Excellent: all three of you are correct!

1. That IS the right question to ask Trained Noticer. (Who gets the "money" that's "created out of thin air?") Because when you understand (WHO) is in receipt of the funds, and to understand that it "is" created out of thin air (at least the funds used to buy the newly issued USTB's are), then, you can start to understand (MOTIVES). MOTIVES then, can lead people to the truth about a subject.

2. And AC...per "they pass it around to their buddies". This is correct. The Fed ultimately creates these funds, and then (through the mechanisms in place: in these cases, "Open Market Operations" or "REPO Operations", the funds are directed to the banks in cash shortfall - for whatever reason; as we still don't know yet; despite the many theories).

3. And AC...per "...it is only worth a fraction of what it was newly created." This is also correct. When the funds are immediately created by the Fed (after the USG creates the USG-debt instrument (Ex: USTB's), these funds are then used to BUY this debt instrument. Investors could also buy it, with "capital" (and they do)...but not SUFFICIENTLY, TO KEEP THE RATES LOW ENOUGH (TO KEEP OUR ECONOMY AFLOAT). If the Fed DID NOT buy the USTB's that they buy, the yields would be MUCH HIGHER - CAUSING INTEREST RATES TO BE MUCH HIGHER - AND THEREFORE, SLOWING ECONOMIC GROWTH. Further, it's the USG that gets the money FIRST! These are known as (hot) dollars...because they have the highest value: they have the greatest purchasing power, (since the USG gets use of these dollars, before they make their way into the economy), and therefore, as you correctly point out AC, are then "worth a fraction of what it was newly created."

All the best GLP,
jk