It is the prerogative of the state to issue money. In the past, some states did it better than others: Roman Republic, Song China issued money in line with economic expansions and under the checks and balances of a solid institutional framework. During the Dark Ages, however, European states issued money to fund disastrous wars waged on the back of economic stagnations. The gold standard, introduced in part to limit the state powers in monetary affairs, did exactly that: it severely restricted the flow of money to the availability of gold, thus cutting the wings of any economic expansion.

When the Bretton Woods agreement in 1971 eventually put an end to the gold standard, and fiat money finally became the norm, governments, however, chose to delegate that function of money creation to their banking system: banks could issue new mediums of exchange only in the process of also issuing debt. This was a massive improvement over any monetary transmission mechanism of the past because it linked money creation directly to economic activity (assuming that the debt is used to fund projects leading to economic growth).

So, it worked well at the beginning: debt levels were very low to start with, the financialization of the economy in the 1980s made it much easier to obtain new debts and the 1st Digital Revolution made sure there were plenty of good project to fund. However, even that was not bullet proof: the system was set-up by default to encourage the creation of debt so that money is created. However, with good projects to fund becoming scarce, funding moved to less productive endeavors: junk bonds in the 1990s, mortgage debt in 2000s, and the pinnacle to top it off, corporate debt for share buybacks in 2010s!

With debt levels high and continuing to rise, how high can interest rates go before they nip the whole process of money creation in the bud? We had a glimpse of that post the S&L crisis in the early 1990s which eventually gave rise to shadow money; we had something similar post the 2008 financial crisis when debt deleveraging gave rise to crypto money. Both shadow and crypto money were designed as substitutes of the medium of exchange which had gone scarce as debt origination slowed down. The problem with that is, because they are not regulated, they do not carry the safety/convertibility features of inside money and thus at some point the whole process badly backfires.

In a sense, we ended the gold standard, only to put the monetary fetters back using debt as the anchor. Even though this process was an improvement, it is questionable, however, whether the banking system has done a better job than the state would have done, if it had taken full advantage of the fiat monetary system post 1971.