Modern Money Mechanics (M0, M1, M2, M3 and the Money Multiplier)

Modern Money Mechanics
Money Supply

Higher Power Money, Quantitative Easing, and what instruments the Federal Reserve can use to control the money supply in the system.

Essentially, the Treasury account, currency notes and coins, and securities the Fed purchases are notional money that cannot be leveraged (multiplied upon). Other money can be multiplied on by the banks, thanks to the fractional reserve system. Providing liquidity means injecting multiply-able money into the money system, in exchange for securities that can be used to sterilize liquidity in the future (traditionally Treasury bills, but now also commercial paper and other securities).

Fed article predicting Fed actions in deflation era