What is the history behind the idea of a fractional reserve banking system?

What will be an ideal response?

Early traders used gold in making transactions. They realized that it was inconvenient and not safe to move gold for every transaction. So they deposited their gold with a goldsmith. The goldsmiths had safes for gold and precious metals, which they often kept for consumers and merchants. They issued receipts for these deposits. Receipts came to be used as money in place of gold because of their convenience. The goldsmiths became aware that the stored gold was never fully redeemed. The goldsmiths realized they could “loan” gold by issuing paper receipts to borrowers, who agreed to pay back gold plus interest. Such loans originated “fractional reserve banking,” because the actual gold in the vaults became only a fraction of the receipts held by borrowers and owners of gold.