Deposits are a public/private partnership which create generally usable money out of risky banking activities.

The model we are taught as children is, like most models, useful but inaccurate. “You take this $20 bill to a bank and deposit it. They will keep it safe for you, and then give you $20 back in the future, plus a little extra for having the use of it in the meanwhile. We call that interest.”

Let’s start dissecting this transaction. You don’t deposit a $20 bill. You purchase a $20 deposit, coincidentally using a piece of paper with the same number on it. The deposit is a liability (a debt) of the bank to you. The bill which you gave the bank in return for the deposit is now theirs, the same as if you had bought a cup of coffee from Starbucks. On their balance sheet, it is now an asset.