Because currency is only a quanta for trade and it's physical manifestation doesn't need to exist in equal amount to all assets and obligations. As for fractio

Because currency is only a quanta for trade and it's physical manifestation doesn't need to exist in equal amount to all assets and obligations. As for fractional reserve banking (the regulated version, anyway...), the bank needs only to hold enough capital to write down expected losses on loans. Much of this mess has been caused by the banks voluntarily levering out of this safety margin.