Disclaimer, I'm not an economist, but I'll leave a brain dump anyway ...
Everyone's a bit confused. Or talking at cross purposes.
* Central banks create M0 (either paper currency, or electronic equivalents - original fiat money). (I had to say fiat, or some gold bug would complain that gold is the real money).
* Banks borrow money, lend it out again, then when the money comes back to the banks they keep recyling it in an infinite cycle, creating M0/fr amount of broad money (M2?).
* Then other infinite cycles create even broader money, but let's forget about that.
A lot of people (especially bitcoin and gold proponents) forget is that the government can still create M0 if it's not just greenbacks (by lending out "imaginary" gold or bitcoins - as long as someone will take an IOU from the government in return for a little bit of interest). Banks can create M2, as long as someone will take their IOUs (with interest). You can ban lending, but since the critics of money usually lean Libertarian, that's not an argument you often get.
What some post-keynesians and some economically literate marxists (and maybe MMTists, I don't actually know what they're on about) suggest is that the fraction can suddenly change.
Boom - lowering fractional reserves, which means the total amount of broad money keeps increasing.
Bust - banks try to lower fractional reserves, which makes the total amount of broad money contracts.
The fraction is often treated as a constant, but if it suddenly changes (or the desired target suddenly changes), it can have a massive impact.
Banks get very comfy lending out money with very low reserve rates (effectively the multiplier of money), because whenever there's a crisis the government will "print" M0, and hand it over. So as long as the banks don't act more irresponsibly than every other bank, they can't fail. "Macroprudential" reforms (telling banks to stop it when they lend to much, or risk fines / penalties) is becoming fashionable for this very reason, since telling banks they'll all go bankrupt is about as credible as a teacher yelling "If the class isn't quiet I'll expel the lot of you!".
I like to consider the human side - in the asset bubble that occurs when M2 is rapidly growing, everyone wants to work hard and save hard, because otherwise they'll never get on the property ladder. That creates a boom, then a bust when they realise it's a Ponzi scheme. Economists who know better talk about high investment, then a crash in investment when the money suddenly dries up.