(1) A consortium of private banks called “the fed” creates the money in the economy and releases it into the economy as debt. So these banks control the amount of money in the economy overall, and earn interest on essentially all the money in the economy

(2) Government revenues (a separate thing) come from taxation.

(3) Where government expenditure exceeds the amount raised via taxation (it always does), the government also borrows the difference from whoever purchases government bonds.

- Simples! :-)

- Shyaku