@mugwump,
You missed a good series on this on radio 4. It still may be available somewhere on their website. Apparently we live in a debt based system in the West. They banks don't have to borrow money to balance their books it's a lot more complicated than that. For commercial banks, every time the bank advances a loan they must deposit (or some other mechanism) a percentage with the central bank, the rest of it is now owed to them and considered an asset. As they have an "asset" they can now borrow and lend against this asset which is effectively new "money". It ends up be loaned, re-payed and loaned, all with interest and by the time it comes back to then can be worth ten times what they made the original loan for. As each bank is lending off the same asset they are all effectively creating new money as it is being loaned. It sounds crazy because it is lol In the banking crash this percentage held back was too low and effectively all the assets were over valued. They have increased this percentage now but the banks are still reluctant in this climate to lend money out. This is why governments get annoyed when they bail them out and they don't re-lend the money. They are effectively locking up the money supply and not creating new money.
No doubt an expert in this field could explain how much more sophisticated and complex the system is but that's the rough gist of it. When governments spend more than the receive it also can create new money. They can issue bonds which pension funds buy to keep their money safe. This creates new money today which will have to be paid back some time in the future when hopefully, the money they will have to re-pay will be worth a lot less. It all seems to work on confidence. If investors are confident in a country the country can increase the amount of money in circulation, if they are not then their currency will crash if they supply too much. Ultimately it's the government in charge. In other systems around the world the government just take charge of the amount of money in circulation. If you are not concerned about international considerations and only your domestic concerns then this can occasionally work well for some countries. Good luck getting your head around it all.