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But it is backed by reputation, threat of litigation and physical violence (police/military) if you try to interfere with it, where as crypto doesn't yet have t

by Daviey 5y ago

But it is backed by reputation, threat of litigation and physical violence (police/military) if you try to interfere with it, where as crypto doesn't yet have this. Disclaimer: A significant part of my investment portfolio is in Defi.

throw0101a 5y ago
> But it is backed by reputation, threat of litigation and physical violence (police/military) if you try to interfere with it, where as crypto doesn't yet have this. Also by the fact that the companies of the S&P 500, who are generally based in the US, account for a large portion of global transactions, which they tend to do with USD. If anyone wants to participate in the global economy, the USD often provides the least amount of friction in transactions. The other most popular/useful/"valuable" currencies, per forex trading volume, are: EUR, JPY, GBP, AUD, CHF, CAD. * https://en.wikipedia.org/wiki/Foreign_exchange_market#Trading_characteristics https://en.wikipedia.org/wiki/Foreign_exchange_market#Tradin... * https://fxssi.com/the-most-traded-currency-pairs https://fxssi.com/the-most-traded-currency-pairs
betterunix2 5y ago
Actually it is backed by US law and the strength of the US government in terms of enforcing those laws. In particular, the dollar is backed by US tax and debt laws; US taxes must be paid in dollars, debts in the US can be cleared with dollars, and US courts deal only in dollars when working out damages or in bankruptcy proceedings. As long as people doing business in the US follow those laws, which ultimately requires them to respect the government's ability to enforce the law, demand for dollars will exist and thus the dollar has value. So it is not really about reputation or violence being used against those who would "interfere" with the dollar (whatever that means). I would argue that the value of the Yen is more influenced by reputation than that of the dollar, since people tend to treat Yen as a "safe haven" during economic crises (but ultimately the Yen's value primarily follows from the Japanese government's ability to enforce its laws).

by Daviey 5y ago

throw0101a 5y ago

> But it is backed by reputation, threat of litigation and physical violence (police/military) if you try to interfere with it, where as crypto doesn't yet have this. Also by the fact that the companies of the S&P 500, who are generally based in the US, account for a large portion of global transactions, which they tend to do with USD. If anyone wants to participate in the global economy, the USD often provides the least amount of friction in transactions. The other most popular/useful/"valuable" currencies, per forex trading volume, are: EUR, JPY, GBP, AUD, CHF, CAD. * https://en.wikipedia.org/wiki/Foreign_exchange_market#Trading_characteristics https://en.wikipedia.org/wiki/Foreign_exchange_market#Tradin... * https://fxssi.com/the-most-traded-currency-pairs https://fxssi.com/the-most-traded-currency-pairs

betterunix2 5y ago

Actually it is backed by US law and the strength of the US government in terms of enforcing those laws. In particular, the dollar is backed by US tax and debt laws; US taxes must be paid in dollars, debts in the US can be cleared with dollars, and US courts deal only in dollars when working out damages or in bankruptcy proceedings. As long as people doing business in the US follow those laws, which ultimately requires them to respect the government's ability to enforce the law, demand for dollars will exist and thus the dollar has value. So it is not really about reputation or violence being used against those who would "interfere" with the dollar (whatever that means). I would argue that the value of the Yen is more influenced by reputation than that of the dollar, since people tend to treat Yen as a "safe haven" during economic crises (but ultimately the Yen's value primarily follows from the Japanese government's ability to enforce its laws).