[jfoldager]

While governments back the base currency, most of the money in the monetary system is created by private banks as "money on account". A bank uses neither government issued money nor deposits from other costumers when writing up an account. Money on account is purely a promise of future payment, and in many countries these privately made money make up ~95 % of the monetary system (there are multiple definitions of money). Note that as long as the money on account are transferred to other costumers in the same bank, or can be cleared with other transactions when transferred between banks, the promise of future payment is deferred in perpetuity.

The main limits to how much money private banks can create are certain legal requirements and costumer trust that the bank is healthy. The legal requirements can be reserve requirements or capital requirements. Neither directly put an upper limit on money creation. A healthy bank will always be able to obtain more reserves. Capital requirements basically restrict how much banks can gear their capital, and when the banking sector grows in worth over time, it can add an equal amount of money into the system multiplied by that factor. In Denmark (where I am from) the is no reserve requirement and the banks are geared at ~20x.