NO worries... you have the gist of it, sort of. The money supply is in effect governed by the Interest Rate the Fed sets. If the rate is lowered the money supply expands (more borrowing), if the rate is increased the money supply contracts (more saving). The Fed's main responsibility is to ensure the value of the dollar by keeping the interest rate at the right level. Unfortunately, they have strayed far away from the initial intent of Keynesian theory and use the internet rates to affect the business cycle (all the busts and booms are caused by lowering and increasing interest rates at the wrong time).
when the fed sells bonds they are purchased with whatever currency,converted to dollars and they take the money back,when they buy bonds back they do it with cash and that cash is redistributed back into the world economy, just one of the ways, they bring dollars in or put dollars back out
Debt is not inheritly attributable to money. Rather, in our fiat money system, the great majority of money is created through the creation of debt.
Money is not debt literally, no... you got me!!! Rather than the great majority of money being created through debt, I'm going to have to go with <b>all</b> new money is created through debt ever since the release of the gold standard
I would argue all three, and add a fourth philosophy: [4. stolen]. Here's how. If the money is loaned out (2) at an interest rate that is lower to or equal to the rate of growth of the money supply, then some portion of that money is essentially given away(1), or rather stolen from all other currency holders(4). When these loans are made to the governmentv(2), some portion has been given to them (1), and thus stolen from the taxpayers (4), so that it can be used to buy stuff (3). Well, that's my philosophy anyways.
the last third of the movie zeitgeist covers the Fed. here's part one of five on youtube.com http://youtube.com/watch?v=_dmPchuXIXQ the 911 theories in the movie are a load of crap but the Fed. part is fairly good