[beefield]

You do not need to issue any new bitcoin. What you need is a trustworthy entity that borrows your bitcoin and gives you an IOU slip, which you can then use as a means to pay other people. That slip, stating that whoever owns the slip is entitled to one bitcoin from the trustworthy entity, is from economical point of view as good as bitcoin. And if people want to increase the amount of those slips, there is nothing in bitcoin that stops it. Ergo, in bitcoin economy money supply is not restricted.

[errantmind]

As I mentioned elsewhere, this only works if people don't insist on custody of their bitcoin, and a lot of people (although not a majority) would.

Also, do you have some strong historical evidence fractional reserve banking is good economically over long periods (100+ years)?