In fact banks can lend out more than they have in deposits which is the point of fractional reserve banking.
For example, imagine a bank with 1 billion of deposits. It's balance sheet has 1 billion of assets (cash) and 1 billion of liabilities (debt to customers). The same bank now lends out 1 billion. It's equity hasn't changed - it's zero; now it has 1 billion assets (loans) and 1 billion liabilities (debt to customers). However there is now an extra billion floating around the economy. In fact banks can lend out more than they have in deposits which is the point of fractional reserve banking.
As I suspect you understood, my point had nothing to do with where the money ends up, what matters is that it is being used in the economy not being stored in a safe which is what would happen if people did not have access to banks who take in deposits and recycle the money as loans. Or maybe you didn't understand and thought it would make you sound clever."floating around the economy" You mean in used notes?
My question is does putting your money in "cash" mean on deposit in a bank?
Jeez, guys, get a room!
You will note from this definition that banks do not lend out more than they have on deposit, but they do lend out more than they have on reserve.Wikipedia said:Fractional-reserve banking is a banking practice in which banks are required to keep only a fraction of their deposits in reserve with the choice of lending out the remainder while maintaining the obligation to redeem all deposits upon demand. This practice is prevalent worldwide and is considered to be the customary form of banking system.
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