By losing tons of coins over time, they reduce the amount of real coins they have to give back to people.
The whole premise behind fractional reserve is that banks aren't handing out real money or real coins when they approve loans or credit for their customers. They are handing out numbers on a spreadsheet only.
[...]
This of course all ignores the fact that you would never get consensus on a proposal to start stealing coins from people's wallets and adding them back in to block rewards.
They are giving I Owe You papers not numbers, this "I Owe You" paper MUST be paid if requested, the thing is that by losing money they because of demurrage, they lose the power of give people their "I Owe You" .
If you put 10kg of gold at someone hand and he give a 10kg gold IOU, if you go there with this paper and they give you back this 10KG IOU, they WILL give to give 10KG gold back to you.
Also, you wouldn't do it with already existing coins, and if wanted to be done with already existing coin you could do some fork of a existing coin you want to implement this feature at.