Ok, now this is a good question. Knowing bank owners personally I will give you the explanation they have given to me. Let’s say you deposit $1000.00 in your bank. The bank will set aside a reserve, say for the purposes of this example, 20%. So the bank then sets aside $200.00. That leaves $800.00 available for them to loan to the next loan applicant, which they promptly do. Now, you deposited $1000.00 and they immediately loaned $800.00 of it. The fact that you can come back to the bank the very next day and withdraw your entire $1000.00 means that the bank, based on your deposit, CREATED a NEW deposit, into the checking account of the borrower for $800.00, even though you still maintained total access to your original deposit.
Then they create a NEW loan, using the newly created deposit they LOANED the borrower in the above example, for 80% of the new deposit or $640.00. This cycle can continue, I think, 28 times. Meanwhile, all of the deposits that made up the basis for these loans could have been withdrawn by the checking account holders. Ninety five percent of the total money supply is created this way.
Loaning less than their deposits is not "CREATING" money. Loaning more than their deposits would be. Glad you figured that out.
So when the $1000 is withdrawn, where does the bank get the cash? Do they print it?
When $1000 is deposited and the bank goes through this "process" 28 times, how much "money" exists? Is it more than $1000? If so, where did it come from?