Goldsmiths realized that people did not come often to withdraw gold and, as a result, they had a large stock of gold continuously on hand. They could lend out some of this gold without any fear of running out.
There were thus more claims than there were ounces of gold.
The required reserve ratio establishes a link between the reserves of the commercial banks and the deposits (money) that commercial banks are allowed to create.
If the Fed wants to increase the money supply, it creates more reserves, thereby freeing banks to create additional deposits by making more loans. If it wants to decrease the money supply, it reduces reserves.
Open market operations is the purchase and sale by the Fed of government securities in the open market; a tool used to expand or contract the amount of reserves in the system and thus the money supply.
Open market operations is by far the most significant tool of the Fed for controlling the supply of money.