Good example. Maybe you will understand this time.
If 10 oz of gold is all the gold in the world and you borrow 10 oz @ 5% interest, the total gold supply must increase by 1/2 oz or you cannot pay the gold loan plus interest one year later. Either I don't get all my gold back or the lender doesn't get his 1/2 oz of interest.
Get it now?
Quick question for you, if you deposit gold based money in the bank and I come to the bank and take out a loan, did the money supply increase?
Fractional reserves limits now much of the deposits can be loaned out, but no matter. Say 10 oz is deposited and 5 oz is loaned out. Now we got 15 oz of gold. That's 10 from the ground and 5 from the air.
Remember that in real live there's more than 15 oz of gold that exists, and that when push came to shove the banks more often than not came up with the gold needed to cover deposits at the end of the day. Just the same, gold got created out of thin air ever time loans were made.