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Comparing the sum of economic transactions to government income is not relevant. Just as with anything in economy you have to think in the margins (marginal dem

by berns 11y ago

Comparing the sum of economic transactions to government income is not relevant. Just as with anything in economy you have to think in the margins (marginal demand, marginal tax rate, etc.) I'm not saying that taxes are the only demand. USD has value! It doesn't matter if you are Chinese! I have another thought experiment: imagine that the US (or any other country, you can think of a small country as it will be more evident) decides to issue a second currency, but you can't pay federal taxes with it and there is no fixed exchange rate to the USD (notice that it's not a bond, it has no maturity). In any case, there is no need for thought experiments with bitcoin. Reality will show you and me if bitcoin has any sustenance. I think it's an amazing technology, but bitcoins themselves have no value (in the long term).

mrb 11y ago
"Comparing the sum of economic transactions to government income is not relevant. Just as with anything in economy you have to think in the margins (marginal demand, marginal tax rate, etc.)" My comparison is very relevant. It means if taxes did not have to be paid in dollars, then with all else being equal there would be 0.16% fewer dollar transactions. Not a big change. You talk about marginal tax rate, but I think you meant tax rate. (Marginal tax rate has nothing to do with our discussion). If tax rates where doubled, then taxes would account for not 0.16% but 0.32% of dollar transactions in my 1988 example. Again, not a big change. And yes in practice marginal demand of the dollar would skew this percentage somewhat, but it would still be insignificant. You did not answer if you were convinced by my thought experiment, are you? About your thought experiment: what you describe has actually happened many times in history, and many of these currencies had a floating exchange rate and could not be used to pay taxes, see https://en.wikipedia.org/wiki/Private_currency https://en.wikipedia.org/wiki/Private_currency Turns out they had value, like Bitcoin.

by berns 11y ago

mrb 11y ago

"Comparing the sum of economic transactions to government income is not relevant. Just as with anything in economy you have to think in the margins (marginal demand, marginal tax rate, etc.)" My comparison is very relevant. It means if taxes did not have to be paid in dollars, then with all else being equal there would be 0.16% fewer dollar transactions. Not a big change. You talk about marginal tax rate, but I think you meant tax rate. (Marginal tax rate has nothing to do with our discussion). If tax rates where doubled, then taxes would account for not 0.16% but 0.32% of dollar transactions in my 1988 example. Again, not a big change. And yes in practice marginal demand of the dollar would skew this percentage somewhat, but it would still be insignificant. You did not answer if you were convinced by my thought experiment, are you? About your thought experiment: what you describe has actually happened many times in history, and many of these currencies had a floating exchange rate and could not be used to pay taxes, see https://en.wikipedia.org/wiki/Private_currency https://en.wikipedia.org/wiki/Private_currency Turns out they had value, like Bitcoin.