You mean it happens when a bank borrows money from a central bank, right?
Not every balance sheet expansion constitutes the creation of money, e.g. when you put money on your bank account, the bank's balance sheet grows, but the money is not newly created.
No I mean in the moment the bank grants a loan. The money the borrower receives is new money, its not taken from anywhere else. But at the same time the bank records the credit as an asset which makes it a balance sheet extension.
> when you put money on your bank account, the bank's balance sheet grows
That's true, you hand over cash to the bank which becomes its asset and your account balance is marked up for the same amount. Not all money in circulation is accounted on a bank balance sheet, but most of it is bank deposits. cash is an exception, it's public money, not private bank money. When you "put money in a bank account", i.e. you bring cash to the bank you are essentially selling your public government money to the bank and it pays you with its own private bank money (which it "creates" as well).
But this is only a micro-view of a single event. In the aggregate money is created when either the government runs a deficit or when banks make loans and money is destroyed when taxes are paid or loans are repaid.
It is very insightful to view money as a creature of accounting for debtor-creditor relations rather than thinking of it as some kind of commodity.
Or let me ask you this: What would in your opinion be a valid example of "money out of nowhere"?
Well, in case of a bank it can. And it happens on a daily basis. In fact thats how most private bank money enters the system in the first place either when a bank makes a loan or when it buys any other asset like e.g. a corporate bond (you can conceptualize a loan as an asset purchase as well, the bank buys a promise to pay from the borrower which is recorded as an asset of the bank). Both are a balance sheet extension from a double-entry bookkeeping point of view.
The 4 operations double-entry bookkeeping allows are:
1. balance sheet extension (e.g. making a loan) 2. balance sheet reduction (e.g. loan repayment) 3. asset swap (e.g. a bank buying a government bond with central bank reserves) 4. liability swap (e.g. transferring money from one account to another)
So it may be more accurate to just say that every event that affects the balance sheet must be one of those 4 operations.
Also see "Money creation in the modern economy" - Bank of England Quarterly Bulletin 2014 Q1