I deposit $100K in my account. The bank keeps $10K of it in its vault, and loans out $90K to you. You deposit the $90K in your account, and the bank keeps $9K and loans out $81K. Keep doing this over and over again, and ultimately the bank has close to $100K in its vault but all of us put together have $1M in spending money (numbers all inaccurate, but gets the point across).
So every dollar the fed creates out of thin air turns into $10 circulating through the economy because of fractional reserve banking.
So every dollar the fed creates out of thin air turns into $10 circulating through the economy because of fractional reserve banking.