If banks can make successful loans in a 100% Reserve Banking System with no increase in the quantity of money, what happens to the quantity of money when the borrower fails and defaults on his loan?

In a 100% Reserve Banking System

Outcome #2 (Loan Not Repaid)

This second model depicts the effects on the quantity of money—within a 100% reserve banking system—using outcome #2, in which a grower borrows money and then cannot repay it. The model shows the following transactions:

Grower Borrows $1,000

First, just like outcome #1, the grower borrows a thousand dollars from the bank for the purpose of buying corn seed.

Grower Buys Seed

Second, the grower buys seed from the seed dealer. He plants that seed; but the crop gets wiped out.

Grower Cannot Sell Seed

Third, with no corn harvested, the grower has no seed to sell to the dealer.

Grower Defaults on Loan

Fourth, without the money from seed sales, the grower cannot pay his loan—he defaults. Some say he skipped town.