> Deposits are what are used to "lever" up in the first place. If a bank lends out $125 for every $100 that it gets in deposits, where is the other $25 coming f

> Deposits are what are used to "lever" up in the first place. If a bank lends out $125 for every $100 that it gets in deposits, where is the other $25 coming from? The answer is that it comes from equity. That's not entirely correct. Those $25 mostly comes from other banks with other business models, e.g. banks holding treasury bonds instead of loans. That said, I really like how radmuzoom's comment contained the kernel of real-life data that should help people realize that the typical money multiplier explanation is just wrong: if you actually look at the sum of deposits and the sum of loans that banks have, you'll see that they are more or less equal. Yet, if you believed the typical money multiplier story, the amount of loans would have to be at least 10x higher than the amount of deposits (even infinitely larger in countries where no reserve requirement exists!).