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Custer County, Nebraska | I understand what you are seeing, but no.
The reserve that is kept with the Fed is a percentage of the bank's deposit liabilities. If someone deposits $100 dollars, it is an asset to the depositor, a liability to the bank. The bank must meet the Fed Reserve ratio with this. Just because a bank lends out cash does not change this liability.
So where exactly did the $90 come from that was withdrawn from Bank A?
When a bank makes a loan, it CREATES money. When a person borrows money from a bank, they exchange a promissory note (not money) for a demand deposit (which is money). By extending credit a bank 'monetizes" an IOU.
So in our case after a borrower draws the $90, Bank A is just meeting the reserve ratio of $10, loans are at $90, and demand deposits are $100.
The bulk of money used in our economy is created through the extension of credit by commercial banks.
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The Fed can provide answers to questions, too
