[dragonwriter]

> This distinction is important since over 90% of US currency is created via loan using this fractional reserve mechanism.

No actual US currency is created this way, we just have a strong social convention of treating “the bank owes me $1 on demand” as equivalent to “I have $1”.

So if I make a “deposit” (which is, on point of fact, a loan) of $1, and the bank retains $0.10 in reserve and loans out $0.90 to someone else, we say that I have the equivalent of $1 and the borrower has $0.90, so it seems that $0.90 has been created. But there is really only $1.00 of currency, of which the bank has $0.10 and the borrower has $0.90. I don't have a currency, I have a right to demand (with certain conditions, depending on the kind of deposit) currency from the bank.

Most dollar-denominated trade is actually trade in future claims of dollars rather than actual dollars. Nothing [0] stops a parallel thing from happening with Bitcoin; obviously, such trade would be distinct from exchanges of Bitcoin recorded in the Bitcoin blockchain, just as trade in future claims of dollars are readily distinguishable from exchanges of physical greenbacks.

[0] Except the current immaturity of the Bitcoin ecosystem compared to the banking systems of any developed economy, but that's presumably something that would change were Bitcoin to achieve broad, durable acceptance.