"Fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical commodity. The value of fiat money is derived from the relationship between supply and demand rather than the value of the material from which the money is made." The user trusts that the government's minted currency has exchange value.

The government can print as much money as it wants, so it can pay off any debt, however the more currency in crculation the less valuable its currency can become....inflation. Some countries have tried to print their way out of debt only to find their currency became virtually worthless.

Modern Money Theory suggests that governments enter into debt with instruments such as bonds in order to control the amount of money in the economy, which is supposed to effect inflation, but the government could have just as easily created more money, assuming that the issuance of additional capital does not impair trust in the value of the government's minted currency.

I dunno, but it's fucking ridiculous when I can wave a pile of money at people and they look at it like it's a dead fish because it's not credit.