For example, in an era of abundant gold and silver coinage, ancient Rome developed a form of credit that became paper money of a sort. After all, for a large transaction like the purchase of an elite level house in Rome, who wanted to lug several tons of coin to the closing?
Eventually, it became possible in ancient Rome to transact business by bank account book entries and credit assignments, with written notes showing a particular sum on deposit becoming a form of credit and checking account. Moreover, loans could be transferred, which made the flow of payments valuable like commercial paper is today. In effect, in addition to banks, ancient Rome had developed other rudiments of modern finance.
This could result in consumer credit situations that we moderns easily recognize. As posted by the New York Federal Reserve Bank:
Imagine yourself a Roman citizen in the 1st Century B.C. You’ve gone shopping with your partner, who’s trying to convince you to buy a particular item. The thing’s pretty expensive, and you demur because you’re short of cash. You may think that back then such an excuse would get you off scot-free. What else can you possibly do: Write a check? Well, yes, writes the poet Ovid in his “Ars Amatoria, Book I.” And since your partner knows it, you have no way out (the example below shows some gender bias on Ovid’s part. Fortunately, a few things have changed over the past 2,000 years):
But when she has her purchase in her eye, She hugs thee close, and kisses thee to buy; “Tis what I want, and ‘tis a pen’orth too; In many years I will not trouble you.” If you complain you have no ready coin, No matter, ‘tis but writing of a line; A little bill, not to be paid at sight: (Now curse the time when thou wert taught to write.)
Not only today, but even in ancient Rome, when your beloved wants a pricey bauble, you commonly paid for it by credit instead of by plopping down gold and silver.
Moreover, if one looks at the development of the US, for most of our history different parts of the country wanted different types of banks and different economic and monetary policies. In the early Republic, the most settled areas of the US around Boston, New York, and Philadelphia wanted hard money policies and saw gold on deposit as the linchpin of commerce and credit.
Of course, outside of those areas where people wore silk stockings and knee britches, people found it hard to get gold and silver coin. This made it difficult to transact business and to convert agricultural produce into money that could be used to pay for other things.
For many decades, US states and the federal government had competing banking charter systems, with state charters easier to get, and with easier capital reuirements and looser credit policies. This gave states eager to grow the ability to mobilize credit money by granting more bank charters.
These examples could be greatly multiplied, but I think that I have made my point: even in the era of the gold standard, various forms of paper money and credit were essential to commerce and development. That being so, paper money is real money and no less so than gold or silver. And in the modern era, just like with gold and silver coin of the realm, the issuance of fiat money is reserved to the government.
In effect, governments, banks, and finance companies are all part of a vast system of interlocking account books. That is where the modern monetary base resides, with paper currency as a minor convenience. And it would be that way even under a gold standard, but with added complications and limitations due to requiring gold on physical deposit in the national treasury before currency and gold credits can be issued.
And, under a gold standard, the worldwide trade, transfer, and accumulation of gold would have to be regulated and controlled to prevent the system from being gamed. It is hard to imagine that working well given human nature and the world's fault-lines and power rivalries.