How do countries end up with worthless currency? Like countries who’s dollar bills lie on the ground or are burned for warmth because it has no purchase power anymore
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Ideally, paper money would represent a certain amount of precious metals being held somewhere secure in that country. Although the US went off of the metal standard in the early 70s, the US economy has been healthy enough to maintain the dollar’s power. When money isn’t absolutely linked to precious metals, it’s called Fiat Currency.
If, for some reason, the currency has nothing backing it, it can become worthless. This happened in Germany following WWI. The harsh reparations Germany was made to pay depleted their precious metal reserves. When a Deutschmark had nothing of value supporting it, it eroded public confidence, and became worthless.
Thankfully this economic crisis was well handled by Germany and the rest of the world, and everyone lived happily ever after.
Oh. Well, there was a significant recovery with economic prosperity and the introduction of the Reichsmark. Germany was prosperous enough that it could back the new currency.
Of note: some paper money actually has a strip of metal embedded in it. This is for anti counterfeiting and isn’t a precious metal.
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