Yes, that's the point. The money gets lent out for people to go out and do things they wouldn't otherwise be able to, causing economic activity. A simple example: If you needed a truck to perform a job, but you'd sit home doing nothing because you couldn't buy it outright, that'd be a loss to the economy. The risk of a default is priced into the interest rate.
Saving money in the form of hoarding is bad. If everyone does it, the economy slows down, we become materially poorer, because the amount of work we perform for each other is lowered. That's why there needs to be an incentive to invest money, through inflation and interest rates.
And the other side could argue that continuously investing in things puts you at continuous risk, and stops you from saving for a rainy day. Also, it's impossible even under deflation to hoard wealth completely, because you still need to buy food and clothes. Presumably, under deflation you would buy more necessities and consume less unnecessary things. Also, setting interest rates is a form of price control (on borrowing money), and maybe lenders should be allowed to respond to supply and demand organically like they can with every other good.
Without hard mathematics, these debates are pointless. I don't understand why you can't see that. This isn't physics.
(Disclaimer: I don't own crypto. I sold all of mine.)
There's no such thing as not putting yourself "at risk" when it comes to finance, or life in general. Even a hypothetical form of money that was perfectly stable puts you at risk of not benefiting from economic growth - the continuous refinement that happens unless we all just stop showing up for work.
Ultimately, this is a philosophical argument about human behavior that mathematics can't model, because our very beliefs shape the outcome. In other words: Dude trust me.
> Yes, that's the point. The money gets lent out for people to go out and do things
No not really, the bank does not need deposits for that, the bank can just create money and making an entry in a database and then just put that in the person loan account, that person then can use it for buying house/business etc.
Using savings then giving that savings as loans is an outdated concept.
Saving money in the form of hoarding is bad. If everyone does it, the economy slows down, we become materially poorer, because the amount of work we perform for each other is lowered. That's why there needs to be an incentive to invest money, through inflation and interest rates.