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> Economic transactions create a tax debt which creates demand for currency to pay the government. Sell stock, car, or some Twinkies, even in a different curren

by darawk 8y ago

> Economic transactions create a tax debt which creates demand for currency to pay the government. Sell stock, car, or some Twinkies, even in a different currency, and they get a cut. That is absolutely correct. But nowhere does it demand that you conduct these transactions in USD. USD ends up getting used because it's convenient, which is because people have to pay their tax debts at the end of the year. However, that is a problem that can be trivially solved by software now, especially as society becomes more and more cashless. As long as the US government accepts payment for taxes in USD, there will always be some demand for it. However, there is nothing actually stopping people from using other currencies for their normal transactions, which would substantially decrease demand for USD, and thereby reduce its value. There is no sense in which the US government 'backs' dollars, except insofar as they are incentivized not to do anything to actively destroy them.

Retric 8y ago
The need to pay US taxes in USD is not a software problem it’s a risk mitigation problem. If you accept pesos/whatever for your car and the peso crashed you might owe more in taxes than you where paid and even if you do the transaction today you still need to buy some USD with pesos to put aside for taxes. So, if by ‘some’ you mean multiple trillions of dollars of demand every year then ok. But, that’s rather trivializes what a trillion dollars means. Which is why I am saying the economy backs the USD not the government.
- darawk 8y ago
  > The need to pay US taxes in USD is not a software problem it’s a risk mitigation problem. If you accept pesos/whatever for your car and the peso crashed you might owe more in taxes than you where paid and even if you do the transaction today you still need to buy some USD with pesos to put aside for taxes. True, though that's simple enough to hedge. > So, if by ‘some’ you mean multiple trillions of dollars of demand every year then ok. But, that’s rather trivializes what a trillion dollars means. Absolute numbers don't matter, relative ones do. The demand may go to trillions, but that would be down from tens of trillions.
  - Retric 8y ago
    Absolute numbers create bounds. USD can’t drop to 1/100th of it’s current value without huge shifts as people would need to pay 100x as many USD in taxes driving up demand for USD. Now, their is slack in the system, but that’s a good thing as it provides price signals and feedback loops. Even record setting sustained inflation of say 2% per month in the middle of some horrific economic issues would still be a bastion of stability relative to many currency’s throughout history. So, as long as the economy stays steady and the USG does not do something monumentally stupid the US economy really does back the USD.
badge 8y ago
But nowhere does it demand that you conduct these transactions in USD. What alternative are you suggesting? It seems like no one's actually transacting in Cryptocoins, as evident with an ideal usecase failing; Bitcoin proved a failure among technically competent users attempting to buy digital goods though Steam [1]. Stripe also determined Bitcoin to be an unreliable method for payments [2]. USD ends up getting used because it's convenient Exactly. Why would anyone bother taking their money, going through all the steps to convert it into the foreign currency or software tokens that they need to buy from someone else (who's siphoning wealth from you) just to find out merchants don't even accept it due to the volatility. And what happens when the merchant turns out to be a fraud? No customer protection by design. [1] https://steamcommunity.com/games/593110/announcements/detail/1464096684955433613 https://steamcommunity.com/games/593110/announcements/detail... [2] https://stripe.com/blog/ending-bitcoin-support https://stripe.com/blog/ending-bitcoin-support
- darawk 8y ago
  > What alternative are you suggesting? It seems like no one's actually transacting in Cryptocoins, as evident with an ideal usecase failing; Bitcoin proved a failure among technically competent users attempting to buy digital goods though Steam [1]. Stripe also determined Bitcoin to be an unreliable method for payments [2]. I'm arguing that USD is not backed by the USG in any meaningful sense. Not that Bitcoin is a good alternative. Just that the "Bitcoin isn't backed by anything, but USD is" argument is unsound. > Why would anyone bother taking their money, going through all the steps to convert it into the foreign currency or software tokens that they need to buy from someone else (who's siphoning wealth from you) just to find out merchants don't even accept it due to the volatility. And what happens when the merchant turns out to be a fraud? No customer protection by design. Are you arguing that volatility is an inherent property of cryptocurrencies? Because if you're not, then I don't see why your point here is relevant. If you are, then i'd like to hear that argument spelled out.

by darawk 8y ago

Retric 8y ago

The need to pay US taxes in USD is not a software problem it’s a risk mitigation problem. If you accept pesos/whatever for your car and the peso crashed you might owe more in taxes than you where paid and even if you do the transaction today you still need to buy some USD with pesos to put aside for taxes. So, if by ‘some’ you mean multiple trillions of dollars of demand every year then ok. But, that’s rather trivializes what a trillion dollars means. Which is why I am saying the economy backs the USD not the government.

darawk 8y ago
> The need to pay US taxes in USD is not a software problem it’s a risk mitigation problem. If you accept pesos/whatever for your car and the peso crashed you might owe more in taxes than you where paid and even if you do the transaction today you still need to buy some USD with pesos to put aside for taxes. True, though that's simple enough to hedge. > So, if by ‘some’ you mean multiple trillions of dollars of demand every year then ok. But, that’s rather trivializes what a trillion dollars means. Absolute numbers don't matter, relative ones do. The demand may go to trillions, but that would be down from tens of trillions.
- Retric 8y ago
  Absolute numbers create bounds. USD can’t drop to 1/100th of it’s current value without huge shifts as people would need to pay 100x as many USD in taxes driving up demand for USD. Now, their is slack in the system, but that’s a good thing as it provides price signals and feedback loops. Even record setting sustained inflation of say 2% per month in the middle of some horrific economic issues would still be a bastion of stability relative to many currency’s throughout history. So, as long as the economy stays steady and the USG does not do something monumentally stupid the US economy really does back the USD.

badge 8y ago

But nowhere does it demand that you conduct these transactions in USD. What alternative are you suggesting? It seems like no one's actually transacting in Cryptocoins, as evident with an ideal usecase failing; Bitcoin proved a failure among technically competent users attempting to buy digital goods though Steam [1]. Stripe also determined Bitcoin to be an unreliable method for payments [2]. USD ends up getting used because it's convenient Exactly. Why would anyone bother taking their money, going through all the steps to convert it into the foreign currency or software tokens that they need to buy from someone else (who's siphoning wealth from you) just to find out merchants don't even accept it due to the volatility. And what happens when the merchant turns out to be a fraud? No customer protection by design. [1] https://steamcommunity.com/games/593110/announcements/detail/1464096684955433613 https://steamcommunity.com/games/593110/announcements/detail... [2] https://stripe.com/blog/ending-bitcoin-support https://stripe.com/blog/ending-bitcoin-support

darawk 8y ago
> What alternative are you suggesting? It seems like no one's actually transacting in Cryptocoins, as evident with an ideal usecase failing; Bitcoin proved a failure among technically competent users attempting to buy digital goods though Steam [1]. Stripe also determined Bitcoin to be an unreliable method for payments [2]. I'm arguing that USD is not backed by the USG in any meaningful sense. Not that Bitcoin is a good alternative. Just that the "Bitcoin isn't backed by anything, but USD is" argument is unsound. > Why would anyone bother taking their money, going through all the steps to convert it into the foreign currency or software tokens that they need to buy from someone else (who's siphoning wealth from you) just to find out merchants don't even accept it due to the volatility. And what happens when the merchant turns out to be a fraud? No customer protection by design. Are you arguing that volatility is an inherent property of cryptocurrencies? Because if you're not, then I don't see why your point here is relevant. If you are, then i'd like to hear that argument spelled out.