Why does the government have to create money?
by 
Clarence Yu
ANSWERS: 3
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Governments haven't always created their own money: in the past, and in some poorer countries today, banks would issue private currencies, backed by their gold reserves. In modern countries, the government issues money, usually through a central bank, to be able to control inflation and interest rates.
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I guess the most correct answer is that they do not "have to" create money. In fact most "governments" do not. In the United States every city, every county, every state has a government that does not issue money. [ Technically, the Constitution does not give the United States government the authority to print money, but only to coin money. Coins are official US money - currency is controlled by the Federal Reserve Bank which is legally not a government institution. ] The reason most countries create and control money is because it makes society more orderly and prosperous. It stifles economic expansion and the creation of wealth if everyone must barter for everything. If you have what I need and I don't have what you want, money makes a convenient instrument of value exchange. So, they don't "have to" but they choose to because it is in the best interests of both the government and the governed to have a trusted medium of value exchange to permit and foster economic growth, jobs, prosperity, taxes, etc.
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To answer why, take this: "Governments haven't always created their own money: in the past, and in some poorer countries today, banks would issue private currencies, backed by their gold reserves. In modern countries, the government issues money, usually through a central bank, to be able to control inflation and interest rates." And add: the principle purpose of government is to protect its people from harm (foreign aggression, environmental effects, each other). That last part in the quote is pretty important in protecting the people in the modern world. Without the government's help, the economy would likely develop some very unhealthy aspects. Deregulation would probably either lead to a very unstable economy or some corporate entity assuming "control [of] inflation and interest rates." The other side of this is that it's a good way to control people, under the guise of guardianship.
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