"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 de

"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.