How does bitcoin manage the money supply? All currencies are expanded when institutions begin loaning currency. How will bitcoin limit this growth? In economics there are several definitions of money such as M2, M3, etc.
The number of bitcoins in existence is limited to 21 million. This is the equivalent of M0, the monetary base. Whatever institutions do with it, creating M2, M3 etc. is not something that Bitcoin can or will control.

Here is some more info on the Bitcoin wiki: Controlled Currency Supply