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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Banks “create” money by giving out loans. This creates money because banks are not required to have all the money the give out, this works because the money is coming back to this(or another bank) at somepoint because you dont take loans out just to have them laying around but to buy things with it and the seller puts the money back into the bank. This is the basis of our modern banking system so if you think our modern banking system is good then yes it is okay, if you think the banking system is bad then its not okay.
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.
They don’t. Where are you getting the info that banks create money? Banks store money and invest it.
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