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Most of the money in our economy is created by banks, in the form of bank deposits the numbers that appear in your account. Banks create new money whenever they make loans. Banks can create money through the accounting they use when they make loans.
How Is Money Created? In the US, money is created as a form of debt. Banks create loans for people and businesses, which in turn deposit that money in their bank accounts. Banks can then use those deposits to loan money to other people the total amount of money in circulation is one measure of the Money Supply.
The Fed creates money through open market operations, i.e. purchasing securities in the market using new money, or by creating bank reserves issued to commercial banks. Bank reserves are then multiplied through fractional reserve banking, where banks can lend a portion of the deposits they have on hand.
Just as money is created every time a bank makes a loan, it is destroyed every time a loan is repaid (partial payments, like mortgage payments, destroy a portion of that money). That decreases the reserves, because the Treasury check is on some bank, and that decreases that bank's deposits.
Commercial banks make money by providing loans and earning interest income from those loans. Customers who deposit money into these accounts effectively lend money to the bank and are paid interest. However, the interest rate paid by the bank on money they borrow is less than the rate charged on money they lend.
Where Does Money Come From? Central banks create money either by printing it or by buying bonds in the treasury market. When central banks buy bonds, they usually buy their own country's treasury bonds, and their purchases are made from banks that own bonds.
governments do not create money. The central bank does. It can issue bonds and ask the central bank to buy them. The central bank then pays the government with money it creates, and the government in turn uses that money to finance the deficit. This process is called debt monetization.
Banks get most of their money from their customers. When customers deposit cash into the bank, into their checking accounts and CDs, it becomes the bank's money. The bank's only obligation is to repay an equivalent amount of money to the customer when they ask for it back.

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