The Federal Reserve is a monopoly over currency creation, owned by private wall street banks, working for their best interests.
The Federal Reserve issues dollar bills, which are loans, referred to as money.
The holder of the bill is expected to repay the bill plus some interest, the rate of interest is called the Fed Funds Rate and set by the Federal Reserve.
The purpose of the Federal Reserve is to control the availability of money in the economy, in other wods control inflation. As well as set the interest rate.
If the Fed allowed deflation, it would be impossible to pay off the debts. If the fed allowed too much inflation, banks wouldnt make profits from the interest on loans.
By limiting inflation, the private member banks can lend at interest and make a profit from it.
Member banks borrow from the Fed then invest the money, a typical way to do this is to loan mortgages. The interest payments on mortgages are then bundled up and sold on the markets. The reserve requirement limits the amount of money a bank can invest to their deposits. In other words the banks deposits create a fractional reserve that limits how much can be lent. Some banks invest in businesses via Private equity, or Hedge funds. Other products include Credit Cards and Personal or Business Loans, these are often unsecured, so the interest rate in much higher to compensate for the risk.
In order for customers to make the interest payments, new money must always be being created, this is known as the rate of inflation.
Dollar bills are recognised money in US Legal Tender Laws - United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes and dues. Foreign gold or silver coins are not legal tender for debts. —31 U.S.C. § 5103