America’s “Magic Money” tree

The coronavirus pandemic has thrown our world into a nearly unprecedented reality. The fact that we are in a global economic recession due to a health crisis has never been seen before on such a massive scale. To help the country cope with this crisis, lawmakers have had to take corresponding extraordinary steps to ensure Americans are fed and businesses remain operational, all while working to stop the virus from spreading even further than it already has.

Over the last several weeks, Congress has passed massive economic stimulus bills to the tune of roughly $3 trillion, with more financial assistance expected to come. This number is staggering. While the level of U.S. debt was already a concern for many, the new reality that our country is facing $30 trillion in post-pandemic debt is certainly startling.

With this concern over the government’s funding situation comes the inevitable question, “Where is all the money coming from?” It makes a lot of sense – if the government did not have this money before, where is it getting it now? This is a great question with a surprisingly simple answer.

In reality, the government does not have troves of cash reserves stored in vaults. When it decides to stimulate the economy and distribute loans, as it is doing now, the Federal Reserve digitally adds money to other banks’ or businesses’ accounts by merely typing the numbers into the computer. It can be thought of as “the power of the keyboard.”