"Technically speaking it's the Federal Government which creates the money out of thin air with its deficit financing via Bonds."
Governments, both state and federal do borrow money in competition with the private sector.
"In economics, crowding out is a phenomenon that occurs when increased government involvement in a sector of the market economy substantially affects the remainder of the market, either on the supply or demand side of the market. One type frequently discussed is when expansionary fiscal policy reduces investment spending by the private sector."
Governments by coming into the market to borrow money tend to raise interest rates and in that way constraining the ability of the private sector to borrow. This during normal times. During a depression no crowding out effect happens as the private sector has not much interest in investing.
Who prints money out of thin air is the banking system typically through the printing of bank notes and the expansion of credit.
When somebody gets a loan to buy, for instance, a house the bank just credits his or her account with money printed out of thin air and that is it. When the borrower pays his loan, the money is destroyed. So, for new money to come into circulation banking credit has to be expanding.
Now, money generally speaking is used to buy things but there are occasions when money is used mainly as a store of value. That is when the central banks can try to stimulate the economy using what is called quantitative easing.
