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Actually the ultimate reason why a note has value is that it can be used to settle tax bills and other debts, so you do not have to "hope" that someone out ther

Actually the ultimate reason why a note has value is that it can be used to settle tax bills and other debts, so you do not have to "hope" that someone out there will take it -- the government behind the money will take it from anyone who owes taxes, which is almost everyone who lives or does business in the country.

iso1210 6y ago
Except not in the case of India, where the government wiped out the value of 500INR notes practically overnight
jakear 6y ago
Hm, so what happens if a country issues some sort of currency in the form of loans/salaries/whatever but does not collect any tax (let’s say they sell natural resources to foreign countries and use that money to maintain their printing presses). Would the currency be worth nothing?
- sershe 6y ago
  I am not sure if taxes were used by GP for any particular reason; I think the key is that the governments actually forces other to use the currency for transactions. So, as long as the govt itself doesn't drastically change the rules, people wanting to sell their time now will take currency. There is no such mechanism for Bitcoin; it's really not that different from baseball cards, original paintings or smth like that in terms of being a store of value; based entirely on others' assumed future faith of its value (compared to any random cryptocurrency I can start tomorrow, or a print of the same painting/card).
- betterunix2 6y ago
  A few things: 1. You mentioned loans, and I mentioned debts. Debts matter at least as much as taxes as a source of demand for fiat currency, since the government can "reassign" the ownership of property if debts are not repaid and the government will always determine debt payments in terms of its fiat currency. 2. Suppose the money is only distributed to citizens in the form of salaries. What do they do with it? Why does anyone they do business with -- merchants, landlords, whoever -- want it? One of the reasons why taxes and debt laws work well is that they are immediately relevant to almost everyone in a country (anyone who owns property owes property tax; anyone with a business loan must make their loan payments; etc.). 3. Suppose a country relies on resource wealth to stimulate demand for its currency. That country will compete in the global market for those resources and the demand for its currency, and thus the value of the currency, will fluctuate according to market forces. The price volatility would be a huge problem for the citizens of the country as they tried to use the currency in their daily lives. So while in theory, under very particular circumstances, such a thing would be possible, in practice it would probably not last long. Volatility, weird distortions in demand, and other issues would render the currency hard to use and reduce its value in the local market.
- imtringued 6y ago
  In that case you could run into the problem that your citizens mint/adopt a competing currency. That's a big problem that Bitcoin faces. There are lots of competitors so the insistence on Bitcoin being the ultimate store of value is unfounded.
chrischen 6y ago
Crypto is required to pay extortionists (whether you agree it is right or not is irrelevant).
- vinger 6y ago
  On the more legal side, some merchants are crypto only.

iso1210 6y ago

Except not in the case of India, where the government wiped out the value of 500INR notes practically overnight

jakear 6y ago

Hm, so what happens if a country issues some sort of currency in the form of loans/salaries/whatever but does not collect any tax (let’s say they sell natural resources to foreign countries and use that money to maintain their printing presses). Would the currency be worth nothing?

sershe 6y ago
I am not sure if taxes were used by GP for any particular reason; I think the key is that the governments actually forces other to use the currency for transactions. So, as long as the govt itself doesn't drastically change the rules, people wanting to sell their time now will take currency. There is no such mechanism for Bitcoin; it's really not that different from baseball cards, original paintings or smth like that in terms of being a store of value; based entirely on others' assumed future faith of its value (compared to any random cryptocurrency I can start tomorrow, or a print of the same painting/card).
betterunix2 6y ago
A few things: 1. You mentioned loans, and I mentioned debts. Debts matter at least as much as taxes as a source of demand for fiat currency, since the government can "reassign" the ownership of property if debts are not repaid and the government will always determine debt payments in terms of its fiat currency. 2. Suppose the money is only distributed to citizens in the form of salaries. What do they do with it? Why does anyone they do business with -- merchants, landlords, whoever -- want it? One of the reasons why taxes and debt laws work well is that they are immediately relevant to almost everyone in a country (anyone who owns property owes property tax; anyone with a business loan must make their loan payments; etc.). 3. Suppose a country relies on resource wealth to stimulate demand for its currency. That country will compete in the global market for those resources and the demand for its currency, and thus the value of the currency, will fluctuate according to market forces. The price volatility would be a huge problem for the citizens of the country as they tried to use the currency in their daily lives. So while in theory, under very particular circumstances, such a thing would be possible, in practice it would probably not last long. Volatility, weird distortions in demand, and other issues would render the currency hard to use and reduce its value in the local market.
imtringued 6y ago
In that case you could run into the problem that your citizens mint/adopt a competing currency. That's a big problem that Bitcoin faces. There are lots of competitors so the insistence on Bitcoin being the ultimate store of value is unfounded.

chrischen 6y ago

Crypto is required to pay extortionists (whether you agree it is right or not is irrelevant).

vinger 6y ago
On the more legal side, some merchants are crypto only.