Part 3/5:
Imagine a scenario where someone approaches the bank for a loan—in this case, a $9,000 car loan. The fascinating aspect of this system is that the bank does not need to access any physical cash from its reserves. Instead, it utilizes the $9,000 from your deposit to facilitate the loan. Once the borrower acquires the car, they pay the seller, who then deposits the $9,000 into their own bank account.
Now, the new bank receives the $9,000 as a fresh deposit and, just like the first bank, is allowed to keep only 10% in reserve, which amounts to $900. The remaining $8,100 can then be loaned out to another customer. This cycle continues as money is loaned out, spent, deposited, and re-loaned throughout the banking system.