the banking system

You may be thinking 'what happens if there are three or four banks in the town? Not all the gold Withdrawn by borrowers Will return to our banker-perhaps only afifthَ well, you are right ,because if one bank 'goes it alone ' and lends , it is loans will end up as deposits with rival banks .
however, if the example were to refer to abanking system , ie all the banks in acountry , in wich all the banks expand their lending at roughly the same rate ,then the same thing might still happen.
most of the lending will return to the banks ,with only afraction being hald elsewhere in cash - perhaps in people is mattersses !-or being paid to the government ,eg in tax or to people overseas.Do not forget that money held by the government,and by banks and foreigners is not included in the m measures of the quantity of money .
so ,he banking system is asort of 'closed ciruit' with entry only from banks , the government and from overseas.which brings us to the role of the government .