I suppose I was being a bit too simplistic. The 10 to 1 creation occurs throughout the banking system (see money creation, money multiplier - Wikipedia has a good article on fractional as well as full reserve banking).
At any rate going back to your example - you're incorrect. Lets set X = 100. So if you deposit $100 dollars in to a bank, the modern fractional reserve requirement is $10. Your argument is that the bank will thus keep $10 and loan out $90. What the bank CAN also do thanks to fiat currency and its bank charter is actually keep all $100 in reserve, and CREATE $500 and loan it out.
As Wikipedia notes generally the banks won't do this directly, but rather let it happen organically throughout the system. So the $90 loaned out in your example is redeposited in to another bank which keeps $9 and loans out another $81, etc. Thus expanding money 10 to 1.
I'm not opposed to letting banks loan out money I have on deposit with them, but it would be an investment like any other with RISK and REWARD. I could have some money as "demand" deposits (checking, short term savings) that indeed are not loan-able. However there are plenty of investment opportunities (stock market, bonds, etc) that I could CHOOSE to invest in if I wanted a return on my money.
Without inflation chasing us down I think a lot of people are quite happy to have some portion of their money "merely" safe.
Why do I care that I get 0.2% interest on my checking account when the bank loans it out at 6%?
Yes, we will be going to OSI, Mars, and Pluto, but not necessarily in that order. -- Jeffrey Honig