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                                      "I BET YOU THOUGHT"

Checks (which are corresponding ciphers of banknotes) aren’t money themselves. They are simply order forms instructing banks to move checkbook (entry) deposits, which are money, from one account to another.  

Those checkbook (entry) deposits are bookkeeping entries, numbers on bank’s ledgers and in their (back office) computers. Banks don’t keep cash in checking accounts and don’t transfer fiat currency or coins when  acting on a check’s (payment order) instructions.

Checkbook deposits are transferred between accounts and banks as bookkeeping entries only in office computers.

The Federal Reserve System doesn’t control the amount of “fiat currency” in circulation. The public general creditors do. The Federal Reserve System, however, determines the total amount of currency in circulation.

When people want more currency, they cash checks which are corresponding ciphers of banknotes. When banks want  more currency, they purchase it from their Reserve Bank with the blank endorsed checkbook money they have on  book entry deposit as part of their required reserves.

Since fiat currency in circulation increases only when blank endorsed checkbook entry deposits decline, the total amount of fiat money remains unchanged. Only the composition of the money supply changes when the public alters the form in which it holds fiat money balances, from electronic digital U.S. dollar credit into paper.

                                           “Modern Money Mechanics”

$1 in fiat currency and $1 in checkable book entry deposits are freely convertible into each other and both can be used directly for expenditures, they are representative forms of money in an equal degree.    

This transaction concept of fiat money is the one designated as M1 in the Federal Reserve’s money stock  statistics. Financial assets which are relatively liquid but believed to represent principally investments to their holder bank rather than a medium of exchange to be used electronically by customers.

The distribution between the fiat currency and book entry deposit components of fiat money depends largely on the preferences of the public general creditors.   

In the United States neither paper fiat currency nor deposits have value as commodities, precious metals. Intrinsically, one fiat currency is only a piece of  paper, deposits merely electronic book entries.  

The actual process of fiat money creation takes place primarily in banks, as noted above, checkable liabilities of banks from book entries are money.

Transaction checkbook entry deposits are the modern counterpart of banknotes. It is a small step from printing Promissory Federal Reserve notes to making checkbook money book entries crediting deposits of depositors, which the general credit depositor in turn could spend by writing checks, which are corresponding ciphers of banks, thereby printing their own money.    

                                         “My Acknowledgment” 

In the modern monetary system, transaction checkbook entry deposits represent digital money that exists in the form of electronic book entries in the banking  system, held on the Fed balance sheet. These checkbook  entry deposits from people’s physical items, are readily used for transactions through various means, including writing checks and electronic transfers by  debit cards. Federal Reserves notes are withdrawn from electronic checkbook entry deposits by the public general creditors who blank endorse non-cash items.