There are two competing hypotheses: (a) deposits create loans (fractional reserve system); (b) loans create deposits (This is from some sections of post-Keynesians from Wynne Godley, MMT, etc).
Only the mainstream folks teach (a).
This sounds like a big deal and the first I'm hearing about this. What's to stop a bank with $1 million in deposits from loaning out $1 trillion?
High likelihood of eventual bankruptcy.
Yes, and some # of banks will do it nonetheless. Sounds like the U.S. taxpayers will be rescuing some failed banks very soon.
This can't end well.
Doesn't seem to work because inflation went through the roof.