How can a currency become worthless?

Most currencies are Fiat Money, not backed by a commodity (like Gold and Silver) but backed by the government that printed it.
Fiat money is a currency without intrinsic value established as money, often by government regulation. It has an assigned value only because the government uses its power to enforce the value of a fiat currency or because the exchanging parties agree to its value.
It was introduced as an alternative to commodity money and representative money. Commodity money is created from a good, often a precious metalsuch as gold or silver, which has uses other than as a medium of exchange (such a good is called a commodity). Representative money is similar to fiat money, but it represents a claim on a commodity (which can be redeemed to a greater or lesser extent). From Wikipedia

If the government behind the Fiat currency becomes insolvent, or acquires extensive debt, their currency may be devalued (relative to other Fiat currencies), their ability to borrow money will be affected (lenders will demand higher interest rates because of the risk), and prices will climb as the currency loses value. At present, Venezuela, Argentina, Zimbabwe, and other countries are suffering due to the inflation they are experiencing. 

Some related websites:
What would you do if your money became worthless? – Prosperous Way Down website
A worthless currency – The Economist (Article on Zimbabwe)
The Greek Crisis Explained – (Infographic) – from Gainesville coins
Many people invest in Gold and Silver as a “Hedge” against devaluation. This can be done with collectable coins and jewelry, or bullion. 
Bitcoin to the Rescue
When fiat currency is failing, the citizenry need a mechanism to trade and move money out of the country without fees and taxes; Bitcoin is an obvious choice.  As a “peer to peer” unit of value,  Bitcoin has minimal fees and a global reach.  It is an ideal mechanism to prop up people when their monetary system is in a shambles, and the value of the local fiat currency drops.
 
In Venezuela, Zimbabwe, China, and other countries, Bitcoin is the method of choice for doing business without government oversight, transfer fees, and excessive taxation.  Even in countries with stable currency, Bitcoin is a welcome addition to the mix of fiat currency, gold, and silver, for acquiring wealth and conducting business transactions.
Here’s hoping your value is strong!
All rights reserved by Alan Chenkin & Primrose Path LLC.  Remember to give credit to the author and any cited works. Some links are promoted so the author can maintain his crypto habit. If you enjoyed this blog, please feel free to share and send some bitcoin in appreciation to my Bitcoin Address:

 

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