While I disagree with somewhereoutth and mostly agree with you, it is true that banks can create money.
However banks don't create money out of thin air. However they can create it out of assets.
As a silly thought experiment: if your bank has a vault full of valuable assets, like diamonds and deeds to houses in prime real estate, stocks etc, they can in principle create loan/deposit pairs (ie make loans and credit the borrowed funds to the borrower account).
When people make withdrawals, especially when they make more withdrawals than the bank has reserves, they just sell some of their assets to cover the difference. That's all pretty normal and boring.
Customers think of their deposits of 100% like money and economically behave as if that was true, but in practice they are backed by 10% money, ie reserves, and 90% other assets.
(The percentages are for illustration only.
Also we ignore minimum reserve requirements and other laws here. Many countries don't have minimum reserve requirements anyway.)
That's a long PDF. What do you want to refer to in particular?
Btw, you might want to study the section 'Managing the risks associated with making loans'.
The pdf is pretty vague about the limits of creating these loan/deposit pairs in general. But there's eg this:
> One way in which they do this is by making sure
that they attract relatively stable deposits to match their new loans, that is, deposits that are unlikely or unable to be withdrawn in large amounts. This can act as an additional
limit to how much banks can lend. For example, if all of the
deposits that a bank held were in the form of instant access
accounts, such as current accounts, then the bank might run
the risk of lots of these deposits being withdrawn in a short period of time.
In general, the limit to loan/deposit pair creation is withdrawals and transfers of the new deposits.
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Btw, I agree that fractional reserve banking can create money. (Just not base money, and not without limits.)
However banks don't create money out of thin air. However they can create it out of assets.
As a silly thought experiment: if your bank has a vault full of valuable assets, like diamonds and deeds to houses in prime real estate, stocks etc, they can in principle create loan/deposit pairs (ie make loans and credit the borrowed funds to the borrower account).
When people make withdrawals, especially when they make more withdrawals than the bank has reserves, they just sell some of their assets to cover the difference. That's all pretty normal and boring.
Customers think of their deposits of 100% like money and economically behave as if that was true, but in practice they are backed by 10% money, ie reserves, and 90% other assets.
(The percentages are for illustration only.
Also we ignore minimum reserve requirements and other laws here. Many countries don't have minimum reserve requirements anyway.)