Only as a proportion of the total amount of money deposited in the bank. That 7x means that if $100 is deposited, the bank can loan out up to $87.5 and would have to keep $12.5, which equates to loaning out x7 the amount kept as reserve. In that scenario there still was only ever $100 dollars, but depending upon how you count the money supply the bank has now 'created' an extra $87.5 and the total supply is $187.5.
In practice it's a lot fuzzier than that, but the above is the basic concept people are usually talking about. The 7x doesn't mean the government or someone else is handing them extra dollar bills, it's just the ratio of what has to be kept in reserves vs. can be loaned out, and the amount that is loaned out effectively gets counted twice in terms of the money supply (and many more times over, since that money will get deposited into a bank and loaned out again at that 7x ratio).
If that 87.50 is deposited at the bank, then they can now loan out against that as well, no? Then, on a 100$ initial deposit, they have lended out over 100$.
This is where it’s important to get pedantic about the technical details of what precisely we mean by “money” and “lending”. If money only refers to cash in vaults or reserves at the Fed, then a commercial bank loan doesn’t create money. But it does create a claim on money, which is (more or less) perfectly convertible to money on demand and thus all economic agents treat it as money.
In theory a bank could create an infinite amount of money claims, at least up to the point where nobody wants any more at the interest rate offered. However, the bank is also subject to capital requirements which determine how much risk it can take relative to the amount of equity it has (this used to be called the “reserve ratio” but that is an outdated concept).
That 7x that is lent will be deposited by the people it is spent on. The bank can then lend 7x that and keep fabricating money as long as there are people to profitably lend too. The rate of currency growth is then correlated to velocity for how fast it’s turned over from debt to deposit to debt minus the counter flow of debts being retired.
As the sibling noted, the order of borrowing and deposits does not matter. The summation will always be zero.
This gets to the heart of why there can be negative dynamics in a credit cycle. If I’ve lent 1 real dollar 100 or 1000x then there is a real risk of everyone needs that dollar back today. Similarly if creditors become risk averse and stop redepositing the money into the banking system, the velocity of money will tank and the number of dollars available to lend/spend will collapse. Growing the money supply only through fractional reserve dynamics also poses risks if a systemic imbalance emerges between creditors and debtors requiring some individuals/corps to be permanent borrowers e.x the Great Depression, and Recession.
In many ways the US is using treasuries to counterbalance the above by having the federal reserve purchase treasuries which will never be paid back in real dollars. However until the pandemic the government had limited ability to place those trillions of dollars in the hands of people who needed the surplus.
The sum of all credits and debits is zero (by the double-entry accounting definition), so seems like this is tautologically true, though not very useful.
The economic principle at work is you can have $1 in the bank and loan that to 7 people sequentially (who each redeposit it), or have $7 and loan it to those same people simultaneously (who each redeposit it), but in both cases the same transactions happened ($7 out and $7 in).
Can't banks lend something like 7X more money than they have in deposits?