That leaves the creation of new State money to the Fed. All State money outstanding is backed by equal liabilities of the Fed. In principle, the public only needs enough State money to meet its tax liabilities. That can be a fraction of one year's worth of taxes since taxes are paid incrementally while government spending constantly replenishes the public's holding of State money. However there are other major demands for State money.
Banks require it for reserves, and the public requires it for wallet money and rainy day money.
Also a large amount of currency migrates overseas and is no longer available for domestic use. The Fed must furnish enough to meet all of those needs. With sufficient government debt available to monetize, the Fed has no problem meeting the demand for State money. Balancing supply and demand for bank reserves at the target rate of interest requires skill on the part of the Fed, but is now routine. Its real challenge is to determine the optimum target rate, taking into account its effects in both the domestic and international arena.