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It’s not quite that simple, no? If I deposit 1M in the bank, that bank can loan you 900k. You then buy a Bugatti from me for 900k, which I then put into the same bank. Then the bank loans you 810k to buy an NFT from me…

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If the bank has 1M deposits, its net assets are 0. It has 1M is cash and has 1M in liabilities to depositors. If the bank loans out 900K, then it still has 0 net assets. It has 1M in liabilities to depositors, 100K in cash, and an "IOU" worth 900K (ignoring interest). Tether is different. When it mints and sells 1M USDT, it gets 1M is cash, but doesn't have any liability to Tether holders other than the honor system. It could easily pay a 500K dividend to its owners and no one would know.

What you describe is called the “money multiplier model” and yes, it’s not how the actual economy or actual banks work.

This document [1] from the Bank of England (UK’s central bank) is the best description I know of about how those ideas (“fractional reserve”, banks lending out deposits, “money multiplier” etc.) are wrong.

1. https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

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