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I've heard many people say this, and it seemed sensible enough at first. But on further thought, I sincerely can't make sense of it. Dollars are just green pie

I've heard many people say this, and it seemed sensible enough at first. But on further thought, I sincerely can't make sense of it. Dollars are just green pieces of paper. We accept them for goods and services because... everyone ELSE agrees to accept them for goods and services. It's circular. How is the might of the US military relevant here? If you lived in South Korea, would you accept the South Korean won, or would you refuse your salary because their military is too weak compared to the United States? I would take my salary in South Korean won because all of my neighbors and strangers will take it in exchange for goods and services. Circular. The circular argument that cryptocurrency has value has turned into a self-reinforcing cascade. Ironically, because of network effects, the more users and speculators there are in Bitcoin, the more utility it actually has, because others will accept it as money. This - and the human tendency toward envious imitative buying - causes the price to rise even further. Cryptocurrencies are easier to secure and transfer than gold, which we only think has "value" because it's shiny and rare. Yet gold is worth $8 trillion. Why not crypto? (caveat: Bitcoin could fall precipitously in the short, medium, or long term. My argument is that cryptocurrency - Bitcoin, Ethereum, or something else - will be more valuable than gold in 10 years or so.)

monktastic1 9y ago
> How is the might of the US military relevant here? If I understand correctly, it's because nobody's going to come and steal our resources. Of course, given the relative peace in the world, probably nobody is going to steal South Korea's either....
kelnos 9y ago
The enduring "value" of the US dollar -- for people who live/work in the US, anyway -- is more that it's the only currency you can pay your US taxes in. Its legitimacy as a currency for everything else stems from that.
tooltalk 9y ago
> ... everyone ELSE agrees to accept them for goods and services. It's circular. If you think about it, there is nothing circular about US dollar's supremacy. If you reside in the US, you are bound by the Legal Tender law -- meaning, by law, you have to accept US dollars as a valid payment for meeting financial obligation. The US dollar is also the defacto reserve currency of the world. All important commodities, for instance oil, are priced and traded in USD -- though there have been a number of bilateral agreements between oil-producing nations and consuming nations (eg, Iran-Turkey, Russia) to breakout of this, the USD still rules the day. If you want to understand how the US dollar became the reserve currency of the world, you do necessarily have to understand the WW2 (ie, military conflict), the Brettonwood agreement that came after the war, the collapse of the agreement in the 70's, and what US has been doing militarily and diplomatically to maintain their dollar hegemony since, but, in short, it isn't just about some arbitrary blind trust in the US dollar by the world (or circular reasoning) that we ended up with the system that we now have. > How is the might of the US military relevant here? If you lived in South Korea, would you accept the South Korean won, or would you refuse your salary because their military is too weak compared to the United States? I would take my salary in South Korean won because all of my neighbors and strangers will take it in exchange for goods and services. Circular. IMO, this is a terrible example to demonstrate your point. In case of national security threat or economic crisis, it's not uncommon to see smart monies fleeing to gold or other safer currency (eg, Swiss Franc, Japanese Yen, or USD). South Koreans are less likely to hold their own currency if the US decides to withdraw all 30K US troops and break any agreements in place to militarily assist the South in case of military conflict.
kamaal 9y ago
>>How is the might of the US military relevant here? Say tomorrow, a large portion of poor in the US, decide to teach the top 0.1% a lesson. They decide to stop trading in dollar, and start their own currency. They would also make it impossible for the current wealthy to liquidate their existing wealth in the new currency. What do you think will happen to the US economy in this situation? What we are talking about is basically a group deciding to decimate the entire economy and start over. The only way to stop these people is using some kind of police/military kind of a force.

monktastic1 9y ago

> How is the might of the US military relevant here? If I understand correctly, it's because nobody's going to come and steal our resources. Of course, given the relative peace in the world, probably nobody is going to steal South Korea's either....

kelnos 9y ago

The enduring "value" of the US dollar -- for people who live/work in the US, anyway -- is more that it's the only currency you can pay your US taxes in. Its legitimacy as a currency for everything else stems from that.

tooltalk 9y ago

> ... everyone ELSE agrees to accept them for goods and services. It's circular. If you think about it, there is nothing circular about US dollar's supremacy. If you reside in the US, you are bound by the Legal Tender law -- meaning, by law, you have to accept US dollars as a valid payment for meeting financial obligation. The US dollar is also the defacto reserve currency of the world. All important commodities, for instance oil, are priced and traded in USD -- though there have been a number of bilateral agreements between oil-producing nations and consuming nations (eg, Iran-Turkey, Russia) to breakout of this, the USD still rules the day. If you want to understand how the US dollar became the reserve currency of the world, you do necessarily have to understand the WW2 (ie, military conflict), the Brettonwood agreement that came after the war, the collapse of the agreement in the 70's, and what US has been doing militarily and diplomatically to maintain their dollar hegemony since, but, in short, it isn't just about some arbitrary blind trust in the US dollar by the world (or circular reasoning) that we ended up with the system that we now have. > How is the might of the US military relevant here? If you lived in South Korea, would you accept the South Korean won, or would you refuse your salary because their military is too weak compared to the United States? I would take my salary in South Korean won because all of my neighbors and strangers will take it in exchange for goods and services. Circular. IMO, this is a terrible example to demonstrate your point. In case of national security threat or economic crisis, it's not uncommon to see smart monies fleeing to gold or other safer currency (eg, Swiss Franc, Japanese Yen, or USD). South Koreans are less likely to hold their own currency if the US decides to withdraw all 30K US troops and break any agreements in place to militarily assist the South in case of military conflict.

kamaal 9y ago

>>How is the might of the US military relevant here? Say tomorrow, a large portion of poor in the US, decide to teach the top 0.1% a lesson. They decide to stop trading in dollar, and start their own currency. They would also make it impossible for the current wealthy to liquidate their existing wealth in the new currency. What do you think will happen to the US economy in this situation? What we are talking about is basically a group deciding to decimate the entire economy and start over. The only way to stop these people is using some kind of police/military kind of a force.