Edit: So basically we have two explanations. One goes by actual money loaned out again and again by different people and banks, thus “creating” money. The other one: Banks actually loan out money they dont have and never had by creating the same volume as asset.
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bank dont create money in the same way a governement does(by minting more currency)
instead what they do is implement a fractional reserve policy, where the banks are only required ot hold a % of the money in their accounts at any given time.
doing this free up those assets ot where the bank and issue Loans and collect interest: this is generally howew a bank becomes “profitable”,
but its entire setup relies on the fact that they safe in the knowledge that its extremely unlikely that all of their clients want their money back in full at the same time(which shouldnt happen in a stable economic policy where people can trust banks to not go under).
if for any reason something changes that forces the general public into a panic ot secure their money(ie: bank loans defaulting in masse.), fractional reserve banking collapses unless a larger entity steps in to either cover the funds or prevent people from pulling all their money at once.
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