I think the key concept is that when the gold standard was eliminated, and the promise to pay gold for paper was eliminated, paper money stopped being a promise to pay. It stopped being a debt at that point and became instead, as Glass says, a replacement for gold.This is perfect, because it solves a big problem. It solves the problem that the quantity of gold did not always expand at a rate best suited to the economy's current growth potential. With paper money as a replacement for gold, insufficiency of money need no longer be a problem.
Read it at The New Arthurian EconomicsOne problem remains, which is the expansion of private money beyond what the base money can comfortably support. But this problem is no different than it was under the gold standard or in the free banking era. No different, except when money was gold and private money was paper, it was easy to see the difference. Now it is harder to see the difference.
Jim Glass at Worthwhile Canadian