Bank deposits are proportional to the level of loans in the system
Bank deposits are created in only two instances:
- When cash is deposited at the bank;
- When a bank issues a loan.
The loan has to be paid back with deposits; so to repay a loan another loan needs to be made somewhere. Debt is what sets the world in motion. And In the end the State holds the financial system together
References
- Central banking 101 p33-34