You are kinda right. Bond's don't directly increase / decrease the money supply but they can be used as a tool to indirectly do so.
In the US the Federal Reserve Bank buys and sells bonds (US Treasury Bills to be exact) as a way to increase / decrease the supply of money. It doesn't actually issue any bonds -- it just trades already issued US Treasury Bills.
At a high level, When the Fed wants to increase the money supply, it will buy bonds on the open market with money it creates out of thin air. To decrease the money supply, it sells bonds on the open market instead and pockets the cash--removing it from circulation.
Quantitative Easing is basically the same idea, only instead of short-term government bonds, the Fed purchases large-scale assets (like mortgage backed securities) instead.
Why? Because if the economy is shitty enough and the interest rates are almost at zero, the conventional methods of stimulating the economy stop working...
In the US the Federal Reserve Bank buys and sells bonds (US Treasury Bills to be exact) as a way to increase / decrease the supply of money. It doesn't actually issue any bonds -- it just trades already issued US Treasury Bills.
At a high level, When the Fed wants to increase the money supply, it will buy bonds on the open market with money it creates out of thin air. To decrease the money supply, it sells bonds on the open market instead and pockets the cash--removing it from circulation.
Quantitative Easing is basically the same idea, only instead of short-term government bonds, the Fed purchases large-scale assets (like mortgage backed securities) instead. Why? Because if the economy is shitty enough and the interest rates are almost at zero, the conventional methods of stimulating the economy stop working...
Macro-economics is pretty cool, actually.