That’s one of the greatest book on the topic of how the Fed does currency creation - in a nutshell, “out of thin air” (in a manner of speaking).
The USD fiat’s strength is relative to the degree to which a debtor is able to repay his or her debt. If everyone repaid their debts on time and demand for new debt remains more or less constant, in theory there would be no need to print new fiat - the same fiat could be re-loaned, over and over again. This would make the fiat ‘like gold’, it would be a constant supply and its value would increase over time.
The reality however is vastly different. People do not repay their debts on time, or sometimes at all. Demands for new debt also isn’t constant, it varies, and typically as we’ve seen, goes up over time as population increases and new business (products, services, etc) is created. This is how we end up printing more fiat to satisfy new loan requests and add that fiat to the circulation, thus weakening the fiat’s (e.g. USD) value.
Then when demand for debt dwindles, but old debts are being repaid, the need for new fiat decreases and suddenly the banks are flush with cash in the face of low demand for it… Then Mr Greenspan or whomever says, “hey, we can loan you at 1% instead of 5%, why don’t you come get some?” And they then try to re-circulate the repaid fiat they now have sitting in their bank safes to others who might be enticed to get a new loan at lower rates…
And on and on it goes. It’s an imprecise way of controlling the money supply since one could not possibly track how many dollars are in circulation, who will and does repay versus who doesn’t…etc.
To sum up - it’s not there’s something wrong with “fiat money”… or the Fed… it’s that there’s something wrong with people - they want more than they can repay, sometimes even unintentionally, and when you have this kind of a breakdown, the “patching up”/clean up of the messes people leave behind is to print more money, thus slowly devaluing the value of the dollar (about 1-3% on average per year).
Now, is this good or bad? Can this be handled with 45 billion Ada’s or 45 quadrillion lovelaces? Beats the crap out of me - I’m not that good or prophetic to know. I can sort of qualify the “problem” of why fiat is problematic… and I also think a LOT of these problems can be dealt with by doing everything electronically, via Ada/Cardano, even if it ends up being inflationary. I mean, when was the last time the people have had the ability to track every penny and every dollar as they move through various hands?
This is what Ada and Cardano could potentially provide. And it’s much bigger than Cardano, IOHK, etc - eventually, if this explodes the way I hope it does, control of the minting process may have to be surrendered to government (i.e. the people). How this is going to look, is anyone’s guess… but the fundamentals being put in place right now, IMHO, assure this kind of a possible future.
Eventually, with Cardano and Ada being omnipresent, one could in theory hold everyone’s balls to the fire , because of what Ada offers… correctness above all, followed by transparency, accountability, pseudonymity, performance, etc.