the multiple expansion of bank deposits

of all financial intermediaries commercial banks are unique in that they can create demand deposits, which provide the bulk of the money supply in the United States. Furthermore, there is a multiple relationship between the amount of bank deposits a given bank can have in terms of cash reserves. it is this fractional reserve requirement for commercial banks that makes it possible for them to create added money, even though each individual bank only lends out its excess reserve. Because each bank can lend only funds that it has, how can the entire banking system create new money? Money creation by the banking system sometimes strikes the student as being almost as mysterious as the processes of the medieval alchemist, who was trying to create gold out of baser metals.