I'm don't know of a good textbook that explains it well. But for an example of a textbook that gets it wrong, see Mankiw's introductory macro book. Mankiw allud

I'm don't know of a good textbook that explains it well. But for an example of a textbook that gets it wrong, see Mankiw's introductory macro book. Mankiw alludes to the important brake on credit creation (capital constraints), but dismisses them as 'arcane', then goes on to describe a fractional reserve system that doesn't really exist anymore. I've pieced together what I can from reading blogs (Frances Coppola [0] is very informative in this regard). The Bank of England wrote a document explaining their view of the process of money creation [1], which is widely accepted as correct. Edit: actually, this might do: http://neweconomicperspectives.org/money-banking http://neweconomicperspectives.org/money-banking [0] http://www.coppolacomment.com/ http://www.coppolacomment.com/ [1] http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf http://www.bankofengland.co.uk/publications/Documents/quarte...