I repay $10 of my loan.
To repay $10 of my loan means someone had to withdraw $10 from their demand deposit.
$90 FED, $900 Loan, $890 Demand deposit, $10 cash.
They pay me the cash, and I pay off my loan
$90 FED, $10 bank excess reserve
, $890 loan, $890 Demand deposit.
Where is the deflation?
What the bank does with the money is irrelevant - but usually they Loan it out again to a new borrower
To claim paying off "debt" is deflationary is utterly bizarre. There is never more money in the system then $100 - NO DEMAND DEPOSIT ACCOUNT CAN WITHDRAW MORE THAN THAT.
though should many withdraw their demand deposit, serious issues arise.