Most of that loaned out money is getting deposited into another bank account. And that deposited loan will (minus a percentage kept in reserve) get loaned out again. And so on, etc. I might be missing something important, though.
https://en.m.wikipedia.org/wiki/Money_creation#Role_of_comme...
- new money, created by the loan; and
- a new, valuable asset — the house or restaurant — worth very roughly that amount of money.
But somebody had better be creating money in a growing economy. Otherwise the stock of desirable stuff will grow while the stock of money remains constant. And once that happens, people start hoarding money rather than doing the hard work of investing in new productive assets. But creating new productive assets is where the growth comes from, not to mention a big chunk of the jobs.
I doubt bank-created money is the only way to avoid deflation and depression. But it’s about the least centrally-controlled alternative I can think of.
They have a liability (their debt to me) and an asset (the thing they "bought", which could be anything from a T-bill, to a bagel). Basically, any debt "creates money."
When you "spend" money that you deposited with the bank, what you're actually doing is getting the money you lent to the bank paid off.
What's the difference between that and you lending money to someone to buy a bagel/T-bond, and then at some point in the future, getting money back so that you can buy a sandwich/car?
No. It moves it to someone else and creates a debt. It needs to be paid back.