> Bank lends out Person A's money to Person B; Person B deposits their money at a bank
You describe this as a two-step process, but it's actually one step, with no actual cash involved. If Person B gets a personal line of credit, it is issued as a deposit in their account at Bank, not paid as cash which is then deposited.
Even if Person B immediately spends that money (on e.g. a house), it is transferred to Person C (former homeowner) directly as a bank deposit, either at the same bank or a different one. There's never any direct cash involved - only bank deposits are moving back and forth.
You describe this as a two-step process, but it's actually one step, with no actual cash involved. If Person B gets a personal line of credit, it is issued as a deposit in their account at Bank, not paid as cash which is then deposited.
Even if Person B immediately spends that money (on e.g. a house), it is transferred to Person C (former homeowner) directly as a bank deposit, either at the same bank or a different one. There's never any direct cash involved - only bank deposits are moving back and forth.