I don't think it does apply to p2p loans. When I save $100 with a bank I retain my demand deposit - that $100 is still "there" for me. That is the multiplier ef

I don't think it does apply to p2p loans. When I save $100 with a bank I retain my demand deposit - that $100 is still "there" for me. That is the multiplier effect (though that model has other flaws). When I borrow $100 from p2p lending then loan it out to you through p2p lending I no longer have that $100 until you repay it to me, at which point you no longer have it. So we are simply passing $100 around without any multiplier effect. edit - can't reply to you as the reply limit bottomed out - your response doesn't have enough info. You didn't address the demand deposit vs timed loan difference.