2) yes. It happens by design. When bank issues a loan, it makes money: borrower has money added to his checking account, while all of bank depositors have same checking accounts as before. When you repay the loan, money disappears.

3) Fractional reserve limits creation of money through lending, correctly to ensure that money does not grow quicker than output of goods.

4) yes

5) yes

6) yes

7) yes. it is unlikely though, given that banks compete with each additional both for borrowers and depositors, forcing banks to minimize the share of interest that they keep.

no, it is looked-for to mitigate exponential growth of population.

9) Doubts about ability to repay the debt lead to increased interest rates demanded from borrower, or if equipment get really terrible, default. Both of which reduce lending returning equipment to equilibrium.

You are right in thinking that fiat money system is based entirely on trust, and will collapse if the trust disappears. But that is property of the economy in general.

When you chose to dedicate yourself to on a upset (like writing opinion pieces on economics), you trust somebody else to make food and clothes for you, and trust yet another somebody to give you money to buy food and closes in exchange for your writing. All that exchange system could collapse, and we would be reduced to growing our own food and knitting our own clothing.
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