Person A’s account is worth $100.
The Bank has $100 in its reserves.
Person B takes out a loan of $80 from the Bank.
The Bank now has only $20 in its reserves.
Person B pays the $80 to Person A for a service
Person A deposits the $80 to the Bank.
Person A’s account is worth $180.
The Bank now has $100 ($80 deposit + $20 left from earlier) in its reserves.
2 days later, nothing’s changed, except Person A needs some extra money quickly, so they go and try to withdraw the $180 in their account. The Bank only has $100 in its reserves.
What the fuck have you been smoking?
You know what? Let me simplify if for you:
Person A deposits $100 to the Bank
Person A’s account is worth $100. The Bank has $100 in its reserves.
Person B takes out a loan of $80 from the Bank.
The Bank now has only $20 in its reserves.
Person B pays the $80 to Person A for a service
Person A deposits the $80 to the Bank.
Person A’s account is worth $180.
The Bank now has $100 ($80 deposit + $20 left from earlier) in its reserves.
2 days later, nothing’s changed, except Person A needs some extra money quickly, so they go and try to withdraw the $180 in their account. The Bank only has $100 in its reserves.
That’s why we have a “fractional reserve” system in place pretty much everywhere.
And besides, they haven’t created that money, as the first person has a balance of -80.