Not how it works. a bank can’t just magically issue loans in a vacuum without caring about liquidity, because the second a borrower spends that money, the bank has to cough up real central bank reserves to settle with another institution or go broke.

Okay, let’s break it down yeah?

We already have mostly digital currency.

Sure. Empty statement though. I can withdraw all I own and turn it into gold or pebbles if I like. That’s what currency is always meant for. Technology made it easier.

Money is created when a bank creates a loan, by starting with nothing and then splitting that nothing into a credit in one account (the borrower’s checking account, usually) and a debit in another (the borrower’s loan balance).

That’s wrong and that’s also not what the paper is implying. Banks don’t have an unlimited balance sheet. Your ‘nothing’ is an expansion of the balance sheet and you’re grisly misrepresenting double entry bookkeeping. The borrower provides an asset (collateral) and the bank provides an asset (savings from third parties). If the borrower spends that loan, on e.g. food, real money is moving around. Finally you’re also misrepresenting capital adequacy regulations.

From there, most transactions are digital where an ACH transfer or similar results in some numbers being subtracted from one account and added to another.

Who cares what percentage of the transactions are digital? That’s where loro and nostro accounts are for. The underlying cash exists and is tangible.

Almost all of this happens on computers, and even before computers it just happened literally on a paper ledger, with paper checks.

Oh my god, computers? Like sand and electricity? Voodoo I say. Don’t trust that.

You might ask, “wait where does the bank get its money from to be able to allow money to be withdrawn or transferred to another bank?” If the bank doesn’t have the liquidity to do so, it can always borrow money from other banks or the government, with the last resort in the United States being the federal reserve banks, who by the way also print all the paper currency. So having that backstop is important for regular banks to have the power to create money, but the actual creation of money happens digitally to begin with, regardless of whether the bank later needs to distribute paper bills or borrow from the federal reserve.

You can’t borrow money from the government. That’s not how central banks work. You still need collateral, which you can’t pledge multiple times.

Exactly. The bank can borrow, for which they need collateral, which sufficiently proves that what you’re saying is wrong.

They have to manage their balance sheet actively, and your original statement was in the lines of ‘it’s all made up and they have infinite equity supply’.

By that logic any bank could grow arbitrarily large by just underwriting more loans. Then there’d be no competition between any of them and my job would be so much easier.

That’s not how any of it works though.