Tim Worstall is normally clued up on economics. But not, so it
seems, on the subject of money and banks. He says, “No, banks do
not create money. The banking system as a whole creates credit.
But individual banks do not create money. They just don’t.” He
needs to look up the definition of the word money in a
dictionary. It is defined as something like, “Anything widely
accepted in payment for goods or serves or in settlement of a
debt.” Now the fact of the matter is that when someone gets a
loan from a private bank, the latter does not need to get the
relevant money from anywhere: it can just credit the borrower’s
account with a book keeping entry – or if you like, it can
credit the borrower’s account with money ex nihilo. And when the
borrower draws a cheque on that account or does a credit or
debit card transaction based on the account, the cheque or card
transaction will be “widely accepted” in payment for goods and
services. Ergo the bank has created money. Here are some quotes
on the subject. "Banks crea