The trouble is that many people think the same thing couldn’t happen elsewhere.  But could it?

It’s an interesting question, and it’s a question that has been raised about one of the world’s foremost currencies of late – none other than the US dollar.

It seems virtually impossible to believe that the US dollar could go belly up.  After all it has been around for a long time.  It has also proved to be one of the world’s strongest currencies. 

But of course things don’t always continue in that vein.  And some people are seeing some of the problems that affected the Zimbabwe dollar creeping up on the US dollar as well.

Let’s see what happened in Zimbabwe that could also happen in the US if we’re not careful.  One of the key aspects of inflation is that you need more cash in the system to keep up with it.  Let’s look at this on a small scale.  Say you have ten one dollar bills in circulation.  That’s fine all the while people are dealing in cents. 

But if inflation rises to the extent that everyone needs lots of dollars to keep getting by, those ten one dollar bills suddenly look woefully inadequate.  So the mint prints more of them to keep up.  This would seem to be one of the only ways to try and keep up with hyperinflation, but as we have seen in Zimbabwe with the one trillion dollar note, it doesn’t work.

But could the US really end up in the same position?  Well these are unprecedented times.  And the fact remains that the currency isn’t backed by gold any more.  That means it isn’t really worth anything at all.  And that is why hyperinflation can happen in the first place.

The US dollar is doing well against some other currencies at the moment.  Take the British pound for example.  It started the month of January on 0.6844 against the pound, but finished it on 0.7005.  But to look at those figures alone – and the encouraging ones that have occurred elsewhere too – is to see only a minute fraction of the whole story.

Some people already think that the US dollar has started down the path that the Zimbabwe dollar is stranded on.  Take a look at this post from the Motley Fool Caps website for example. 

You might ask, having read this story, who Marc Faber is.  He is an investment guru who really knows his stuff – and he has been saying for a while that the US dollar does risk going downhill fast.  It may still be unbelievable to compare it to the Zimbabwe dollar, but why shouldn’t it happen?  After all, America is not immune to the woes and troubles that are going on in so many countries at the moment.

Obviously there is no need to panic unduly just yet.  But as Marc Faber has made it quite clear, the problem needs to be looked at and accepted as a potential problem right now.  That is, if America is to reduce the chances of a potential problem becoming a real one.

The trouble is, many people will take one look at Zimbabwe and its problems and assume that the US is so far away from being in a similar situation that it could never happen.  And how many times in history have we seen a similar sense of denial take over and cause problems that didn’t need to happen?

In the end, the people in the street will have to wait and see what really does occur over the short and the long term.  The currency exchange rates will provide a clue as to whether the Zimbabwe situation of hyperinflation could set in across the US.  In that sense we should keep an eye on them and see whether they do start to go south.

These are certainly dramatic times for many countries.  No one can really remember times like this before.  But are they severe enough to start a roll of hyperinflation going on in other countries?  We shall see.