I think this is wrong. Banks create the money they lend, all of it, they do not lend existing money which was also created as a loan. The government borrows, through a convoluted process, from the banking system like the rest of us and that does not take money out of the economy, it increases the money supply. But as you say, not necessarily inflationary. I think people need to understand and change this awfull system from a private system creating all the nation's money, to a public system creating the nation's money for the needs oft he nation, not speculators. 80% of bank loans go to personal loans often used for speculation, not into the real ecnomy.. monetaryalliance.org