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"Money is purely a social construct. It only has value because people collectively find it useful. There is no backing." You're missing a very important point:

by rsync 8y ago

"Money is purely a social construct. It only has value because people collectively find it useful. There is no backing." You're missing a very important point: US dollars are special because they are the only thing accepted to pay US taxes. No matter how valuable of a thing you own - gold, euros, a truck full of mona lisas, shares in TSLA ... it will not be accepted as payment for US taxes. Understanding where the value of money comes from and what it is actually used for and what the nexus is between financial entities and physical force ... it all starts with understanding what it means that the government will not accept anything from you, no matter how valuable, for payment of taxes other than the currency it issues.

panarky 8y ago
Let's try a thought experiment. The government starts accepting any asset for tax payments. You can now sign over fractional ownership in your factory, or your rental real estate, or your Mona Lisa to pay your tax bill. Are dollars now worthless, because they're not required to pay taxes? Do you abandon your bank accounts because the dollars have no value? Certainly not! It's too inefficient for the grocery store to appraise your Mona Lisa and negotiate a 1e-8 share of it. Dollars are still useful, and they still have value even if they don't have a monopoly on tax payments.
- tim333 8y ago
  The point with taxes is they are denominated in dollars or similar so if you conduct your US business in French Franks or Bitcoins or whatever, converting each transaction to dollars on the return would be a pain in the arse which is why most businesses don't do that. Paying isn't a problem - send Franks or whatever to your accountant and they'll sort it.
- jerf 8y ago
  Let's try something that isn't a thought experiment, but a natural experiment, that is, something that has happened dozens of times throughout history. Why is it that when governments collapse, their fiat currency simultaneously goes with them? If money is just a social agreement, why do those two things always happen together? If money is just a matter of convenience, why isn't that money still useful even after the government collapses, if nothing about the state of that money has changed? Why aren't people still accepting Confederate State Dollars somewhere? The answer is that the state has changed. The backing of the currency collapsed, and it turns out that currencies collapse hours, if not minutes, after that news gets out. In the modern era, probably minutes. There's an irony to cryptocurrency advocates claiming money doesn't have backing, which is that the only reason you can claim that is precisely that you're so casually used to fiat currency being rock solid, to the point that you literally can't imagine it collapsing, that it leads you to misunderstand the nature of currency.

by rsync 8y ago

panarky 8y ago

Let's try a thought experiment. The government starts accepting any asset for tax payments. You can now sign over fractional ownership in your factory, or your rental real estate, or your Mona Lisa to pay your tax bill. Are dollars now worthless, because they're not required to pay taxes? Do you abandon your bank accounts because the dollars have no value? Certainly not! It's too inefficient for the grocery store to appraise your Mona Lisa and negotiate a 1e-8 share of it. Dollars are still useful, and they still have value even if they don't have a monopoly on tax payments.

tim333 8y ago
The point with taxes is they are denominated in dollars or similar so if you conduct your US business in French Franks or Bitcoins or whatever, converting each transaction to dollars on the return would be a pain in the arse which is why most businesses don't do that. Paying isn't a problem - send Franks or whatever to your accountant and they'll sort it.
jerf 8y ago
Let's try something that isn't a thought experiment, but a natural experiment, that is, something that has happened dozens of times throughout history. Why is it that when governments collapse, their fiat currency simultaneously goes with them? If money is just a social agreement, why do those two things always happen together? If money is just a matter of convenience, why isn't that money still useful even after the government collapses, if nothing about the state of that money has changed? Why aren't people still accepting Confederate State Dollars somewhere? The answer is that the state has changed. The backing of the currency collapsed, and it turns out that currencies collapse hours, if not minutes, after that news gets out. In the modern era, probably minutes. There's an irony to cryptocurrency advocates claiming money doesn't have backing, which is that the only reason you can claim that is precisely that you're so casually used to fiat currency being rock solid, to the point that you literally can't imagine it collapsing, that it leads you to misunderstand the nature of currency.