From my understanding of the current monetary system when a bank issues a loan it is effectively creating money for the receiver of the loan i.e Mortgage. This increases the M1, M2, M3 numbers of the monetary aggregate.
In the news in the past year or so the US government is attempting to pay for a lot of new spending by issuing a lot of bonds. Stimulus + Infrastructure.
Those bonds need to be sold and I am assuming initially it is a set of primary dealers that are the market makers for the bonds. I am guessing most if not all the primary dealers are banks with the ability to create money.
So when the government issues new bonds does that mean the primary dealers actually issue new money to purchase those bonds that will increase the M1, M2, M3 aggregates?
Also when the Fed performs QE it is effectively swapping those bonds for reserves.
So when the US government issues another 2T of bonds it is effectively increasing the money supply by 2T.
Is my model of understanding correct?