system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5: The Federal Reserve is increasing the money supply to create jobs? How does this work?

ELI5: The Federal Reserve is increasing the money supply to create jobs?  How does this work?

I've heard that the "tapering" will end when unemployment reaches some X% or what not.

What is the reasoning behind how more $ in the overall $ supply allows for companies to hire more employees or gets more businesses started?
gpt
US Treasury bonds are considered the safest possible investment historically.  Risk/Reward trade offs in investing means that the absolute lowest risk will have the lowest rewards.  Treasuries therefore generally set the baseline 'reward' for lowest risk investment in the form of interest on your principle investment.  The principle investment into treasuries causes very little economic growth or job creation due.

When the government 'prints money' it is actually the Federal Bank printing the money by buying up more and more treasury bonds/bills out of thin air.  The Fed has the right to bid on Treasury bonds without having the money in their vaults, thus printing money.  By bidding for treasuries with money that no-one has 'chosen' to invest in treasuries, they drastically increase the demand for low risk/low reward investment and cause the interest on bonds to drop to near 0% annual because treasuries have a limited supply (based on how much money the federal government needs to borrow).

The theory is that by dropping treasuries to almost 0% interest, you encourage those in the private sector to take on more risk with their investment.  All the 'safe' investment options don't even match inflation, so its not worth saving money in treasuries during this time.  This means if Joe America wants to open a restaurant, there will be dozens of potential investors begging him to take their money to start up at either a lower interest rate or a smaller % of the business due to the increase in competition for lenders/investors/start up capital/etc.

Business start ups DO create jobs, and DO create wealth.  Service business compete and innovate to drive down cost of services and increase standard of living, while manufacturing/mining/farming operations create value/wealth to prop up the value of the currency.

The theory behind the fed is that by encouraging lenders to decrease interest rates for higher risk, higher reward lending such a start ups, the economy as a whole will have a greater growth than it would otherwise have.  The creation of wealth will generally offset the increase in total monotized USD and cause limited inflation.   Plus getting people back to work sooner means higher tax income and fewer dependents on social safety nets.

This is also true for borrowing money in established businesses.  Often CEOs or owners will see an opportunity to expand and increase their long term profit, but cannot afford to do so and still make payroll.  Banks can lend them money at a much much lower interest rate when treasuries as near 0% because they offer lower interested on savings accounts (again cause they are low risk/low reward and tend to mirror treasuries).  The lower the interest a business has to pay for a payroll loan, the more often they will decide to take the risk to expand on credit and create wealth/jobs.