system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5: For every US dollar owned by someone, is there a physical banknote somewhere to back it up?
gpt
Ok, apparently people want me to elaborate.

US banks are allowed to do what is called "fractional reserve banking". This means that, if a thousand people have a thousand dollars at the bank, the bank does not actually have a million dollars there. They have some *percentage* of that (I don't remember the exact amount, but it's around 20%), and the rest of it the bank loans out to other people.

So you see how this happens. If a million dollars of physical currency is deposited into the bank, the depositors have a million dollars, *and* people taking out loans from the bank have $800,000. So there's that much more money around than there are actual banknotes to back it up.