[type111]

If a bank wants 'someone else' to have $10, such as a customer at an ATM or a different bank, they indeed must hand them literal cash or 'wire' them $10 of reserves.

Banks, through 'loans', don't create cash or reserves, they create local bank deposits. One flows freely around, the other is confined to a particular institution.

You are able to do almost exactly what a bank does: My holding a $50 IOU issued by you is like having a $50 balance in a chequing account. The only way I can 'transfer' that to someone else is either (1) having you give me literal cash that I can give them, or (2) forfeiting my IOU and having you generate one for someone else.

(1) Works because cash is universally accepted. (2) Only works when the other party is part of your IOU club. Translated to the world of banking: they are a member of the same bank!

[civilized]

I think I get it now. The bank is able to "create" money because it is, in some sense, the sovereign issuer of its own internal "IOU" currency. It makes IOUs (deposit records) to track who has the right to draw currency from it, and it can create as many of these IOUs as it wants for any reason. And if you classify bank deposits as money, these IOUs count as money.

[type111]

You've got it. They certainly don't create these IOUs for -any- reason (I'd wager there's legislation that strictly governs this.) In practice deposits (customer assets/bank liabilities) are created simultaneous to the customer handing over an asset of equal value: their promise to pay down the debt, such that the books balance.

A side note to think about: Although the memes might have you believe that 'money' is being 'printed' by the bank, in actuality the true creation is happening on the side of the customer whom, from nothing, manifests an asset into the world: their promise to pay. Intentional or otherwise the system obfuscates this fact.

[civilized]

Thank you, this is great. I am still a bit mystified for murky reasons I may be able to articulate better later... but feel much closer to understanding this than before :)