Modern fiat currency enables governments and their central banks to utilize monetary policy levers for the expansion and contraction of a nation’s money supply. These policy levers do not account for the issuer’s ability to “back,” or essentially underwrite, these promissory notes. Fiat currency is therefore best understood as debt issued by central banks, with the foundational balance-of-account structure in a state of perpetual negative balance.
Simply, when fiat currency is printed, debt is issued; when debt is paid off, currency is removed from circulation.
(To read more about the fate of fiat currency, read the AXIA Whitepaper.)