If banks make $2 trillion in new loans while the public's demand to hold CDs expands by $2 trillion, how much "real money" do the banks need to already hold, to create that $2 trillion?
The answer is "zero".
Does this mean those $2 trillion in new loans will wreck everything and all be lost?
No, it means the net movement of real assets the loans to parties A by CD holder parties B, brought about, will enrich the whole society if and only if the shifted assets in favor of group A, exceeds the value they had before in their prior holder's hands. A will gain if they exceed that value by enough to cover their higher loan interest costs. The bank intermediaries will gain by their spread if the loans stay current. The CD holders will probably be lucky to break even in real terms, but got the safety and liquidity they freely chose as more important to them than return.
Somehow or other the originating banks need to come up with $2Trillion through direct or derivative deposits.
Sure, a bank issuing a loand based on funds provided thorugh a CD needs to "hold" nothing against a CD in a reserve account. On the other hand they didn't just print a $10,000 CD and give it to me. I had to purchase it transferring to the bank $10,000 from my checking account. Second, the $10,000 actually had to be on deposit with the bank. My bank cannot write a $10,000 check against my CD. They actually have $10,000 in excess reserves which the FED can debit to clear the $10,000 check.
The difference is slight. My bank does not have to hold $1000 in reserves against my $10,000 CD. They can lend the entire amount. The next guys bank who gets the $10,000 as a cash deposit needs to hold $1,000 in reserves in order to loan $9,000 against the $10,000 deposit, so there is a slight difference in the banking system on a deposit held in a checking account and a deposit held in a CD.
Obviously, if you could get everyone to hold money in CDs and none in checking accounts there would be no reserve requirements at all. There would still be capital requirements, however, which are just about as stringent.
As a matter of fact, however, we don't and keep our monthly expenditures in cash, and pay by debiting our demand deposit accounts rather than swapping IOUs back and forth.