I agree, and IDK why it is so hard to talk clearly about finance. Here is how I understand what's been said (not an expert): When a bank pays a loan out to it

I agree, and IDK why it is so hard to talk clearly about finance. Here is how I understand what's been said (not an expert): When a bank pays a loan out to its lender, it must have capital (valuable assets actually owned by the bank) to back it up. But these "assets" are not always easy or possible to liquidate, or turn into cash. This is where the other person's deposit comes it. They use the deposits for "cash" instead of liquidating the assets they own in order to pay out the loan. This is what is meant by providing liquidity. Technically, the bank's own assets can be considered to be backing the loan, but the long-and-short of it is that YES, bank's do use the cash from their deposits to make loans, and that is why there is no money available when the bank run happens. Disclaimer: this is my interpretation of what others on this thread are saying. I don't actually know if this is right or wrong