"Let me just ask: WHO is demanding currency? It seems like it is either the gov. or the people. Is it businesses who "demand currency" by trying to get money?"
In this case, it is the currency-issuing government that "creates" demand for its currency by levying taxation that is only payable in that currency. One can go live on the beach and trade with seashells if it suits, but when the tax man shows up one had better have what he "demands". In the case of the US, it is US dollars.
This makes everyone effectively unemployed in terms of that currency, so the issuing government is then obligated to provide the means to satisfy the tax obligations of the people or they will revolt. It does this by offering its currency in exchange for the resources and labor it needs to provision itself and pay for the programs it initiates.
By creating more currency than it demands back in taxation the government encourages the society to trade in that currency and deploy resources and labor into the private sector, making them available to the government as well. Since the issuing government literally creates the currency from thin air, regardless of artificial constraints imposed by Congress, ie: gold standard or debt ceiling, it never actually needs its own currency back to enable spending except to comply with such constraints.
Barring any such constraints, the issuing government can never involuntarily default on any obligation denominated in its currency. It can also "afford" any resources and labor that exist and are priced in that currency. This always makes the issuing government the price setter for its purchases unless all desired resources and labor are already deployed in the private sector.
Only at that point does inflation become a risk, regardless of previous spending or the quantity of its currency in circulation, and the issuer can decide to reject or accept the resources/labor at an inflated price. Many people confuse price with inflation, but they aren't the same. Inflation means the price of "everything" rises in response to too much money, while the price is only effective to the resource and dependent upon its relative scarcity.
