section_path: Money supply/Creation of money
section_name: Creation of money
paragraph_text: Creation of money
  
  In current economic systems, money is created by two procedures:
  
  Legal tender, or narrow money (M0) is the cash created by a Central Bank by minting coins and printing banknotes.
  
  Bank money, or broad money (M1/M2) is the money created by private banks through the recording of loans as deposits of borrowing clients, with partial support indicated by the cash ratio. Currently, bank money is created as electronic money.
  
  Bank money, whose value exists on the books of financial institutions and can be converted into physical notes or used for cashless payment, forms by far the largest part of broad money in developed countries.
  
  In most countries, the majority of money is mostly created as M1/M2 by commercial banks making loans. Contrary to some popular misconceptions, banks do not act simply as intermediaries, lending out deposits that savers place with them, and do not depend on central bank money (M0) to create new loans and deposits.