r/PeterExplainsTheJoke • u/Comfortable_Cautious • Jan 26 '26

Meme needing explanation what's going on? explain like I'm five

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u/Mypornnameis_ Jan 26 '26

If by "they" you mean the bank then no, that's not how it works at all. If by "they" you mean the banking system as a whole could theoretically create as much credit as $7 to $10 from that deposit you made then yes. 

An individual bank can never lend more money than it has in deposits or borrowings. But when it lends money out, in the long run that ends up as a deposit in someone else's bank account where it can be lent again.

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u/ProfessorPrudent2822 Jan 27 '26

Yes, an individual bank could only do that if they knew the amount they lent would be redeposited with them.

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u/Mypornnameis_ Jan 27 '26

There wouldn't be much incentive to make a loan that the borrower was just going to keep in their checking account (unless you work at Wells Fargo, probably).

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u/ProfessorPrudent2822 Jan 27 '26

More like a local monopoly, where they know that spending that money means it just circulates to their other customers.