[indubitable]

That is, surprisingly, not true. Literally printed money makes up a tiny minuscule fraction of all money in existence. We live in a debt based economy and banks are legally allowed to create money through debt. This is a product of fractional reserve banking.

Imagine we live in a world with a total of $100 in existence, owned by Bill. Bill deposits that $100 in a bank. With fractional reserve banking in our current system the bank only needs to keep 10% of deposits on hand. So they can legally lend out $90 of that money, even if they don't have the money to cover it. So Travis takes a loan from the bank of $90 and spends it buying stuff from Slim. Slim then spends that $90 deposits it at bank B. Bank B then keeps his $90 and lends out $81, and so on.

Think about what's happening there. You started with just $100 yet now Bill has his $100 but Slim also has $90. In the end, with a 10% fractional reserve requirement, Bill's $100 of "real" money will end up being turned into $1000. Of course in this process of this you also end up creating $1000 of debt - but that debt is not directly tied to the money it created. E.g. Slim's money is, from his perspective, debt free.

Now factor in the issue that banks not only lend out money they don't actually have, but they also charge interest on that money. Bill's $100 of "real" money will create not only $1000 of other new "real" money, but well over $1000 + interest of debt. In other words, if all money was collected into a pot, it would no longer be even remotely close enough money to pay off all debts. So old debts are only being paid off by new debts which in turn are only payable by even more debts.

This is one reason I'm not entirely sure how private banks actually make sense. This system empowers banks, private for profit institutions, to enormously profit from activities that would be of dubious legality for private individuals. Even our language has adopted this bizarre notion. For instance a 'run on the bank' has a very negative connotation today -- in reality it's just people withdrawing the money they deposited, only to find it's no longer there. And that's totally legal.

[Boothroid]

If you spoke to a supporter of what you describe they would no doubt point to the extra economic activity created by the new money that would otherwise not be there - if we strictly only lend against deposits this would mean we would all be far poorer than we are now. As long as we all believe in the new money and expect our creditors to pay us back as promised, the sleight of hand works.

That's what a supporter of the current system would say. Personally I think the whole setup stinks and any benefit the average person gets is merely a side effect of a system designed for the benefit of the rich.