The libertarian side of me says, "I'm not allowed to counterfeit... why should banks be?" But I'm curious as to how this actually benefits people in the long run instead of just devalue currency.
Banks aren't printing currency. Furthermore, the loans can only be granted because the banks have excess reserves from either previously not lending to the maximum or because of expansionary actions by the Federal Reserve. Banks only "create" money to the extent that they let previously granted money be put into circulation.
IMO, individual banks have too much power to not "create" money.
What's the difference between printing currency and "creating money?"
By "printing currency", I'm referring to the actual usage of a printing press to generate new, hard, real dollar bills that you can touch and hold.
As for the rest of your question, it goes to the various definitions of the money supply. Think about it this way: There exists a total universe of money in the United States that is divided between hard cash and soft (in essence, a number in an account) cash held by the public, plus bank reserves plus Federal Reserve credit and bonds plus a number of other sources. I believe this total universe is called MB, but I could be wrong about that. Any money not held by the public is held by a bank, essentially trapped in a confined area that has no impact on the rest of the economy. When a bank decides to lend from their reserves, the more common designation of the money supply M2 (and M1) is increased, essentially giving the economy access to the MB money that was previously locked away. Banks can lend their reserves until they reach the required reserve ratio, and any reserves they hold above the RRR are called excess reserves.
Now, when the Federal Reserve seeks to increase the money supply through open-market operations, they generally aren't increasing MB, but are instead in essence buying bonds held by private banks using their own reserves, transfering their reserves to the reserves of the private banks. This hypothetically gives banks more ability to lend, thus providing the ability to increase M2 to the general economy, but the banks have no obligation to actually lend and can hoard their reserves if they choose. The Fed could increase MB if it so desired (which would be "printing" soft money so to speak), but this rarely happens.
Thus, "creating" money by bank loans is only creating M2, but not MB, unlocking soft money already in existence for the general public.