You're all wrong (at least partially), unless I'm mis-interpreting something you guys said. The local banks lend out money that they have, but the majority of that money is not depositors money, it's money from a bigger bank that they borrrow from. That bigger bank in turn borrows it from a bigger bank, think Bank of (un)America(n). Those banks in turn borrow money from the Federal Reserve which is the entity that illegally prints money out of thin air. (That's actually the Mint's job as per the Constitution, but apparently the reserve too big to jail.) You're welcome. Oh by the way, the Federal Reserve's board of directors is made up of executives from the biggest 13(? I think thirteen) banks.