It's a simple four-step process.
1.The FOMC first approves the purchase of US government bonds on the 'open market'. [When the government is short of funds, the Treasury issues bonds and delivers them to independent bond dealers, which auction them off.}
2.When the FED wants to "expand the money supply'"i.E. Create money the New York Fed bank buys these government bonds from the independent securities dealers (financial markets always have an equal number of buyers and sellers).
3.The Fed pays for its purchases with electronic credits to the sellers' banks, which, in turn, credit the sellers' bank accounts. These credits are literally created out of nothing.
4.The banks receiving the credits use them as reserves and loan out several times the amount of the money held in reserve due to the magic of fractional reserve banking. If their reserve requirement is 10% then 10 times the money put into reserve can be loaned out. The banks can create new loans because of these increased reserves. As the money is loaned the money supply in the U.S. increases.
Also, the FOMC can also change the reserve requirements for the banks. This allows banks to increase or decrease the loans it makes. Once again creating money from nothing.
The FED also loans money to banks for short periods of time. This is called the discount rate. If the discount rate is low enough then banks can borrow from the FED and loan the loan out to the bank's borrowers. In fact the bank can loan multiple times the FED loan out to borrowers due to the magic of fractional reserve banking.
Now that we know how it works-ish, why do we need taxes? The central bank/fed reserve can set inflation target, money supply, and/or interest rates to adjust the funds the govt needs. Without taxes, there would be less headache from the populace. To counter the effects of superinflation (not quite hyperinflation), the interest rates could be set a little higher. Without the negative effects of taxes eating at income, households wouldn't mind as much. This would also need to go down to the state and local levels as well. Rather than having multiple currencies which would likely be unwieldy, state and local govts could just piggy-back on the interest rates and add extra for their revenue.
The big flaw with that is the money is backed only by fiat. What is stopping someone from saying "No, we won't accept that currency."
The Fed is the biggest bank int the world that only happens to exist to lend to other banks.
Inflation will strike out of literally nothing, making the pre-existing money essentially worthless.
Here is the only reason you need, when the supply of money (how much there is) the prices of everything go up. This is a simple for of supply and demand, and inflation. When there is a lot of money, it loses its worth! If you found $50 on the ground, you would be thrilled! Not that its a pice of paper, but about the rarity of that paper! It the government kicked out 1,000,000's of 50's and let them into the system, the worth of a 50 would go down!
Heres what I'm getting at, the worth of a dollar changes with the quantity of it. 50 cents used to equal $5. However, since the government printed more, the worth went down. This can end up very badly if it continues for to long!
This is a bad idea. I needed 45 words for this argument so i am just writing random words. I do not know what else to say. This is such a stupid question and a no brainer. I need 13 more words at this point. I am almost there. I made it.
There's something called inflation. By printing money you make existing money useless. Look at post WW1 Germany for one of many examples. Nobody will accept the money. How are people so dumb? Like seriously, printing money? If that worked why wouldn't every country be doing it right now? This is a new low for humanity.