This is a common myth. Banks don’t lend out deposited money. Their business model is not taking that money, loaning it out at a higher interest rate than they pay depositors, and living off the difference. Rather, when they lend out credit they create, on their books, a liability (the funds they are lending to the client), and an asset (the client’s future payments to them). The liability, the outflow, is a bookkeeping fiction. It is not the transfer of cash deposits. In this sense loans create deposits, not the other way round.
This is a common myth. Banks don’t lend out deposited money. Their business model is not taking that money, loaning it out at a higher interest rate than they pay depositors, and living off the difference. Rather, when they lend out credit they create, on their books, a liability (the funds they are lending to the client), and an asset (the client’s future payments to them). The liability, the outflow, is a bookkeeping fiction. It is not the transfer of cash deposits. In this sense loans create deposits, not the other way round.