"and one reason for this is because banks won't have the capital to lend you because people won't deposit their money there anymore."
That's not how banks work. Banks are factories not warehouses.
Banks create money out of thin air. The loan comes first and that causes the deposit - which is then trapped within the banking system for that denomination until it is used to discharge a bank or government liability in that denomination.
That's not how banks work. Banks are factories not warehouses.
Banks create money out of thin air. The loan comes first and that causes the deposit - which is then trapped within the banking system for that denomination until it is used to discharge a bank or government liability in that denomination.
As the Bank of England explains: http://www.bankofengland.co.uk/publications/Documents/quarte...