See Rothbard’s What Has Government Done to Our Money.
When a regular person buys a government bond, that person is spending money they had to have somehow received beforehand from someone else. That is, it must have been money that was already in circulation. When the Federal Reserve buys government bonds, it really does just create that money out of nothing. This is only possible because the government has succeeded in redefining money to be Federal Reserve Magic Tokens instead of the gold those tokens used to (in theory anyway) represent. Here is a Twenty Dollar Federal Reserve Bank Note from 1929:
https://forum.freecapitalists.org/members/hjmaiere/files/twenty.jpg.aspx
On the left it says “THE FEDERAL RESERVE BANK OF MINNEAPOLIS MINNESOTA WILL PAY TO THE BEARER ON DEMAND TWENTY DOLLARS.” On the right it says “REDEEMABLE IN LAWFUL MONEY OF THE UNITED STATES AT UNITED STATES TREASURY OR AT THE BANK OF ISSUE." On top it says “SECURED BY UNITED STATES BONDS DEPOSITED WITH THE TREASURER OF THE UNITED STATES OF AMERICA OR BY LIKE DEPOSIT OF OTHER SECURITIES."
The bank note is not money. It is a receipt for money (gold) ‘lent’ to the government. In theory, you were supposed to be able to bring this note to a Federal Reserve Bank and get one of these:
http://en.wikipedia.org/wiki/St._Gaudens_Double_Eagle
In practice of course you couldn’t, because the Federal Reserve had issued far more Magic Tokens than they had Double Eagles. So in 1929, when too many people tried to redeem their Magic Tokens for Double Eagles, the economy collapsed. The crash of '29 was not the consequence of ‘unbridled capitalism’ as many a high-school history book put it. It was the collapse of the biggest financial scam in history.
Since government authority serves the banking and mercantile interests first and foremost, the eventual ‘solution’ to the problem was to redefine a dollar to be 1/35th of an ounce of gold instead of 1/20th of an ounce, and then eventually in 1933, to outlaw entirely the use of gold as money by private citizens. In effect, the government worked with the banks to allow the banks to confiscate everyone’s gold. See: