Argument for Fractional Reserves: The use of central bank backed fractional reserves allows for more investment (via debt) in innovation.

Response: It doesn't increase the amount of wealth available for investment in real terms as each virtually printed dollar proportionally reduces the value of all investment dollars (and in a system where everyone holds their cash in banks, that's basically the entire money supply). What it does do is give the banks a greater ratio of the profits gained on savings which are invested.

Argument for Fiat Money: There wouldn't be "enough" money to go around if they didn't keep printing more. A fixed or precious metal currency wouldn't allow this.

Response: If the problem is that the smallest unit has too much value, pull larger bills out of circulation and print fractional denomination currency to replace them.

Argument for Fiat Money: The ability to print more money provides a means of avoiding a deflationary spiral.

Response: AFAICS, deflationary spirals are unobserved theoretical entities and observed periods of deflation have been the result of credit bubble collapses (following credit booms caused by central bank inflationary monetary policy).

Notes

value of item		cost of item
	=
net value of all items		total money in system

And to be clear, I have no problem with fractional reserve banking in the absence of a central bank and legal tender laws as it would be naturally regulated by rejection of credit to over leveraged banks.