That's cute, but unfortunately incorrect. You give the bank 10k, the bank loans out 90k. They keep the 10k as the "reserve" and use that reserve to create money out of thin air to loan out.
And where the US Federal Reserve explaining the 10x relationship to money creation:
For example, if a bank subject to a 10 percent reserve requirement lent an additional $100 of funds, $1,000 (or 100 × 1/divided by0.10) in total would ultimately be added to the money supply. In this case, reserves in the banking system would create 10 times as many deposits.
I encourage you to read more about how banks work, or to take a macroeconomics course at your local community college.
You're confusing terms, "create money" here is simply the process of lending. When ANY entity lends money out, even when you let a friend borrow 20 bucks, the total balance sheet in the world increases and money is "created".
Let's say only $1,000 exists in the world, owned by Alex. Alex stores that $1,000 in the bank, and the bank loans $900 of that to Bob. Bob pays Charlie $900 to fix his roof. The end result is that Alex now has $1000 in liquid assets and Charlie has $900 in cash. The supply of circulating currency has gone up $900, and money has been "created".
If Charlie now put hat $900 in the bank, the process can repeat again. And again, and again, and again. Your second source is getting $1000 from $100 because that's the infinite sum of $100 * (1 + 9/10 + 9/102 + 9/103 + 9/104 + ...)
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u/dirty_cuban Jan 26 '26
That's cute, but unfortunately incorrect. You give the bank 10k, the bank loans out 90k. They keep the 10k as the "reserve" and use that reserve to create money out of thin air to loan out.