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The demand for USD, as with most things, does fluctuate regularly. The value of USD is stable because there is a more-or-less omnipotent central bank that can a

The demand for USD, as with most things, does fluctuate regularly. The value of USD is stable because there is a more-or-less omnipotent central bank that can alter the money supply to match demand and target 2% annual inflation. The way we pay taxes does not matter nearly as much as the Fed. By design, BTC can never have such a central entity that ensures price stability, so its price is practically doomed to swing wildly with speculative booms and busts.

imtringued 6y ago
>The way we pay taxes does not matter nearly as much as the Fed. It matters, in the sense that the government could just adopt a foreign countries' currency and thus the value of that foreign currency would benefit from the power of the USA. The USD would lose its value as a result. I can run my own central bank and mint the hacker news dollar and the currency would still be worthless because of a lack of government adoption. The US government has decided for itself to be dependent on the USD via taxation and thus it will do everything in its power to protect it. It's that simple. So, yes taxation has a huge second order effect that completely dwarfs the first order effect. Compare that to oil dependent countries that get paid in dollars for their wealth. They tend to protect their USD based economy at the expense of everything else. Their local currency tax base tends to be pathetic in comparison to the oil money and thus they neglect it.
- sobellian 6y ago
  If, say, the government abolished the IRS and demand plummeted for USD, the Fed would respond by taking money out of circulation. The Fed creates an elastic money supply. You cannot reason about the dollar's value by studying demand for USD in isolation. As for your "HND" hypothetical, it's very plausible that you could mint your own currency and control its value. You would not be able to control the total value of all HND in circulation. In aggregate HND would probably be a relatively worthless currency but so long as you are willing to constrain supply very tightly you will ultimately end up with a market for the few weirdos who are willing to part with $1 to obtain 1 HND. That may be a total of $1000 or less in the end, a laughable sum, but the unit price would still be controlled.

imtringued 6y ago

>The way we pay taxes does not matter nearly as much as the Fed. It matters, in the sense that the government could just adopt a foreign countries' currency and thus the value of that foreign currency would benefit from the power of the USA. The USD would lose its value as a result. I can run my own central bank and mint the hacker news dollar and the currency would still be worthless because of a lack of government adoption. The US government has decided for itself to be dependent on the USD via taxation and thus it will do everything in its power to protect it. It's that simple. So, yes taxation has a huge second order effect that completely dwarfs the first order effect. Compare that to oil dependent countries that get paid in dollars for their wealth. They tend to protect their USD based economy at the expense of everything else. Their local currency tax base tends to be pathetic in comparison to the oil money and thus they neglect it.

sobellian 6y ago
If, say, the government abolished the IRS and demand plummeted for USD, the Fed would respond by taking money out of circulation. The Fed creates an elastic money supply. You cannot reason about the dollar's value by studying demand for USD in isolation. As for your "HND" hypothetical, it's very plausible that you could mint your own currency and control its value. You would not be able to control the total value of all HND in circulation. In aggregate HND would probably be a relatively worthless currency but so long as you are willing to constrain supply very tightly you will ultimately end up with a market for the few weirdos who are willing to part with $1 to obtain 1 HND. That may be a total of $1000 or less in the end, a laughable sum, but the unit price would still be controlled.