How do private banks “create” money and is that okay?

Question

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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Answer 1

The ELi5 explanation I like to give that doesn’t involve things like velocity of money or deposit ratios is this:

Let’s say 50 people all have $100 and no immediate need for the money, but one person needs $1000 to buy something he really wants and will pay back later. Nobody wants to loan him the money, because its risky and they might need it. Banks fix this problem by providing a solution for both savers to have a safe haven and buyers to get a loan which keeps money moving most efficiently.