You're both wrong. Come on. If you, private Bank Lubos, only have $100 on hand but have a customer who wants a $1,000,000 loan, you don't just write a piece o

You're both wrong. Come on. If you, private Bank Lubos, only have $100 on hand but have a customer who wants a $1,000,000 loan, you don't just write a piece of paper. You would go to the U.S. Fed Reserve (central bank) and take out a loan for $999,900 with interest.. The central bank creates the $999,000, and the private bank charges a premium on the interest rate.