[ehzy]

The point is not that the bank magically credits someone with $10. The $10 figure is arrived at after a series of infinitely recursive loans and deposits.

If you deposit $10, you still have $10, it's just in a bank account. If the bank then lends out $9 of that and hands it to them, that person now has $9, and you still have $10 (in your account). Presto, now there's $19 of money available. Of course if you both want to spend your money at the same time, then the bank will have to go back to the fed and say oops! we're illiquid and need to borrow $9. And the fed will say, ugh, you should manage your capital better but here's a loan for $9.

The same process that's occurred here can be done recursively, i.e. the person who borrowed $9 can deposit it in another bank, who then loans out $8.10, and so on...

This works out such that for every real dollar d, the total money supply is (d / r), where r is the reserve requirement, in this case, 10%.

[type111]

No the $10 is indeed 'magically' credited in one step. There is no recursion required.