Not true; true; missing the point completely.

Allister Heath rants on in today's City AM:

If anything, today’s problem is even greater than that: it is clear from the global government debt crisis that fiat money – currencies entirely detached from any commodity or anchor and produced entirely at the discretion of government agencies – has failed. (1)

Its adoption has abolished all restraints on governments and has meant that currencies keep being devalued and inflated away.(2) Eventually, we will need a new monetary system more in tune with the principles of capitalism and sound money – until then, expect tensions between central bankers and governments to rise and rise.(3)

1) Not true. Although superficially a government cannot finance itself by handing out bits of paper, on the facts it works surprisingly well.

Sometimes governments introduce paper currencies by accident, and people work out how to use them: for example, food rationing vouchers. Ignoring undeclared production and the grey market, we know that each household or each person has different preferences, so those people who don't need to redeem the full value of their vouchers can sell them to those people who want more than their state-allocated ration. So the former group sells their surplus vouchers to the latter group.

You can see handing out the vouchers as a universal benefit/Citizen's Income as well as a tax on buying food; if you want more, you have to pay somebody for their surplus vouchers.

2) True. So although the physical vouchers have no intrinsic value, the fact that the government does not just create them but also taxes them away again gives them value. And the same basic principle applies to any paper currency: as long as the government is not running a deficit (i.e. it is printing/spending at the same rate as it is taxing/collecting them) the value of the vouchers is largely stable.

It is only when the government prints more vouchers/bank notes/government bonds than it is collecting back in again (as taxes) that the value of vouchers is diluted.

3) Missing the point completely. I'm no big fan of deficit spending as a long term plan, and would prefer UK government spending to be reduced by about a quarter*, down to the level of taxes it currently collects (easily do-able if you chuck out all the theft and waste).

But government deficits (to which there is always an equal and opposite asset, such as money deposited with National Savings & Investments or held in the form of government bonds or even bank notes and coins) are not the largest debts of all; the total value of outstanding debts secured on land and buildings (and the corresponding assets) are about twice as much* by volume.

As illustrated above, government debts are secured on publicly collected taxes and mortgage debts are secured on privately collected taxes, i.e. ground rents. The total value of UK ground rents has barely increased over the last ten or fifteen years*, so how come the total value of mortgage debts has doubled or trebled*? That's where the bulk of your [monetary] inflation comes in.

* Don't quote me on the exact fractions and percentages, I'm talking ball park figures here.