"Just as the money supply was expanded according to the bank multiplier, artificial economic expansion fostered by the *ex nihilo* creation of loans eventually triggers an endogenous recession, which in the form of a widespread repayment of loans and an increase in arrears, reduces the money supply substantially. Therefore *the fractional-reserve banking system generates an extremely elastic money supply, which 'stretches' with ease but then must contract just as effortlessly, producing the corresponding effects on economic activity, which is repeatedly buffeted by successive stages of boom and recession.* 'Manic-depressive' economic activity, with all of its heavy, painful social costs, is undoubtedly the most severe, damaging effect the current banking system (based on a fractional reserve, in violation of universal legal principles) has on society.

In short, bank customers’ economic difficulties, one of the inevitable consequences of all credit expansion, render many loans irrecoverable, accelerating even more the credit tightening process (the inverse of the expansion process)." - Jesús Huerta de Soto, ***Money, Bank Credit, and Economic Cycles*** (2020) p. 261. 4th ed. Translated by Melinda Stroup. https://mises.org/library/book/money-bank-credit-and-economic-cycles

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