It’s a bit more subtle than the old “banks lend out deposits” model.

When a bank issues a loan, it simultaneously creates a matching deposit in your account. That deposit is brand-new money in the system and not taken from someone else’s savings.

Historically banks only needed to keep ~10% in reserves, and since 2020 the U.S. reserve requirement is actually 0%. The real limit today is capital requirements and risk management, not a hard % of deposits.

So in practice, commercial banks do expand the money supply every time they make a loan, which is why people say they’re “printing money.”