Like what drops them from just adding some extra 00 as everything is digital, especially in third World countries?
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Commercial Banks actually do create money everyday in form of loans.
The bank only has in its possession a fraction of the money it lends out to people. When you get a loan it just sets that balance into your account electronically and the banks only obligation is to have a small fraction of that money on its reserves.
As you pay back the loan the money you pay go out of circulation again until you paid the whole loan back at which point money the money disappears into thin air again and the only thing that’s left is the interest you paid (the extra money the bank charges you beyond the loan amount) and this is what the bank keeps as its profit.
It is a common misconception that banks loan money from deposits. That used to be the case but it’s no longer so. Nowadays banks need to just have a small percentage of the money they loan out.
This has a whole of bad effects on the economy. Since banks have an incentive to lend out as much money as they can they just shower companies and high worth individuals with cheap loans. This money is invested into real estate and drives the cost of homes up with all the negatives that brings for ordinary people.
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