A fiat currency has value because a government uses its power to enforce that value, or because exchanging parties agree to its value. It's not hard to see how problems could occur in this scenario. Let's look at some examples of when the fiat currency system backfired under the control of irresponsible or corrupt governments, prone to economic and political mismanagement.
At the time of the independence of Zimbabwe from British colonial rule in 1980, the ZWD was worth about 1.25 US dollars. Soon after, inflation started to creep up, and it got completely out of control when President Robert Mugabe began confiscating land from the white farming community in 1998, resulting in a nearly total collapse in food production and the decline of foreign investment.
In order to help pay for the government's expenditures, the Reserve...
