I ask because since our money is backed in value (a precious resource like gold and oil) and doesn’t leave the country, doesn’t it also mean that our wealth remains intact as a nation regardless of whether or not the bank has it? (Ie, us citizens have it, so it doesn’t matter if it’s in a bank or not- the wealth is held by a U.S. citizen).
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US currency is not backed by gold or any other precious resource. It’s based on trust in the issuing agent (the US government) and widespread acceptance for payment of goods and services.
When you deposit money into a bank they do not store the bills you give them somewhere. Instead they mark on a ledger (electronic and backed up in many places these days) how much you put in. When you withdraw money they give you currency equal to that amount.
Of the $150 trillion in US wealth, only around $2 trillion is represented by paper currency.
To your question, if a large number of people all try to withdraw money from a bank at the same time this is called a run on the bank. If the bank does not have enough currency on hand to pay everyone well, some people are screwed and those people are going to get angry. This happened during the Great Depression for example. Of course back then you didn’t have electronic payments and national banks with tons of branches and the like. Unless your money is all in a small bank with one location you’d probably not be affected if a single branch runs out of money. You can still pay with debit, still pay with credit. Still go to any random ATM, still go to another branch.
But let’s scale things up. Let’s say lots of people all over want to withdraw money from that bank and it does not have the money. Well it needs to get the money somehow or it goes under (more on that in a bit). One way a bank could get more money is to sell some assets. It might have treasury bonds for example it has purchased or stock portfolios. Or it could sell loans it owns to other banks. It gets money in the short term but not as much as it would have gotten long term. Or it gets some kind of loan itself, either from a larger financial institution or the government.
But what if all that fails? Well then the bank goes belly up. The people it owes money to are paid based on various rules and regulations from whatever money and assets it does have or can be sold off. What about your individual account? Well some account types are insured (you may have heard/seen the term FDIC Insured). That means at least some of the money in your account is gaurenteed even if the bank goes under but there’s a limit, last time I checked it was $250,000 per account. But be careful, not all accounts are insured. Stocks, Bonds, Crypto currency, etc are all not insured.
One other thing I almost forgot to mention, a bank may, if it suspects or detects a run, limit the amount of money that can be withdrawn temporarily.
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