In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood: the principle way is through commercial banks making loans. Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.
Interested in finding out more? Take a look at the Quarterly Bulletin article: www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy