When we receive money from a paycheck or a sale or a gift, we know whom it came from.
The person or company it came from got the money likewise from some other party before they passed it on to us.
Our question is, where did this money originate? How was it born?
The answer is, new money is created when a bank and a non-bank (person or company) sign a contract of mutual obligation.
Let's say Jones wanted to buy a house cousting $200,000, but he only had $50,000 of his own money to spend. He banks with Bank of America, so he goes to them and applies for a $150,000 mortgage with the house he wants to buy as collateral.
Bank of America as of 2022 has $3T in Total Assets and $2.7T in Total Liabilities. Notice that this leaves only $.3T (10% of Total Assets) in Owners' Equity. Yet they have $1.9T in deposits. This is typical.
Where did all that Money they call "deposits" come from?
Remember from the previous page that customer account balances are among a bank's Liabilities.
Next page, please.