I agree one can not re-lend the same asset, but one can lend more from same asset (to other fiat?) if it appraise in value. Like many house owners do when using their house as an ATM.
Re-lending is the issue. I lend you 1$, you lend 1$ and then someone else lends 1$. Now there is 3$ of debt and 1$ in circulation. Banks and secondary lenders behave similarly.
