I thought that FRB does create more money.  Money is lent into existence. 

If the reserve requirement is 10% and a bank has a billion, a bank can create, in the form of loans, 9 billion.  That is considered to be 'real' money that is introduced into the overall money supply.

That was my understanding anyway.

You lend out the same $100 note 10 times, the accumulated lending is $1000, but you do not have more than $100 at any moment

FRB works like GUI, to confusing people with illusions

I don't believe we can have fractional banking with BTC as BTC was created to live in a reality opposing this kind of monetary system with a deflationary value. It goes against what Bitcoin stands for and I believe it is totally unnecessary. Yes Banks can own Bitcoin and Wall St has already jumped in but as long as Bitcoin is being mined I can't see this as a danger.

If the reserve is 10% and the bank has a billion, it can loan 900 million. This means on 1 billion dollars there are 1.9 billion in claims on those dollars. The loaned 900 million could then be deposited at another bank, and 90% of it could be loaned, resulting in another 810 million in loans, resulting in 2.71 billion in claims on the original 1 billion, and so on. This works fine until there is an economic problem that causes an unusual number of bankruptcies or reduction in investments and such.

The money is generally not created arbitrarily, the banks are supposed to weigh the risks and they earn their profit based on successfully gauging those risks. It has been proven multiple times in the last few hundred years that banks cannot be trusted with this responsibility.

If the required reserve ratio is say 9:1 (so around 10%) and the bank has say $1111.12 on deposit, the total amount of new money that can be created is around $9000 initially and then all the way up to $100,000 if the full sequence is followed to its conclusion (i.e., assuming the initial $9000.00 are redeposited by the borrowers and so on and so on).

This is at least the 3-step explanation starting at 13:00 of "Money as Debt"
http://www.youtube.com/watch?v=jqvKjsIxT_8

You've seen paper wallets and stuff right? The reason these work and still retain their value is because they have the private key stored on the block chain, if somebody tried this everybody would be able to tell because they'd get some of the notes, check the blockchain and then notice that the private keys etc. are fake.

Counterfeit Bitcoins are an extremely unlikely scenario right now, we've already had exchanges try to fake their trade volume and it was spotted very quickly.

Is it possible that these 42coins were counterfeit ?

FRB only works because "credit money", created from loans (currency as debt), is fully fungible with deposit currency and government printed fiat currency.

FRB under a gold standard requires that banks which lend irresponsibly (over 100% of capital) should face bankruptcy if too many loans go bad. This did create a lot of booms and busts in the 19th Century, although living standards continually improved and commerce thrived. Central banking is the reason the gold standard broke down, because central banks backstop retail and merchant banks with printed money which rapidly outpaces the amount of central gold holdings. Central banks create greater systemic risk, but also persist because they fund spendthift politicians in government which inevitably fall victim to the siren song of buying votes with taxpayers money in order to win re-election.

Bitcoin makes FRB obsolete because credit money is no longer fungible with bitcoin savings. A bitcoin bank which lends out bitcoins can't pretend to still own them as assets. It will have bitcoin-denominated loans, but these will be clearly promissory amounts not reflected in the blockchain. Loans may exist in a separate blockchain, or as smart property amounts, but they cannot be confused as bitcoins.

Bitcoin also makes central banking obsolete as bitcoin banks cannot be backstopped with printed money.

Ok.  Paul Grignon offers a good clarification on this and a related point.
http://paulgrignon.netfirms.com/MoneyasDebt/disputed_information.html

The main thing to focus on is that, in practice, the present system continues to rapidly drive up money supply inflation and with it debt, in effect stealing from the masses in two ways:  1) by decreasing buying power of any money we may have saved; and 2) by charging interest on money that was created out of thin air.  That's parasitic.

Hopefully a system like Bitcoin, which has much more transparent accounting of the money system built in, can finally do away with this bogus, rent-seeking system.

That's what the money mongers are afraid of...with Bitcoin it's much more difficult to manipulate our trust...it's all about the blockchain.

The gravestone of the banks will read:
"RIP Banks:  Too much was not enough"