Question

When I'm paid my check is backed by my employer's bank account. Where does the money come from when the Fed buys government paper?

Answer 1

I am not very sure. Still I think, Government sells securities when it intends to liquidate its assets i.e. it wants money in hand.

Answer 2

The Fed prints money. The Fed has money for its own account and uses that also.

Answer 3

Yes, Fed prints money to buy Government Debt.

Answer 4

The FED basically debits the cash account of the bank it is buying the paper from. There is no actual money being printed. Monetary policy dictates the amount of curency in circulation through FOMC buying and selling of government securities. The FED has it's on balance sheet and when they want to put more money in circulation they buy paper and when the want to tighten or pull money out of circulation the sell paper