Money From Nothing

Where does money come from? Most people picture a mint printing notes, or coins struck from metal. But the vast majority of money was never printed at all — it was typed into existence, out of nothing, by ordinary banks.

When a bank grants you a loan, it does not quietly hand over cash that some saver deposited. It simply writes a new number into your account. That number did not exist a moment before; now it is money, spendable anywhere, conjured from a promise to repay. Most of the money circulating in the world today was created exactly this way — as debt, as a keystroke, as a bet on the future.

Which means money is not a fixed pile being passed from hand to hand. It is summoned when we borrow and it vanishes when we repay, swelling and shrinking with our collective confidence.

And if money is conjured from a promise — what is actually holding its value up?