The fed does not borrow money,they print it out of thin air,its a note or a debt based currency the precice moment it is created it is actually worth less than face value because it is loaned out to even the .gov at interest. See also fiat currency,
http://en.wikipedia.org/wiki/Fiat_currency we also operate under fraction reserve banking which means a bank may loan out 10 times the amount of money they actually have,at interest, again creating money out of thin air. Here is something I just came across havent watched myself but am going to tonight.
http://www.youtube.com/watch?v=vVkFb26u9g8