Once banks start lending again and expanding base money through the fractional reserve system, M2 could increase exponentially.

FORBES: An Inflationary Death Spiral

Fractional reserve banking expands the money supply without regard to real wealth, and this is inflation, resulting in price increases.

FORBES: Irish Stress Tests: Bailout To Cost $99B, Banking Sector To Consolidate

They withdrew deposits from banks, which because of a fractional reserve system caused a drop in the money supply in spite of a rising monetary base.

WSJ: Arthur B. Laffer: Taxes, Depression, and Our Current Troubles

Government cannot specifically control the money supply at its source in a fractional reserve system, but only react to conditions caused by the decisions of individual banks to supply or not.

FORBES: Private Currency Competition Is The Monetary Answer

Without fractional reserve banking, without the Fed, and with sound money there would absolutely be no business cycle.

FORBES: Fighting the Last Monetary War

In a fractional reserve banking system, banks are permitted under law to create deposit money out of thin air.

FORBES: Cyprus, Anything But Unique and Why to Worry

Normally, because of fractional reserve banking, this would lead to a further multiple expansion of bank deposits and the money supply.

FORBES: Sterilizing QE3

Also, the central bank and the (fractional reserve) banking system would face a nearly irresistible temptation to use their ability to create money to hold the deflation at bay as long as possible.

FORBES: Stop The Madness: Make The Dollar As Good As Gold

Many of us learned in economics 101 that banks create money by depositing the proceeds of a loan in the borrower's checking account, but the total money created is controlled by central banks through the minimal reserves that banks must maintain with them, the fractional reserve system.

FORBES: Magazine Article