"A $20 bill is a $20 credit, someone else's liability."
Actually, a $20 bill is an asset to its owner but a liability to no one, especially not to he Federal Reserve. Ironically, then, an increase in such "outside money" (cash outside the banking system) raises national wealth.
John F. Kennedy's United States Notes would have been as you described, an asset to the owner but not a liability to anyone else. Those notes were taken from circulation following his death because of their debt free nature. They were spent, not lent, into circulation. Emitted by the US government they yielded no profits for the central bank, which is in the business of extending credit to the nation.
The economy could run just as well with United States Notes. There would be little inflation if any and no national debt.
The United States Notes were replaced by Federal Reserve Notes which are lent, not spent, into circulation, and do provide profits for the private central bank. The US government borrows more than it takes in and spends it all (what it borrows and takes in) on all its expenditures.
What it borrows stays on the books as interest bearing debt obligations of the taxpayers but once the money gets out in the economy, the rest of us use it as currency for business purposes. To us it behaves much like any other money. We see it as an asset when it is ours and that is just as well.
Yet, the U.S. Government and the American taxpayers are on the hook for borrowed money that just gets rolled over year after year. It is comparable to those interest-only loans that some homedebtors have gotten recently. What does that money look like? Federal Reserve Notes currency and the bits in the banks' computers that keep track of deposits. It is debt and to increase it increases only indebtedness.
I don't agree that there is any such thing as "outside money" unless the money has been sent to Mexico by an illegal to help mom and his 10 siblings. This is one of the ways inflation is exported. However, $20 in my pocket or parked at the bank, hardly any difference to immediate circumstances.
Does arbitrarily increasing currency really raise national wealth? If it did we could make ourselves rich by printing money and giving it to everyone. No, prices would go up to account for the cheapening of money and though all prices and salaries would nominally be more, we wouldn't feel any richer. In 1999 my house went for 189,000. Today, $400,000. Same house. No more space, no more bedrooms than before, no more bathrooms than before. It takes more credits to buy it because the credits are all worth a fraction of what they were in 1999.
The best way to increase national real wealth is not to play with numbers, or manipulate currencies, but to stop punishing risk taking entrepreneurs with high taxes and unreasonable regulations.
Respectfully.