Technically, the monetary base (coins and paper currency) belongs to the Central Bank of the country that created it (in our case, The Federal Reserve Bank). If you look at a U.S. dollar, you should see a few important details.
First, at the top of the banknote, it says, “Federal Reserve Note.” A note is an I.O.U. or promissory note that you will repay a loan. In essence, this paper currency is a loan from the Federal Reserve Bank to the holder of the note. It also has the signatures of the Secretary of the Treasury and the Treasurer of the United States. Since a promissory note is a legal document, it must be signed. This I.O.U. is signed. Finally, the bill also states that “This note is legal tender for all debts, public and private.” The currency may be used to pay for goods and services and to satisfy all debt. Of course, when you are paid money for your work, you get to use the money, but the actual currency is on loan from the Federal Reserve Bank.
A lot of people do not realize that not only does the Federal Reserve Bank create money, but the actual banking system also creates money. When you deposit your money into a bank, whether it be currency or a paycheck, the bank credits your account electronically. If you deposit $1000, you can claim it back whenever you want. This is called a demand deposit. The bank then might lend out the $1,000 to someone else, and now there is $2,000 in the economy’s money supply. If the person deposits that loan of $1,000 in their own bank, that second bank can then lend it out, and now there is $3,000 in the M2. Pretty sneaky, huh? In aggregate terms, of the total 2019 M2, only about 10% is currency. The rest of M2 has been created electronically by the banking system.