[type111]

I think much confusion comes from association with the word 'loan'. In reality, a bank 'loan' is actually an extension of credit.

You are indeed 'magically' credited, in an instant, with say $100 of new deposits which is a liability to the bank. Simultaneously the bank gains an asset: your signed promise to pay that $100 or otherwise forfeit equivalent collateral.

A key point here is that this new 'magical' deposit is not the same stuff as cash or reserves. It is confined to that particular institution. Nothing that is being 'magically' created can escape the bank. Only cash and reserves can do that.

[asvitkine]

Ok, but if the credit is say a mortgage for a property being bought, the seller still receives the money in full, no? I guess the idea that they fully cash it out is unlikely and so that scenario would indeed come from the reserve - and otherwise if they just deposit it, even if at another bank, then it's just updating some ledgers around (i.e. the ledgers of the two banks with each other)?

[type111]

The only ledger that two different banks share is the ledger of reserves at the central bank. The bank deposit that is created through the mortgage process has no means of escaping the buyer's bank and into the seller's account -- it's an artifact of the contract between the buyer and their bank. The seller's account grows only in response to a bank-to-bank transfer of reserves or a huge cash withdrawal and deposit (which are essentially similar.)