Digital Banking

The process by which banks create money is so simple that the mind is repelled.

Commercial banks create checkbook money whenever they grant a loan, simply by adding new deposit dollars in accounts on their books in exchange for a borrower's IOU.

The actual process of money creation takes place in commercial banks. As noted earlier, demand liabilities of commercial banks are money. … Confidence in these forms of money also seems to be tied in some way to the fact that assets exist on the books of the government and the banks equal to the amount of money outstanding, even though most of the assets themselves are no more than pieces of paper...