If you look at every currency that has not been backed up by a commodity, it dies in hyperinflation.
The first experiments in fiat currency occurred in about 1200 AD during the reign of the Song Dynasty in China. Although it started off being "fully convertible" to gold, silver and silk, soon they were printing more notes than they had commodities to back up. Once that was realized, merchants stopped accepting the notes and they quickly became worthless.
In the aftermath of the American War of Independence, the Continental Congress issued paper money that ended up not being backed by anything. Hyperinflation went rampant and a few short years later the bills were worthless.
During the American Civil War, the Confederates, facing a shortage of gold and silver bullion, issued paper money with a promise to repay when a peace agreement was signed with the Union. As supplies ran out, the CSA started printing higher and higher denominations that they could never pay back in real money. The CSA notes became worthless.
After Germany's defeat in WWI, the leading German economists of the day removed the gold standard from the German mark and had the "Papiermark" to pay its war debts. Since the war took a huge toll of Germany, money was printed left and right and things that used to cost a fourth of a mark, ended up costing 5 marks, then 50 marks, then 5,000 marks, then 500,000 marks, then 5 million marks, then 5 billion marks, etc. Savings held in marks virtually evaporated overnight. Papiermarks were burned because they were cheaper than firewood. All the while Germany's economists stated that the problem was that Germany was suffering from DEflation and that more money was the answer! Those who saved money in the form of physical bullion (gold or silver coins) ended up more or less unscathed. Urban legends include that those who had saved even a small amount of gold were able to buy property and land at very cheap prices. One famous tale is the tale of a bellhop at a German hotel who received a gold coin as a tip, he kept it and ended up buying the entire hotel with it! Granted, I don't know of any reliable sources that tell of it, so it could just be a myth.
The German mark stabilized when they returned to the gold standard with the Reichsmark.
To understand why the US dollar hasn't collapsed yet, you need to know a bit of the history of the dollar.
Prior to the crime of '33, the dollar was equal to 1/20.67 of an ounce of pure gold, essentially making 1 ounce be worth about $20. So a $20 gold piece (double eagle) would contain about 1 troy ounce of gold. In 1933 this all changed when FDR made an executive order that made it forbidden to own gold, the dollar also became devalued with it theoretically worth 1/35 of a troy ounce, however individuals could not redeem their gold certificates and had to turn them and their gold coins to the government who in turn got to profit from this mass theft of wealth. (because the dollar was worth much less and their contracts were denominated in dollars because gold-clauses (clauses in contracts that said that you could get paid in dollars or gold bullion at the rate of 1/20.67 an ounce of gold) were unenforceable after 1933)
After WWII, most of the world's countries were part of what was known as the "Bretton Woods System" in this system, rather than holding gold reserves directly, countries would instead hold US dollars, which in turn were (theoretically) backed up by 1/35 of a troy ounce for each dollar. Individuals could not redeem their dollars for gold, but countries had a right to, however it was generally agreed that they wouldn't ever demand physical delivery of gold because they wanted to appear to trust the new superpower.
The Vietnam War changed all that though, the US simply could not afford to pay for it, so they did what governments do and print up more banknotes than they had gold to back up, since few countries ever redeemed their paper dollars in gold it seemed like it would be a foolproof plan. However, European countries knew that the US was lying and so countries such as France and Switzerland began to redeem their dollars for gold. Since the US did not have full gold reserves to cover all the dollars they had printed, Richard Nixon "closed the gold window" in 1971 meaning that he stopped allowing countries to redeem paper dollars for gold. This severed the last link to gold and so the dollar was pure fiat currency.
However, the wheels of bureaucracy are slow to turn and many international organizations require transactions to be done in US dollars. For example, OPEC trades solely in US dollars. Because of this, the US dollar remains in use despite the fact it is worthless.
In recent memory the currencies of Zimbabwe, Georgia, Peru, Argentina, Mexico, Ukraine, Bulgaria, Moldova, Tajikistan, Armenia, Bosnia, the Congo, Nicaragua, Russia, Uruguay, and a whole host of other countries have been rendered worthless due to inflation and had to be superseded by a brand new currency.
There is nothing stopping the US dollar from becoming the next Zimbabwean dollar, or the next Papiermark. The powers that the Federal Reserve have are the exact same powers as the Reserve Bank of Zimbabwe. Holding real, physical and tangible assets is very prudent. No, I don't think that gold will skyrocket or that we will have $500 silver tomorrow (unless the dollar collapses overnight) but the dollar -will- collapse. There has been a 100% track record of fiat currencies collapsing, the US is not immune to the effects of economics, nor was the Roman empire, nor was post-WWI Germany. This isn't something to panic about or be scared about, this isn't some apocalyptic scenario, its just part of history. Empires are born, they decline and eventually they die. Will the US collapse tomorrow? Its unlikely, Rome wasn't built in a day nor did it collapse in a day.
What does this mean for the average American? Diversify. Hold foreign stocks that aren't tied to the US dollar, consider opening bank accounts outside of the US (not for tax purposes, but most foreign banks offer MUCH higher interest rates on low-risk investments like savings accounts and CDs and are much more stable than US banks), perhaps even looking at getting a second passport and having an "escape" to a different country during the chaos that follows a hyper-inflationary event.
The important thing is to be rational and don't let emotions overtake your judgement. This isn't the apocalypse but an event already played out by many countries in the world.
