When you create a valuable thing, you can use it as collateral for a loan. The bank literally creates the money to loan out out of nothing. When the loan is repaid, the money is destroyed.
Think of a dollar bill as an "IOU $1" (which it pedantically is), and it'll make sense.
When you create a valuable thing, you can use it as collateral for a loan. The bank literally creates the money to loan out out of nothing. When the loan is repaid, the money is destroyed.
Think of a dollar bill as an "IOU $1" (which it pedantically is), and it'll make sense.