new digital dollars. This process does, in effect, create money “out of thin air” and expands the money supply, though not by literally printing bills.
Is the Money “Unbacked”?
- No Gold or Commodity Backing: U.S. dollars are not backed by gold or any other commodity. Since 1971, the dollar has been a fiat currency, meaning its value is based on government decree and the trust of users, not a physical asset.
- “Backed” by Government Obligations: The money created by the Fed is “backed” in the sense that it is a liability of the Federal Reserve, and ultimately of the U.S. government, which is obligated to accept it for all debts, public and private.
How Much Money Does the Fed Create?
- During Crises: In extraordinary situations (like the COVID-19 pandemic), the Fed dramatically increased the money supply, at times creating tens of billions per day. For example, in March 2020, the Fed increased its balance sheet by $586 billion in a week, which is about $84 billion per day—far more than $500 million per day.
- In Normal Times: The day-to-day increase in the money supply is much lower and fluctuates based on economic conditions and Fed policy.
Summary Table
| Claim from Commercial | Reality |
|---|---|
| Fed prints $500 million/day | Physical bills: less than this; electronic money creation can be much higher in crises |
| Money is created “out of thin air” | True for digital money creation via asset purchases, not literal printing of bills |
| Money has “no backing” | True in the sense of no gold/commodity backing; backed by government obligation |
Conclusion
The commercial exaggerates and misrepresents how the Fed operates. While the Fed can and does create new money electronically, especially during crises, the scale and mechanics are more complex than simply “printing $500 million a day out of thin air with no backing.” Most new money is created digitally, not as physical cash, and the U.S. dollar is a fiat currency backed by government trust, not by physical assets
Yes, creating more money—whether through the Federal Reserve’s monetary policy tools or by physically printing cash—can cause inflation, especially if the growth in money supply outpaces the growth of goods and services in the economy.
When the Fed increases the money supply, there is more money circulating in the economy. If this increase is not matched by an equivalent increase in the production of goods and services, it leads to “too much money chasing too few goods,” which pushes prices up—inflation. This relationship is described by the quantity theory of money, which essentially states that if the money supply grows faster than economic output, prices will rise.
Recent examples illustrate this effect. During the COVID-19 pandemic, the Fed increased the money supply dramatically to support the economy, driving a $6.4 trillion increase in the M2 money supply between March 2020 and the end of 2021—a 42% increase in just 22 months. This expansion was much larger than the economy’s ability to produce more goods and services, contributing significantly to the high inflation that followed.
However, it’s important to note that inflation is influenced by multiple factors, not just money supply. Supply chain disruptions, changes in consumer demand, and external shocks can also play significant roles. Still, sustained increases in the money supply that outpace economic growth are a well-established cause of inflation.
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