It' s super easy to be confused about this topic, as the mechanism is, in my humble opinion, much more complex than it should be.
I also see that you asked your question over 6 years ago, so there's a chance you won't even see this answer.
There are a few very important main concepts to understand here. The questions are simple, the answers are involved.
First: What is money and where does it come from?
Second: What is "moneyness"?
Third: What are bank reserves and how is it they have a very low level of moneyness, and yet are the scaffolding on which the enti... (read more)
Here's the rub....
Classical and neoclassical economic ideas and theories are based on the idea of "competitive markets". But the modern form of capitalism is not built on a foundation of competitive markets. It's build on a foundation of "rent... (read more)