[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 :)