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When a commercial bank makes a loan, it does not lend out existing savings. It adds a new asset (the loan) and a new liability (a deposit in the borrower's account) to its balance sheet in the same moment. New spendable money comes into existence with a keystroke, so bank lending is money creation, not intermediation.
A bank deposit is not money held in a vault. It is a legal claim on the bank, recorded as the bank's liability. Depositors are unsecured creditors, and the bank owns the funds. In the UK these deposits make up about 97% of the money supply, while notes and coins make up only about 3%.
Textbooks say central bank reserves limit lending through a fixed multiplier. In practice, banks lend first and then get the reserves they need afterwards, because the central bank supplies them on demand to hold its policy interest rate. The real constraints are profitability, capital requirements, and borrowers' demand for credit, not the quantity of reserves.
Trace any monetary claim through double-entry changes on the balance sheets of the central bank, the commercial banks, and households. If a proposed mechanism cannot be written out as matching asset and liability entries that agree with official data, it does not describe how money actually works.
Banks create money when they lend, so their choice of borrowers decides where new purchasing power enters the economy. Lending for property and financial assets inflates asset prices without raising output. Lending to productive businesses expands goods and services. Banks therefore make a public allocation decision through private credit choices.
When a borrower repays a bank loan, the loan asset and the matching deposit liability cancel out, and that money leaves circulation. The money supply therefore shrinks when repayments outpace new lending. This is why private deleveraging can cause monetary contraction and deepen recessions.