What does Varoufakis mean by 'banks can make up money' in 'Talking to my daughter about the economy'?
Banks and the finance industry have an essential function of allocating capital to productive uses, intermediating between savers and investors, and managing risk. However, banking deregulation, beginning in the 1970s (and not "centuries ago" as claimed by Varoufakis), has moved this industry toward rent-seeking activities. So, since then, bankers do not lend money from savings accounts deposits. This is "the legend". They offer financial services. They are engaged in lending by trading bonds and securities. They are engaged in futures markets (central financial exchanges where standardized futures contracts are traded - see wikipedia).

By the way, deregulation has been a very lucrative change because finance has become more profitable relative the rest of the economy. Philippon and Reshef show convincingly in a QJE paper that salaries in the financial sector have skyrocketed.