> Governments create money "by fiat" and then pay people with it and collect it from people. FIat money is not debt. Actually, the typical way modern central b

> Governments create money "by fiat" and then pay people with it and collect it from people. FIat money is not debt. Actually, the typical way modern central banks create money\* is by giving out loans (consisting of money they just created) to banks, which must post some collateral for it. When it's paid back, the money returned to the central bank is destroyed. This is done to create a "spring" effect in the money supply -- as having money in existence has a cost, it prevents too much liquidity pooling up in the economy. If the banks are not using the money, they want to pay it back to the central banks to get rid of the interest payments. \* Most money is not created by the central banks, but by the commercial banks, by using fractional reserves to "multiply" the money supply. However, fractional reserves always use the central-bank-created "base money" as the base they multiply.