ONLY central bank have the right to create money, commercial banks can not create money, they can only loan out part of their existing money That's what you hear, but the truth is different. When a bank makes you a loan, they just add a number to your checking account balance.  They also make a new account (your loan) and subtract a bigger number from that, so according to their books, they are even better off than before.  They don't have to run out and get more bits from someone. When you spend part of that loan, you write checks against that new balance.  To the extent that your checks go to other banks, their account with the regional fed is decreased, which may put them in a tricky situation with the auditors, causing them to borrow to keep their reserves up.  This loan is, of course, backed by the asset they are holding, namely your promise to pay them. I don't think that is the case. If commercial banks can create loans as wish, then central bank's open market operation will have no effect at all. The OMO's purpose is to increase or reduce the amount of money that commercial banks can loan out, in such a way to adjust the credit money available for business. If commercial banks can create money by themselves as wish, this whole operation will have no effect When a commercial bank give me a loan of $900, he must have that money at his account at the first place, and the reason that he can lend me that $900 is because he already have $100 deposited at central bank (10% reserve requirement) Don't be fooled by bank's accounting tricks
ONLY central bank have the right to create money, commercial banks can not create money, they can only loan out part of their existing money That's what you hear, but the truth is different. When a bank makes you a loan, they just add a number to your checking account balance.  They also make a new account (your loan) and subtract a bigger number from that, so according to their books, they are even better off than before.  They don't have to run out and get more bits from someone. When you spend part of that loan, you write checks against that new balance.  To the extent that your checks go to other banks, their account with the regional fed is decreased, which may put them in a tricky situation with the auditors, causing them to borrow to keep their reserves up.  This loan is, of course, backed by the asset they are holding, namely your promise to pay them. I don't think that is the case. If commercial banks can create loans as wish, then central bank's open market operation will have no effect at all. The OMO's purpose is to increase or reduce the amount of money that commercial banks can loan out, in such a way to adjust the credit money available for business. If commercial banks can create money by themselves as wish, this whole operation will have no effect When a commercial bank give me a loan of $900, he must have that money at his account at the first place, and the reason that he can lend me that $900 is because he already have $100 deposited at central bank (10% reserve requirement) Don't be fooled by bank's accounting tricks

ONLY central bank have the right to create money, commercial banks can not create money, they can only loan out part of their existing money That's what you hear, but the truth is different. When a bank makes you a loan, they just add a number to your checking account balance.  They also make a new account (your loan) and subtract a bigger number from that, so according to their books, they are even better off than before.  They don't have to run out and get more bits from someone. When you spend part of that loan, you write checks against that new balance.  To the extent that your checks go to other banks, their account with the regional fed is decreased, which may put them in a tricky situation with the auditors, causing them to borrow to keep their reserves up.  This loan is, of course, backed by the asset they are holding, namely your promise to pay them. I don't think that is the case. If commercial banks can create loans as wish, then central bank's open market operation will have no effect at all. The OMO's purpose is to increase or reduce the amount of money that commercial banks can loan out, in such a way to adjust the credit money available for business. If commercial banks can create money by themselves as wish, this whole operation will have no effect When a commercial bank give me a loan of $900, he must have that money at his account at the first place, and the reason that he can lend me that $900 is because he already have $100 deposited at central bank (10% reserve requirement) Don't be fooled by bank's accounting tricks

ONLY central bank have the right to create money, commercial banks can not create money, they can only loan out part of their existing money That's what you hear, but the truth is different. When a bank makes you a loan, they just add a number to your checking account balance.  They also make a new account (your loan) and subtract a bigger number from that, so according to their books, they are even better off than before.  They don't have to run out and get more bits from someone. When you spend part of that loan, you write checks against that new balance.  To the extent that your checks go to other banks, their account with the regional fed is decreased, which may put them in a tricky situation with the auditors, causing them to borrow to keep their reserves up.  This loan is, of course, backed by the asset they are holding, namely your promise to pay them. I don't think that is the case. If commercial banks can create loans as wish, then central bank's open market operation will have no effect at all. The OMO's purpose is to increase or reduce the amount of money that commercial banks can loan out, in such a way to adjust the credit money available for business. If commercial banks can create money by themselves as wish, this whole operation will have no effect When a commercial bank give me a loan of $900, he must have that money at his account at the first place, and the reason that he can lend me that $900 is because he already have $100 deposited at central bank (10% reserve requirement) Don't be fooled by bank's accounting tricks