Why Do Banks Need Deposits?

If the money multiplier is a myth and banks don't multiply their reserves and deposits then why do banks even need deposits? This video answers one of the most common questions when learning that the money multiplier is a myth.

In short, banks "multiply" deposits by earning a profit from them in various ways. They don't take in reserves or deposits and lend them out $ for $ in a textbook multiplier manner.

#banking #howbankswork #understandingmoney
00:00 Introduction
00:32 Why deposits add to net interest
01:00 Deposits create other forms of profit
01:36 Loans create deposits AND deposits fund loans