I sometimes encounter incredulity when I point out that banks create money by making loans, or that this is the source of most modern money. This easy to read paper may be of some interest to those who don’t believe it, but may also be of general interest.
“Commercial banks create money, in the form of bank deposits, by making new loans. When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created. For this reason, some economists have referred to bank deposits as ‘fountain pen money’, created at the stroke of bankers’ pens when they approve loans.”
As an aside, it is the very process which makes it feasible to repudiate bank debt. Such repudiations cause harm and damage, but they needn’t be existentially perilous. I bring it up because I think this is knowledge we will need in the near future.