4 ms·

> funded through taxes Whatever your views, this is simply wrong. A state that controls its own currency doesn’t need taxes. They only exist to control infla

> funded through taxes Whatever your views, this is simply wrong. A state that controls its own currency doesn’t need taxes. They only exist to control inflation. We could achieve the same thing with high interest rate, printing all the money we need and having zero tax on anything. Taking out loans creates money, including when private banks do it. That’s what national debt does too.

HPsquared 2y ago
The currency only has value because of taxes.
- ClumsyPilot 2y ago
  What do you mean - if US government cuts taxes, value of USD goes down?
  - HPsquared 2y ago
    Definitely. There would be more dollars in circulation for a start. Ultimately the government is the final "sink" for dollars in the system. That and loan repayments (but unlike taxes, loan repayments could be made in any currency).
- carlosjobim 2y ago
  This is the first time I've encountered anybody else who has figured this out and says it openly. For those who wonder how: If it wasn't for taxes being collected in the currency of the government, people and businesses would conduct their affairs in other currencies that do not decrease in value from inflation. That's also the reason why there will never be any simple taxation system, such as land value tax or whatnot. In order to keep everybody using the government currency, the taxes demanded in that currency has to be applied to every and any economic activity imaginable, otherwise people will flock to other currencies after having paid their dues, and the government currency value collapses. This is also the reason why the public sector workforce is of an enormous size, even in supposedly capitalist countries. Public sector workers cannot choose another currency for their paycheck. This is the reason why most third world countries cannot create a stable government currency: Their tax collection is not effective or comprehensive enough. Unless all the population is put under government issued money by rigorous taxation, they will choose other currency.
  - ToucanLoucan 2y ago
    Also why cryptocurrency will never replace fiat currency. Not that it was ever really meant to, but you know.
    - kbolino 2y ago
      A cryptocurrency where all the voting nodes are run by the state could fulfill the same objective. The problem is that cryptocurrencies as we know them are based upon a publicly verifiable ledger. Inevitably, the state would want an "off the books" way to move money around, which would lead to a shadow currency, and the resulting disequilibrium would destabilize either the state or the "official" currency.
      - HPsquared 2y ago
        Public ledger is also a privacy (and potentially fungibility) nightmare.
  - skulk 2y ago
    > This is the first time I've encountered anybody else who has figured [taxes keep currency value up] out and says it openly. Wut? This is one of the basic principles of Modern Monetary Theory, and reams upon reams have been written on it. https://en.wikipedia.org/wiki/Modern_monetary_theory https://en.wikipedia.org/wiki/Modern_monetary_theory
    - carlosjobim 2y ago
      I'm not saying the same thing as the Wikipedia page. They say that taxes can counter inflation by reducing spending. But this comes from the erroneous belief that inflation is created by spending (or even worse, by labour wages). Inflation is created by an increase in the money supply, which mainly comes from completely different debt than consumer spending. I'm not saying like them that increased taxes reduce inflation and props up the currency value in this way. The evidence is against this. What I'm saying is that a comprehensive taxation system that gets into every imaginable nook and cranny of economic activity or life in general, is what is required to give the government currency any value at all. Without having complicated taxes on basically everything, the currency would be worthless or worth much less, as we see in the third world. The US of course has the option to bully other countries to use their currency, by military means. But this is not true for the euro or pound, for example.

HPsquared 2y ago

The currency only has value because of taxes.

ClumsyPilot 2y ago
What do you mean - if US government cuts taxes, value of USD goes down?
- HPsquared 2y ago
  Definitely. There would be more dollars in circulation for a start. Ultimately the government is the final "sink" for dollars in the system. That and loan repayments (but unlike taxes, loan repayments could be made in any currency).
carlosjobim 2y ago
This is the first time I've encountered anybody else who has figured this out and says it openly. For those who wonder how: If it wasn't for taxes being collected in the currency of the government, people and businesses would conduct their affairs in other currencies that do not decrease in value from inflation. That's also the reason why there will never be any simple taxation system, such as land value tax or whatnot. In order to keep everybody using the government currency, the taxes demanded in that currency has to be applied to every and any economic activity imaginable, otherwise people will flock to other currencies after having paid their dues, and the government currency value collapses. This is also the reason why the public sector workforce is of an enormous size, even in supposedly capitalist countries. Public sector workers cannot choose another currency for their paycheck. This is the reason why most third world countries cannot create a stable government currency: Their tax collection is not effective or comprehensive enough. Unless all the population is put under government issued money by rigorous taxation, they will choose other currency.
- ToucanLoucan 2y ago
  Also why cryptocurrency will never replace fiat currency. Not that it was ever really meant to, but you know.
  - kbolino 2y ago
    A cryptocurrency where all the voting nodes are run by the state could fulfill the same objective. The problem is that cryptocurrencies as we know them are based upon a publicly verifiable ledger. Inevitably, the state would want an "off the books" way to move money around, which would lead to a shadow currency, and the resulting disequilibrium would destabilize either the state or the "official" currency.
    - HPsquared 2y ago
      Public ledger is also a privacy (and potentially fungibility) nightmare.
- skulk 2y ago
  > This is the first time I've encountered anybody else who has figured [taxes keep currency value up] out and says it openly. Wut? This is one of the basic principles of Modern Monetary Theory, and reams upon reams have been written on it. https://en.wikipedia.org/wiki/Modern_monetary_theory https://en.wikipedia.org/wiki/Modern_monetary_theory
  - carlosjobim 2y ago
    I'm not saying the same thing as the Wikipedia page. They say that taxes can counter inflation by reducing spending. But this comes from the erroneous belief that inflation is created by spending (or even worse, by labour wages). Inflation is created by an increase in the money supply, which mainly comes from completely different debt than consumer spending. I'm not saying like them that increased taxes reduce inflation and props up the currency value in this way. The evidence is against this. What I'm saying is that a comprehensive taxation system that gets into every imaginable nook and cranny of economic activity or life in general, is what is required to give the government currency any value at all. Without having complicated taxes on basically everything, the currency would be worthless or worth much less, as we see in the third world. The US of course has the option to bully other countries to use their currency, by military means. But this is not true for the euro or pound, for example.