The primary effect of interest rates is to reduce investment/borrowing, or increase it. That is a consumption factor really.

How bonds would help money supply is like this. You have excess money supply and you want to get rid of it, basically remove it from the system. You issue a bunch of government bonds and people will purchase them in $ and you take it out of the system.

You can also do this with interest rates, lower interest rates may increase money supply because more people borrow, but in reality there is less demand through investment channels because nobody wants to invest in a coutry that has lowering interest rates.

Countries that peg to a vehicle currency tend to do that for foreign exchange reasons, so basically their currency isn't worthless. The thing is, you don't have much control over US policy so you're goods may become more expensive or less expensive depending on decisions abroad.

Hope this helps.

How does the discipline, investment vehicles and interest rates fit in?

I understand how interest rates seems to move to keep inflation in check; the primary effect of this being it seems to police the feel good factor in society so it doesn't go mad with excess income.
I don't understand how the investment vehicles, bonds etc also come into the equation to produce a well round and organised economy, which is what I would imagine the better economies do.

Where does the discipline with countries that bolt on to other currencies come into it? It sounds like they are following their leaders a tad. So emerging countries like China & India would these have been in a similar situation to the foloowers but having gotten a handle on how to manage things have learnt now to do it for themselves?