[its_ethan]

One (of several) ways to think about this would be that money backed by the government treating it as the legal tender for settling any and all debts within that country. So the underlaying value is partially just trust in that governments ability to enforce laws related to the exchange of money and/or settling of debts between it's citizens/users of the money.

If a government issued money but never imposed/enforced penalties for failing to pay debts, that money would probably be pretty useless (less underlaying value), and some other form of money would emerge (probably one backed by actual value, like gold/scarce resources).