A currency collapse occurs when the value of a currency falls dramatically.
Causes of a collapsing currency include:
- High inflation, reducing the value of money.
- Balance of payments crisis. When a large current account deficit cannot be financed by
- capital flows on the financial account.
- Lack of confidence in the economy.
- Political turmoil and instability.
Examples of currency collapses include:
- German D Mark during hyperinflation of 1920s
- Russian Rouble in early 1990s
- Zimbabwe currency in 2008
- Icelandic Currency in 2008
Some fear that the US Dollar could collapse if National debt became unmanageable and government responded by increasing the money supply. See: US Dollar Collapse?