It's a simplification to help people understand, but this is in the spirit of how things work because the value in the economy is not the money, but the goods and services that get created in the economy as a consequence of it. Most constructive uses of financial instruments in the markets (stocks, bonds, mutual funds, etc) are about efficient reallocation of money to enable value creation while balancing different risks, and people who provide this money indirectly benefit from this value creation via interest, dividends, selling stock at a higher price, etc.

Now to expand GP's example (still simplified):

- A borrows $100k money to pay B toward building a house. B puts $100k in their bank.

- C borrows $90k from B's bank toward building a house to pay D. D puts $90k in their bank.

- etc

So, houses were created (or other services were provided), and that's the real multiplicative factor. If banks loan out 90% of the cash stored (i.e. keep 10% in reserve [1]), the multiplicative factor of value creation in the economy is 10x the original amount of cash deposited in the first bank.

Now, if all of us withdrew our savings at once or sold all our stocks at once, we would have an economic shock analogous to that which resulted the Great Depression. That's why for banks, we have FDIC insurance - to mitigate such a panic so that money can serve its value-multiplicative role when it's not being actively used for anything else by the person owning the money. That's also why a positive (but low) inflation was originally considered economically healthy - so that people put their money in banks/market rather than under their mattresses gradually losing value. When interest rates are low, that encourages people to put their money into riskier (non-FDIC-insured) investments with higher growth potential, like a balanced portfolio of stocks/bonds/etc to avoid losing value to inflation, resulting in more economic growth.

[1]: https://en.wikipedia.org/wiki/Fractional-reserve_banking