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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They create money by making loans. The bank simultaneously gets an asset (it will be paid money in the future) and a liability (the borrower has some money that they can withdraw from the bank). The two add up to zero. Eventually the loan will be paid back, cancelling out the asset and the liability. In the meantime, the borrower gets to do something useful with the money and the bank gets some interest. It’s OK as long as the loans are paid back and the banks don’t lend so much that they create asset bubbles and inflation.
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