You have no idea how the system works, and I'm not sure where the certainty is coming from. This is right from the wiki page you refuse to read:

"Because bank deposits are usually considered money in their own right, and because banks hold reserves that are less than their deposit liabilities, fractional-reserve banking permits the money supply to grow beyond the amount of the underlying reserves of base money originally created by the central bank."

The money multiplier effect you're alluding to means that if I have $1000 in the bank, the bank can lend $750 of it out to you, so between the two of us we have $1750 of liquid assets despite the $1000 of hard cash backing it. If you spend your $750 on a house, and the guy selling the house puts the $750 in his bank account, the bank lends out $562.50 which means that from my $1000 hard cash, there is now $2312.50 of liquid assets floating around. It does not mean that the bank can fiat $4000 into existence the second I deposit that $1000. If that were the case, there wouldn't be such a thing as a bank run, because the bank would still have my $1000. Bank runs are widely acknowledged to be the biggest risk of fractional reserve banking.

From the very Wikipedia article you're citing:

"Fractional-reserve banking is the practice whereby a bank accepts deposits, and holds reserves that are a fraction of the amount of its deposit liabilities"

"The relending model begins when an initial $100 deposit of central bank money is made into Bank A. Bank A takes 20 percent of it, or $20, and sets it aside as reserves, and then can theoretically loan out the remaining 80 percent, or $80. If the bank does in fact issue loan proceeds in the form of $80 in central bank money, the money supply actually totals $180, not $100, because the bank has loaned out $80 of the central bank money, kept $20 of central bank money in reserve (not part of the money supply), and substituted a newly created $100 IOU claim for the depositor that acts equivalently to and can be implicitly redeemed for central bank money (the depositor can transfer it to another account, write a check on it, demand his cash back, etc.)".

(The editors of Wikipedia are evidently fond of their run-on sentences.)

Which was my entire point, that when I take out a loan the bank is creating money. I have the $750 I borrowed, the bank has $250 and also a document (my promise to repay) that's worth about $750.

If a bank starts with $1000 in assets, loans me $750 and still retains $1000 in assets, how can it be said the bank can't loan money it doesn't have?

EDIT: In the real world what happens is the banker charges you loan fees (like "points" on a mortgage), and reserve ratios are more like 10% than 25%. Theoretically, if the banker can get you to pay 10% in loan origination fees (and assuming nobody defaults), he can loan as much money as he can find people willing to borrow.

And where does the money for those fees come from? At that point they're still just a promise.

I deposit $1000 in the bank. The bank has an asset of $1000 cash and a liability of $1000 deposit payable to me.

The bank loans $900 to Jimmy. The bank has an asset of $100 cash and another asset of $900 of Jimmy's debt, payable to the bank. The bank has a liability of $1000 payable to me.

The bank profits from fees we pay to the bank and from interest on loans from the bank, but they have to have the money before loaning it out in the first place. They can't just loan you money out of nothing. If Jimmy shows up at the bank before I do, and Jimmy and I are the first two customers, the bank has no money to loan Jimmy and has to turn him down. They don't get to print it, which is what it sounded like you were saying. If that was a misunderstanding, I apologize; I've just run into a lot of misinformed and deluded goldbugs on HN before.

Really, what's going on is more of a double booking. Like on airlines, where they sell more tickets than they have seats based on the assumption that not everyone will show up, banks get to say my $900 belongs to me and Jimmy at the same time, and depend on having enough customers that we don't all ask for it at once, or else if there is a run on the bank, they've bought an insurance policy from the FDIC to cover that eventuality, and can borrow their own money from the FED as well.

Also, I'd be really surprised if anyone paid loan fees in the neighborhood of 10%. People these days can't be bothered to put down a 20% down payment for a house and you think they pay 10% in fees for a loan from the bank? Even if you could pull off that scheme, I'm pretty sure that's not how the reserve ratio works. The reserve ratio has to do with what percentage of a bank's deposits must be held in cash; it has nothing to do with money loaned by the bank, and it doesn't mean the bank can loan money it doesn't even have.

Oh, I agree they have rules they need to follow. The way modern lending works is the bank makes you a loan and then goes looking for funds to cover its reserves by borrowing against your loan document. I'm sure they like to lend out depositors' money because it's cheaper, but they certainly don't need it.

They borrow from other banks if they can, but if not they borrow straight from the Fed at the "discount window". And when the Fed lends money it is literally created by changing a number in a computer somewhere. So ultimately that $1000 has been injected into the economy though the creation of money (which will get destroyed slowly as the loan is paid off).

The point, way back in the beginning, was that the money supply is really only constrained by the amount credit-worthy borrowers are willing to borrow at a profit to the banks. That's why the Fed discount rate has such a big effect on the money supply - by raising it they make unprofitable some portion of loans that would have been profitable at the lower rate.

I'm not sure if the central bank is technically part of the fractional reserve system. But is there fractional reserve system currency issuer without a central bank? I'm not aware of one.

Let me apologize for my tone as well.

Banks don't have to have the money before loaning it out

"the relationship between reserves and loans typically operates in the reverse way to that described in some economics textbooks. Banks first decide how much to lend depending on the profitable lending opportunities available to them ...It is these lending decisions that determine how many bank deposits are created by the banking system. The amount of bank deposits in turn influences how much central bank money banks want to hold in reserve (to meet withdrawals by the public, make payments to other banks, or meet regulatory liquidity requirements), which is then, in normal times, supplied on demand"

Link above is specific to UK but it's similar in most countries

See also https://en.wikipedia.org/wiki/Reserve_requirement#United_Sta...

"When an institution fails to satisfy its reserve requirements, it can make up its deficiency with reserves borrowed either from a Federal Reserve Bank"

in other words... banks lend first and account later, if there's a shortfall at the end of the day they basically get an automatic loan from the central bank

Because the bank has to transfer the money.

Let's assume a 2 bank world: Bank A and Bank B

I apply for a loan for a house of $100, ignoring future value and default probabilities.

I get given the loan and need to send the money to the house owner. The Bank A marks in its books that I have a $100 loan and transfers the money from its assets to Bank B. Bank A's assets have not changed, but its capital-asset ratio has (as it now has less assets to back its capital).

OR

Bank A transfers $100 to Bank B but doesn't want to pay out assets, so it goes into the interbank market and borrows $100 from another bank at the same time, increasing its assets by $100 and also increasing its liabilities by $100.

The home owner that receives the money in their bank, Bank B.

Bank B's assets have increased by $100 and liabilities have increased by $100 (as it will, in the future, need to pay out the cash to the home owner). This is where the money multiplies happens.

Finding itself sitting on deposits not doing anything, it is likely Bank B will go into the interbank market and lend out some money to Bank A who seems better at finding customers.

Credit in your checking account is defined to be money under the usual definition. The process of depositing and loaning money at commerical banks creates additional credit that wasn't there before. If a bank accepts $1000 and loans $900, there is now $1900 of money. By definition.