FractionalReserveBanking

ThoughtStorms Wiki

How money is really created. Private banks conjure it out of thin air when they make loans.

The one sentence summary is that banks are allowed to make loans (ie. update the value of money in borrowers' bank accounts) greater than the amount of money that has been deposited with the bank for saving.

As long as certain conditions are met. Traditionally this is thought of as a "fractional reserve" ie. the bank can make loans up to 10 times the amount it has reserved (ie. deposited). PositiveMoney think that the "reserve" part is a bit of a red-herring because the criteria in the UK are far more obscure and convoluted.

DavidGraeber writes in TheGuardian that the banks are admitting it.