Not only does fractional-reserve banking gives rise to monetary inflation it is also responsible for monetary deflation. Money created out of "thin air" can disappear as rapidly as it was created.
Real GDP does not measure the real strength of an economy, but reflects monetary turnover. Thus, the more money is pumped, the stronger the economy appears to be.
Recessions emerge when the central bank reverses its loose monetary stance. But the seeds of recession were sown earlier by private lending practices that grew out of central-bank money creation.
