Like what drops them from just adding some extra 00 as everything is digital, especially in third World countries?
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There is a text by the Bank of England named “money creation in the modern economy” that describes the topic for the general public. If you want the whole thing explained by actual experts and don’t mind reading a few pages, that’s about the best source you can get.
Essentially, there are two kinds of money: Checkbook money, that you and I have in our bank accounts, and central bank money, that our banks have in their accounts in the central bank. Banks use central bank money to transfer money to each other, just like we do with our checkbook money.
As long as they stay within regulation boundaries, banks can create as much checkbook money as they want. When you take out a loan of $1000, your bank will really just add the number to your account.
Now, you will of course spend the money, and a lot of it will go to accounts in other banks. That means your bank has to use their central bank money to make your payments. To not only stay in business but also turn a profit, it has to make sure you will pay it back. That’s why they check your creditworthiness before creating money for you.
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