The insane, chaotic circus we call the economy is nightmarishly hard to comprehend, but here's my best shot:
Printed money can become worthless for two reasons.
The first, which is a phenomenally rare occurence, is that if the state collapses entirely, it becomes worthless.
The second is that if the ratio of available money to commodities increases, the money becomes worth less because you can buy less with it. Printing money at a rate grossly exceeding the rate of commodity production can sometimes do this. What the anti-fiat money crowd don't realise is that, unlike the first reason, this can happen to gold too; you can't print more gold, but production of commodities can fall below consumption, and then the ratio of gold to actually useful goods will still rise, devaluing the gold in just the same way as if it were paper notes.
The only additional problem notes introduce is that, sometimes, if commodity production falls, and money becomes worth less, governments start to print more in order to increase the supply of capital, start more industry, increase the availability of goods, lower the cost of goods and hence restore the value of their money. The catch is, printing money will also slowly devalue it.
If the initial rise in capital does cause a rapid boost in industry, the plan works; if industry is too sluggish to respond to the newly printed capital, the increase it causes in the value of printed currency will be overtaken by the decrease caused by the excessive printing, and then you get inescapable hyperinflation and eventual collapse.
In short, it's not the excessive printing of money that's the problem; that's only a symptom, although that symptom can, as we have seen, cause positive feedback and make the problem worse. The actual problem is the lack of industry to support it. Money, regardless of whether you represent it with gold or with paper, can't exist stably, in one place, without commodity production in the same place.
