Note that in a secured loan, the security is rarely for the full amount of the loan (mortgages being a notable exception). Usually it covers only a fraction of it, but it's there to increase the borrower's "skin in the game". Rules also differ on whether or not the security itself is acceptable as discharging a loan's obligations (e.g., in Spanish real estate lending, if the property itself isn't sufficiently highly valued to pay off the loan balance, the borrower _remains_ on the hook for the balance, this is usually not the case in the US, where most mortgages are non-recourse loans.). See also "deficiency judgement".
In both secured and unsecured loans, the debt itself is the security, with a portion of the interest being attributable to the risk (default) component of the loan.
As for money supply, bank reserves are included in M2 which is used for inflation calculations, so I'd argue that yes, fractional reserve lending does increase money supply, as commonly used.
In both secured and unsecured loans, the debt itself is the security, with a portion of the interest being attributable to the risk (default) component of the loan.
As for money supply, bank reserves are included in M2 which is used for inflation calculations, so I'd argue that yes, fractional reserve lending does increase money supply, as commonly used.