In modern economies money is created in many places.
The most discussed means is through loans to banks from the central bank ("the Fed"). This money is lent to the banks at the current federal interest rate and is "free" in the immediate term but "unfree" in the long term as they must pay interest. Roughly speaking, if you can convince a bank that, should you borrow that money you will certainly generate more, and return it at a faster rate than the bank has to pay, then they will seek to lend you money. For most individuals, this is housing debt (a mortgage) and personal consumer credit (credit cards, car payments, other forms of purchasing in installments, etc.). Companies have access to roughly equivalent and often larger and more attractive forms of credit such as business loans, equipment financing, and so on. Printed money is such a small portion of the economy that it is statistically mostly irrelevant. Other acts of government can also create money by generating government debt and obligations.
However, that is not the whole story. Separately to the banking sector, a whole lot of money is "created" when people ascribe value to things. For example in venture capital, if I were to create a company purely with hard work and loose change and you were to buy in to it because it's the next greatest thing and is clearly going places, let's say you buy 1% for $1M at a pre-money valuation of $100M then you've sort of voted in to existence $99M of the $100M that you didn't buy by saying that valuation has enough legitimacy for you to put down $1M. While that value is not liquid, and is not really "money" per-se until it becomes so, it's been "created" just the same. If I create shares on public markets, art, or iconic architecture, or an NFT, it is the same process. Ultimately the value of these things is curtailed by the market's willingness to purchase them, which is often not directed purely by demand for the supply but by other concerns (irrationality such as FOMO or fads, money laundering, fear of regulators, devaluation of currencies, otherwise illiquid capital, etc.).
In Switzerland they have WIR, an interesting mutual credit clearing association for companies which allows them to purchase from one another without immediate settlement, on the understanding that they will settle in time. Such mechanisms are also effectively creating liquidity (==money) by agreeing to hold debt on their books. It doesn't come from nowhere, but it's still created and created outside of banks. https://base.socioeco.org/docs/wir_and_the_swiss_national_ec...
To a lesser extent all businesses do this with any difference between values ascribed and paid, goods received and payments scheduled, services rendered and payments received. Paraphrasing George Soros: Classical economics is based on a false analogy with Newtonian physics. It's actually a whole lot more irrational, complicated, interesting, and exploitable. Always remember: Trust is the availability of effective recourse. - Dan Geer (2014)
In modern economies money is created in many places.
The most discussed means is through loans to banks from the central bank ("the Fed"). This money is lent to the banks at the current federal interest rate and is "free" in the immediate term but "unfree" in the long term as they must pay interest. Roughly speaking, if you can convince a bank that, should you borrow that money you will certainly generate more, and return it at a faster rate than the bank has to pay, then they will seek to lend you money. For most individuals, this is housing debt (a mortgage) and personal consumer credit (credit cards, car payments, other forms of purchasing in installments, etc.). Companies have access to roughly equivalent and often larger and more attractive forms of credit such as business loans, equipment financing, and so on. Printed money is such a small portion of the economy that it is statistically mostly irrelevant. Other acts of government can also create money by generating government debt and obligations.
However, that is not the whole story. Separately to the banking sector, a whole lot of money is "created" when people ascribe value to things. For example in venture capital, if I were to create a company purely with hard work and loose change and you were to buy in to it because it's the next greatest thing and is clearly going places, let's say you buy 1% for $1M at a pre-money valuation of $100M then you've sort of voted in to existence $99M of the $100M that you didn't buy by saying that valuation has enough legitimacy for you to put down $1M. While that value is not liquid, and is not really "money" per-se until it becomes so, it's been "created" just the same. If I create shares on public markets, art, or iconic architecture, or an NFT, it is the same process. Ultimately the value of these things is curtailed by the market's willingness to purchase them, which is often not directed purely by demand for the supply but by other concerns (irrationality such as FOMO or fads, money laundering, fear of regulators, devaluation of currencies, otherwise illiquid capital, etc.).
In Switzerland they have WIR, an interesting mutual credit clearing association for companies which allows them to purchase from one another without immediate settlement, on the understanding that they will settle in time. Such mechanisms are also effectively creating liquidity (==money) by agreeing to hold debt on their books. It doesn't come from nowhere, but it's still created and created outside of banks. https://base.socioeco.org/docs/wir_and_the_swiss_national_ec...
To a lesser extent all businesses do this with any difference between values ascribed and paid, goods received and payments scheduled, services rendered and payments received. Paraphrasing George Soros: Classical economics is based on a false analogy with Newtonian physics. It's actually a whole lot more irrational, complicated, interesting, and exploitable. Always remember: Trust is the availability of effective recourse. - Dan Geer (2014)
Quotes via https://github.com/globalcitizen/taoup