The New Technology, page-32

I don't think so, I've researched this quite thoroughly and the confusion is always the difference between monetary supply and monetary base.

Fractional reserve banking doesn't alter the monetary base, it alters the monetary supply. Big difference and it is a key difference.

A good example would be your bank account.

Lets say you have 10,000 dollars in your bank account, meaning you've physically put in 10,000 worth of currency. If the bank has a fractional reserve of 10%, that means they must hold 1,000 of your money at the bank in liquid assets.

The other 90%, is free to be lent out and charged good interest rates on. So they will naturally try to lend out 9,000 to someone else, lets call them fred. Fred goes and buys a car for 9000 from Bob. Bob then deposits 9000 in the bank. The bank must hold 900 dollars of this in reserve.

So if you looked at it from a basic deposits point of view, your 10000 has now turned into 19000 being owed by the bank (to you and bob) and only 1900 of depoists. This cycle would continue with diminishing returns (next time they can only loan out 8100, or 90% of 9000) on their money. This final amount (in this case 100,000 or 10,000/0.1 (10%)) would be called the monetary supply.

So you could argue (and people do) that the bank has turned 10,000 into 100,000 dollars, thus creating money. In fact, they have increased the monetary supply which is the amount of travel a single dollar does, which is good for the economy.

To prove that this hasn't created money, lets go back to the original example of 19000 in the bank in deposits from your original 10000. Lets assume they lend 8100 of Bob's money out to Judy who uses a different bank.

The total ledger is:

Bank - $1900 cash on hand - owed to you and Bob.
$9,000 of recievables from Fred. Owed to you.
$8100 of receivables from Judy. Owed to Bob.

IF you do the balance, the bank Owes 19,000 total, has 1900 on hand and 17100 in receivables, a balanced (no money created) book. You gave 10,000 and you are owed 10,000. Balanced. Fred owes 9000 and received 9000. Balanced. Bob gave 9000 and is owed 9000. Balanced. Judy owes 8100 and received 8100. Balanced.

All parties are balanced, but as you can see by doing fractional reserves, the bank has been able to lend out multiples of the money you deposited but no money has been created or lent twice. It is simply the asset sheets of the individuals that has created that illusion.

This is an incredibly simple scenario and obviously in the real world, this gets incredibly complicated to try and trace how and where deposits are used so people often simplify the principle and make the mistake of confusing the monetary base (which is purely controlled by the reserve bank to adjust for inflation/replace currency) and the monetary supply which is how dollars move through the economy and is a measure of how productive a dollar is (how many times it can change hands). The higher the reserves required at the bank, the less productive a dollar becomes.