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There's two things working against this theory. First, such systems only work in the presence of a unit of account, because otherwise it's impossible to cohere

There's two things working against this theory. First, such systems only work in the presence of a unit of account, because otherwise it's impossible to coherently price items in a pure unlike-for-unlike barter system. The unit of account would, of course, be money. So what you're talking about isn't a collapse of the money system, but black markets. When you say "people who want to keep their transactions off the books will use black markets," it sounds much less prophetic. Second, the value of state money is maintained by the state's ability to levy taxes, and the state only accepts tax payments in its own money. For people living "on the grid" in a country with a credible government, this means that most of their economic action has to happen in the state's money. Since people have to, at the very least, acquire enough money to pay their taxes, and most people don't want to put up with multiple systems of exchange. Not coincidentally, this is also the biggest hurdle for serious adoption of cryptocurrencies.

mrb 10y ago
"Second, the value of state money is maintained by the state's ability to levy taxes [...] Not coincidentally, this is also the biggest hurdle for serious adoption of cryptocurrencies." It is not a hurdle. In fact Bitcoin's growing adoption and increase of value over the last eight years has already demonstrated your worry is a non-problem. Money has value because people demand it. It doesn't matter if demand comes from the government or a merchant. Both can change their mind about what they'll accept tomorrow as money (as history has shown many, many times.) Sure, on a practical level a currency's value will have a more solid foundation if (1) the government that demands taxes is big and stable, or (2) if a large number of merchant accepts it. But again, fundamentally there is no difference between (1) and (2). Multiple cryptocurrencies already have value resting on a more solid foundation than the value of currencies in many smaller countries.
otakucode 10y ago
It seems that you know a good deal more than me about economics, so allow me to ask a question please. You say this: >Second, the value of state money is maintained by the state's ability to levy taxes Does that also hold when the state allows the vast majority of the transactions within the state to be mediated by banks and payment processors who charge a proportional "processing fee" on every single transaction which becomes essentially indistinguishable from a tax? Does that not put banks in the position of having as much, or at least nearly so, control over the value of the money of that state?
- dragonwriter 10y ago
  > Does that also hold when the state allows the vast majority of the transactions within the state to be mediated by banks and payment processors who charge a proportional "processing fee" on every single transaction which becomes essentially indistinguishable from a tax? The existence of other necessary service providers who also.demans payment in the government's preferred currency is an additional source of support for currency value, not a countervailing force. And it's often largely a secondary product of the government requiring the use of the currnecy, anyway, especially when they are heavily regulated creatures of law, like banking corporations.

mrb 10y ago

"Second, the value of state money is maintained by the state's ability to levy taxes [...] Not coincidentally, this is also the biggest hurdle for serious adoption of cryptocurrencies." It is not a hurdle. In fact Bitcoin's growing adoption and increase of value over the last eight years has already demonstrated your worry is a non-problem. Money has value because people demand it. It doesn't matter if demand comes from the government or a merchant. Both can change their mind about what they'll accept tomorrow as money (as history has shown many, many times.) Sure, on a practical level a currency's value will have a more solid foundation if (1) the government that demands taxes is big and stable, or (2) if a large number of merchant accepts it. But again, fundamentally there is no difference between (1) and (2). Multiple cryptocurrencies already have value resting on a more solid foundation than the value of currencies in many smaller countries.

otakucode 10y ago

It seems that you know a good deal more than me about economics, so allow me to ask a question please. You say this: >Second, the value of state money is maintained by the state's ability to levy taxes Does that also hold when the state allows the vast majority of the transactions within the state to be mediated by banks and payment processors who charge a proportional "processing fee" on every single transaction which becomes essentially indistinguishable from a tax? Does that not put banks in the position of having as much, or at least nearly so, control over the value of the money of that state?

dragonwriter 10y ago
> Does that also hold when the state allows the vast majority of the transactions within the state to be mediated by banks and payment processors who charge a proportional "processing fee" on every single transaction which becomes essentially indistinguishable from a tax? The existence of other necessary service providers who also.demans payment in the government's preferred currency is an additional source of support for currency value, not a countervailing force. And it's often largely a secondary product of the government requiring the use of the currnecy, anyway, especially when they are heavily regulated creatures of law, like banking corporations.