Weimar Germany's monetary collapse is perhaps the most infamous episode of inflation gone mad. In 1923 Germany, prices rose on an hourly basis. Wage earners were losing purchasing power because the prices of goods were rising faster than their incomes could be adjusted. Melchior Palyi, a college instructor who saw his pay go from 10,000 marks per month to 10 million marks paid twice per day in less than two years' time tells the story of how another professor asked him on the way out of their offices, "'Are you taking the streetcar?' he asked. 'Yes,' I said. 'Let's hurry. The fare will be raised by 6 pm. We may not be able to pay it.'"
Fiat money derives its purchasing power entirely from its acceptability as a medium of exchange. As the illusion is shattered, it stops being money. But not all individuals reach the point of skepticism at the same moment in time. Initially more farsighted individuals seek to escape from paper, they purchase more sound assets such as gold bullion, land, property, or other durable assets. Further on, sound and durable goods are no longer offered for sale in (the former) money terms at any price. Successively lesser and lesser quality goods are sought out for monetary exchange.
Near the end, as the majority of the population abandon their faith in fiat, any good will do so long as it can be purchased with what is then nearly worthless money. Once nearly everyone believes that the purchasing power of money is or will soon be extinguished entirely, money no longer serves as a medium of exchange.
…when money loses purchasing power from day to day its retention involves a loss. Whoever gets money, therefore, spends it immediately—even by buying something for which he has no present use and maybe even no future use. In the last days of the inflation the employees got their payment daily. At once they handed it over to their wives and these hurried to spend it as quickly as possible by buying at any rate something or other. Nobody wished to retain money, everybody dropped it like a live coal. (Mises, The Great German Inflation)
Gary North tells a story of a German citizen who realized too late that her money was on the way to becoming worthless: "…the truly marketable goods were gone. They were being hoarded. All she found was a large inventory of bedpans. She bought them in late 1923."
At the end of this process, with the monetary system completely destroyed, exchange reverts to a barter system. If some alternative money is available, such as gold coins or some stable foreign currency, the alternative may come into circulation to replace the rejected currency.