Tether can already exist and be in circulation and people can be willing to buy it at a higher price from existing holders. In this event, Bitfinex/Tether needs to be willing to create more Tether, diluting the current supply to offset the greater demand and keep the peg.
To me, it isn't important that "each Tether is backed by USD [in their bank account]", but they may accomplish it that way for consistency anyway. Each Tether is still backed by a notional value and was exchanged for such.
Their willingness to do this could help arbitrageurs try to front run and sell their own Tether when a premium exists.
> diluting the current supply to offset the greater demand and keep the peg.
Their peg is created explicitly by being 1:1, not by manipulating their supply. This is how they create trust that they aren't subject to market conditions or threatened by a run on redeeming their tokens.
To you it may not be important, but it's right there as a bold claim on their home page, and it's why they've been used.
Note that I did not say that their peg could not conceivably work without 1:1 backing, I said that their claims would be a lie. As are their claims to have been subject to frequent audits - they've never completed a single one.
