Fiat paper currency and fractional reserve are basically independent concepts. Fractional reserve is practiced by the banks, and was done under gold-backed currency just as much as today. A really interesting thing is the period of "Free Banking"[0] -- in Scotland in the 1700s/1800s where banks were essentially unregulated; State banks in the US were loosely regulated in much of the 1800s as well.
All that's required to do fractional reserve is the ability to distinguish "money on account" from notes. Either issue private notes, or maintain ledgers of balances.
You could conceivably have a 100% reserved bank (doing bailment of physical fiat notes -- a $100 note in the vault for every $100 in a savings account balance) even under fiat currency. Or you could have something with only one entity allowed to increase the money supply (deposit with the central bank, but a 100% central bank reserve requirement, but the central bank allowed to do loans).
You're right that I conflated the two above but the relevant feature of each is that they're a form of money creation. With a fractional reserve, the amount of money created (through leveraging the reserve) is inversely related to the size of the reserve. With fiat currency the 'reserve' the government has is nonexistent, allowing for unlimited money creation. The government or a bank's ability to engage in money creation are both limited by the certainty that those using the currency have in its future value. If a bank loses it, we get a run. If a government loses it, we get hyperinflation.
Thanks for the distinction between the two concepts though. You're exactly right and gave a great explanation of them. I'll take a look at the free banking period. It does sound very interesting. Talking about the money and valuation sometimes it seems like all we have to measure things with is a rubber ruler, especially when the amount and value of currencies can be manipulated.
All that's required to do fractional reserve is the ability to distinguish "money on account" from notes. Either issue private notes, or maintain ledgers of balances.
You could conceivably have a 100% reserved bank (doing bailment of physical fiat notes -- a $100 note in the vault for every $100 in a savings account balance) even under fiat currency. Or you could have something with only one entity allowed to increase the money supply (deposit with the central bank, but a 100% central bank reserve requirement, but the central bank allowed to do loans).
[0] http://en.wikipedia.org/wiki/Free_banking