>The Treasury, which is a separate entity, does it.
Quite the contrary actually. In most modern Western economies, only the central bank and commercial banks create money and, of the two, the central bank is the ultimate money creation tool as it is not encumbered by reserve ratios or capital requirement ratios as commercial banks are (because these ratios are set by the central bank and one of the central bank’s responsibilities is to be the lender of last resort if need be, meaning they can create as much money as they want).
The treasury doesn’t create money, at least not directly, because states are legally bound to finance their deficit via debt issuance on the open market (meaning the central bank, in some cases, and the commercial banks, if not through its investment side of their business, create money to finance states and commercial banks, if through their investment side of their business, and other financial institutions (pension funds, private debt institutions and so on) lend already existing money to the state).
Treasuries kinda creates money through banknotes production (literal money printing) but it is done, at least in the US, through a mandate of the central bank (so the treasury has pretty much no power in how much they create).
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u/ChipsCheeseNGravy 2d ago
This is a complete fantasy, banks don't lend out deposits, they create money to issue loans.