They create it out of thin air, but I believe it requires an act of Congress for them to expand their balance sheet.
And, yeah, the whole thing is incestuous.
“They create it out of thin air...”
That is correct; I should have specified that in my post.
The average American thinks the Fed is part of the Federal government.
The Fed created the Great Depression by withdrawing too much money out of circulation. The Fed chairman finally admitted that some years back. When I was a kid I remember an old man saying, “There just wasn’t any damn money!!” And the chairman said the Fed would be running printing presses next time. There would have been a depression, but not the carnage it created.