To begin with, my friends were uncomfortable with the question. When pressed, in a friendly way, they said the federal government prints the money. When I asked what percentage of new money the federal government prints, the guesses ranged from 60 per cent to 100 per cent. If that were so, it would be a very different system and we wouldn't have all the problems with debt and deficits that we do today. In fact, nearly all of the new money created each year is created by the private banks.
Banks manufacture money.
As Graham Towers, the first and brightest governor of the Bank of Canada said, that is their business. Banks manufacture money the way steel companies manufacture steel. You go to the bank to borrow money, provide adequate collateral, sign a note and, presto, new money is created. All it takes is a tap on the computer. A principal problem of letting private banks create nearly all new money is that it is all created as debt.