Q: Why can't this sovereign nation just create lets say 1 million "money" and hire police/workers/etc who then start buying stuff from bakers/butchers etc who then pay taxes and get the society running, why do they need to sell bonds for dollars?

A: Ah, great question. The answer is that selling bonds is how you create money in the first place.
Here's how initial money creation works in a modern economy: You start by establishing two institutions. First you need a treasury, and second you need a central bank.

The treasury has exactly two powers: It can sell bonds for money, and it can spend money. That's it. That's all the treasury has the power to do.

The central bank, on the other hand, also has exactly two powers: It can buy government bonds, and it can sell government bonds. But there's a catch. When the central bank buys government bonds, it creates the money to do so out of thin air. And when the central bank sells government bonds, the money it takes in return for them vanishes from existence.

The central bank, then, is a money source and a money sink. It has an infinite supply of money, in the sense that it can create money out of nothing, but it's also a monetary black hole into which money flows and then disappears.

So in the initial condition, the treasury has the power to issue bonds, but it has no actual money. The central bank has, in a sense, infinite money, but all it can do with that money is buy government bonds. So what do you do? Duh. You have the treasury issue a series of bonds and sell them to the central bank; the central bank wishes the necessary money into existence and then gives it to the treasury in exchange for the bonds. The treasury then goes and spends that money on stuff - like paying police officers for example - and that's how money gets out into the economy.

But the central bank is not the sole source of money in the economy. There are also commercial banks, also called lending institutions. They create money too. Here's how:

Remember that police officer the government hired, and how he gets paid out of the treasury? Well, he doesn't want to just carry a big sack of currency around with him all the time, so he finds a bank and opens an account. He deposits his money into his account - say it's $100. The bank is allowed, by law, to lend out $90 of that $100 in loans to the community. Somebody else - Alice, we'll call her - goes to the bank and asks to borrow $90 to start a business. Alice has no money, because remember, the economy just started like five minutes ago. But she does have a business plan, and the bank manager likes it, so he agrees to lend her the money.

Alice takes her newly-borrowed $90 and uses it to buy something from Bob, something she needs to start her business. I dunno, maybe she's starting a gardening business and needs to buy a rake, whatever, doesn't matter. Point is, Bob has something Alice needs but no money; Alice has the $90 she borrowed from the bank that came out of the government-employed police officer's deposit account that holds the $100 he got paid by the treasury which came out of the money the treasury got from the central bank by the sale of bonds which were paid for by money the central bank literally wished into existence.

Pant, pant.

Okay, so anyway, Alice gives her $90 to Bob, who gives her the rake. Alice goes off and starts her gardening business. Bob, meanwhile, now has $90 that he didn't have before. He doesn't want to carry that around, so he goes to the local bank and opens an account of his own - that same bank that holds Alice's loan and the cop's deposit account. Bob deposits his $90 into his new account and calls it a good day.

We just made $90 out of nothing. Our cop deposited $100, the bank lent out $90 of that, that $90 was used to buy something, the person who sold that thing deposited that $90 in the bank, and now there's a total of $190 on deposit at the bank, even though all we did was move some money around.
When we say that wealth is created by the movement of capital, we aren't kidding around.

Of course, it's not really right to say that we created that $90 out of nothing. That $90 on deposit at the bank is actually backed by Alice's promise to pay back the loan she got. And Alice's promise is, in turn, backed by both her ability and her willingness to earn money in the future by working. So what that $90 in Bob's deposit account really represents is Alice's future labor.

So every dollar in the economy is backed by a dollar of debt. Bob's bank account balance is backed by Alice's debt to the local bank, the cop's paycheck is backed by the treasury's debt to the central bank. For every dollar that exists in the world, you can - if you had access to all the information, which you don't, because it's none of your business where other people get their money - trace it back to some debt somewhere. There's a one-to-one correspondence between dollars in circulation and dollars of debt.

Why do we do it this way? Well, we could dive in to all the various ifs and buts of the thing, but the bottom line is we do it this way because it works. Seriously. It's that simple. No other economic system that's ever been tried has proven to work as consistently, as reliably, and as scalably as the treasury/central bank/fractional reserve lending system we're talking about here. And that counts for a lot, y'know?