Don't call me a bot and a troll then play the victim card.
You stated that fiat currency cannot be backed by anything yet bank notes are fiat and they are backed by gold that was held within bank accounts. Therefore you can have a fiat currency that IS backed by a commodity. If you are confused just go back to the quote I used to respond to about this topic. The dollar was once back by gold but it is no longer. Legal tender laws have been in place for decades even before the U.S. dollar went off the "gold standard" (if it can even be called such). So you have a dilemma. You stated:
"The definition of a fiat currency is one that is not backed by any commodity. "
The dollar was back by gold.
The dollar is legal tender and has been for some time.
The dollar is fiat currency.
Therefore, your definition sucks.
The fact that money is created by printing and lent out by the Federal Reserve is not a criticism against the idea that fiat money does not necessitate an ever increasing supply (inflation). The inflation experienced by the Federal Reserve on the U.S. money supply is not a natural inclination, it is an artificial influence. The point of my argument was that contra as to your thinking, fiat money is not naturally inflating. It can be static.
When money is repaid on a loan then that money is presented back out into the populace as another loan as long as the loaning bank meets Federal Reserve reserve limited which usually are around 10%. Meaning that every bank has to withhold that amount of funds within their vaults. All other funds are presented back out in the market place and multiple titles are given concerning loans and savings. My account balance may say I have 100 dollars in my bank account but the bank doesn't necessarily have that 100 dollars in their holdings. That is how fractional reserve banking works.
And what use are laws if people don't follow them? Bernanke holds power because and is motivated by his ideas. Laws and mandates don't mean anything if people don't latch onto the ideas. It is the same with governments. The ruled always outnumber the rulers so they must justify their rule in order to gain widespread acceptance. This whole little aside happened because you said the example in the article isn't "the real world."