This is the classic description found in the economic textbooks. Unfortunately it is incorrect, the system doesn't work that way. (See comments above). apropos

This is the classic description found in the economic textbooks. Unfortunately it is incorrect, the system doesn't work that way. (See comments above). apropos btw. I've never actually seen a banking system that has a 10% ratio, I think that was Keynes chosing easy numbers. The reserve ratio back in his day was more like 20-25%, these days it is down to about 1-2% in most countries, and being replaced with terms like "required liquidity ratios".