Quote: SBR "Well because multiple people 'have' the same money.'"
The money supply does not increase because people "have" money. That decreases it because they are sitting on it i.e. it is not active in the economy.
Quote: SBR "A deposit and loan are the same thing just viewed from a different perspective. When you deposit money in your bank account you are loaning that money to the bank. When a bank makes a loan they are depositing that money with you.
'"
What has that got to do with the way fractional reserve banking increases the money supply via lending? Nothing.
Quote: SBR "It requires money just as the mark-up in a shop requires money. This again doesn't require new money, it is simply money circulating through the economy funding economic activity. So the shop owner borrows money to buy stock. He adds a mark up to the cost of the stock that covers his costs and his profit. Part of his costs are the cost of borrowing the money. When he sells the stock he pays the interest on the loan. The bank then has its profit which it puts back into the economy via another loan, the money markets, dividends etc.
'"
All money in the economy was created at some point and the amount of money in the economy varies over time. The money used to pay interest can be money created by commercial banks in the way described. If I borrow money at 0% interest on my credit card and use it to pay down another loan with a higher rate of interest rate I will be using money created by one bank to pay a loan on money another bank created. "Created" means created as described here
rlhttp://en.wikipedia.org/wiki/Money_creationrl by the way.
Quote: SBR "And you'd have a massive decrease in economic activity as deposited money will just be sat there losing value. We are currently seeing the effects of banks having to maintain larger reserves and restricting lending. This has reduced the money supply.'"
And the reason it does is that restricts how much money they can create because they can't lend as much on.
Quote: SBR "The massive (and unprecedented) progress made over the last 20/30 has been funded by the financial industry. Moving money efficiently around the world to where it can be used most productively. This is pretty much the purpose of investment banks.'"
The problem with the progress made over the last 20/30 years is the much of the assets the banks have been lending against have proved worthless. This leads to banks taking a dim view of other banks credit worthiness as they believe they risk insolvency so they cease lending to those banks. And lo and behold the money creation process hits another hiccup because lending is reduced for this reason (as well as because banks have to hold more in reserve).