Whether you put your money in a piggy bank or a bank account doesn't impact the productive capacity of an economy. Keep in mind that money can be created out of thin air and that's effectively what would happen if enough people cashed out - it would reduce the supply of money and the central bank would make up for it until the desired level as measured by inflation would be reached. Other than some volatility this would create if it was coordinated, it would have little impact on the real economy.

False. Trillions of dollars are simply re-invested in financial activities (many of which are risky and borderline illegal as well as insured by your taxes) that serve only to generate more numbers with 0 physical contribution to the world. At least you can lift your mattress up with money underneath it or use your piggy bank as a paper weight.

Do explain where they get the interest they pay the depositor of the cash.

Interest rate has nothing to do with profitability - it's just a price that balances the supply and demand of funds and on the short end, it's heavily influenced by monetary policy and on the long end, it's heavily influenced by the inflation and growth expectations. Lots of consumers borrow at very high rates and it's not because they expect to be profitable with the money they borrow.