Overflight, 131

… Suppose the Federal Reserve System … buys $10,000 of Treasury bills from a dealer in U. S. government securities. … the Federal Reserve Bank pays for the securities with a … check drawn on itself. … The Federal Reserve System has added $10,000 of securities to its assets, which it has paid for, in effect, by creating a liability on itself in the form of bank reserve balances. These reserves on Bank … books are matched by $10,000 of the dealer's deposits that did not exist before. …
If the process ended here, there would be no "multiple" expansion … However, banks are required to maintain reserves equal to only a fraction of their deposits. …
All banks together have $10,000 of deposits and reserves that they did not have before. … All they need to retain, under a 10 percent reserve requirement, is $1000. The remaining $9,000 is "excess reserves." This amount can be loaned or invested. …
Of course, they do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers' transaction accounts. …
Carried through to theoretical limits, the initial $10,000 of reserves distributed within the banking system gives rise to an expansion of $90,000 in bank credit (loans and investments) and supports a total of $100,000 in new deposits under a 10 percent reserve requirement. The deposit expansion factor for a given amount of new reserves is thus the reciprocal of the required reserve percentage (1/.10 = 10). … The multiple expansion is possible because the banks as a group are like one large bank in which checks drawn against borrowers' deposits result in credits to accounts of other depositors, with no net change in the total reserves.”
Federal Reserve Bank of Chicago, Modern Money Mechanics
["invested" meaning here: $9,000 that did not exist before will be credited to someone's deposits and thus added to deposits and reserves of all banks considered together, of whom in the next spin on the stage floor $900 will be "retained" as "reserves", and the remaining $8,100 that did not exist before will be invested and credited and added to deposits and reserves, and so on, on and on, and all the while every "Dollar" that did non exist before is new purchasing power sprung into existence out of nothing in the hands of its "creator";

Overflight