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“Money is an agreement between a government and its society in terms of national unity. But on the other side of the medallion, if everyone leaves the fiat—if e

by dools 2y ago

“Money is an agreement between a government and its society in terms of national unity. But on the other side of the medallion, if everyone leaves the fiat—if everyone leaves the social agreement of their nation—it could derail the world.” The sooner everyone actually learns what money is, the sooner we can stop with all of this foolishness. Money is a tax credit. It is a token that the sovereign who imposed the tax in the first place will accept back in payment of taxes. That's it. Without taxes, there's no money. The "social contract" part is more about resources than money. By imposing the tax, the sovereign creates unemployment in terms of a currency only it can issue, and thus is able to provision itself.

methyl 2y ago
> Without taxes, there's no money why?
- nsomaru 2y ago
  I believe the argument goes like this: "fiat" depends on a declaration by a government that something has value. The way a government does that is by declaring something legal tender and accepting taxes denominated in that currency. Contrast with a time when currency was pegged to a physical asset like gold and GBP so no depreciation in something like 300 years. Savings actually had meaning.
  - XorNot 2y ago
    What happens to the price of bread if the rate of gold mining outstrips the rate of bread production?
  - dools 2y ago
    Not quite. The government imposes a tax, the tax is due in the state's unit of account. The government can then spend its unit of account into circulation, and later accepts it back in payment of taxes. > Contrast with a time when currency was pegged to a physical asset like gold Even when a currency is constructed from a commodity, it is not the commidity that is the money. It is a commodity that bears the stamp of the sovereign. > and GBP so no depreciation in something like 300 years. Savings actually had meaning. When money was constructed from a commodity there was a terrible shortage of coin to support the economy and it was a horror show for almost everyone. It's certainly possible to have price stability and full employment, but if you're going to choose, a bit of inflation is much, much better than deflation.
- pstrateman 2y ago
  It's the only thing you really need money for. If you don't pay your taxes in your nations currency you go to prison.
  - grugagag 2y ago
    Do you not eat? How do you pay for food or utilities/rent? Do they take anything other than money where you live?
    - beaglesss 2y ago
      Those people only take dollars because every transaction has a third guy with a club demanding dollars from the other two, that makes it incredibly challenging for the currency to shift to something else. Without the third guy standing there with a club it's not clear if or why they would demand dollars.
      - ralferoo 2y ago
        I agree with the "taxes make the fiat currency" argument, but what you said isn't a good justification for it, because that third guy with the club probably isn't paying any taxes! Well, maybe sales taxes when he spends his ill-gotten gains, but that's indirect and if he's effective at intimidation with his club, he arguably doesn't need the money in the first place as he can acquire goods through other means. The more compelling argument is that we pay taxes primarily to enforce peaceful law and order, primarily through control of force - at home through the police and abroad through the army - so that our stuff isn't just taken by "someone with a club" and making it worth being part of a larger society.
        IanCal 2y ago
        The third person in the analogy is the government, who demands payment specifically in dollars and who can use a remarkable amount of force if you don't pay.
        2y ago
- beaglesss 2y ago
  What would drive a currency with no demand? Money almost always ends up as a commodity itself (gold/silver/ramen packets/cigarettes), commodity backed, or as a token to prevent the state from tossing me in a tiny cage. In most crypto, the commodity isn't very clear. I attribute it's rise largely to the tax authorities and the FATF snuffing out anonymous banking and bearer shares and most high denomination notes around that time, creating massive demand for an alternative that crypto largely fills.
  - dools 2y ago
    Crypto "currency" is a very successful libertarian propaganda project.
    - immibis 2y ago
      Or as I like to call them, propertarians.
- Log_out_ 2y ago
  https://en.m.wikipedia.org/wiki/Somali_shilling https://en.m.wikipedia.org/wiki/Somali_shilling
- thaumasiotes 2y ago
  Surprisingly many people are willing to argue for positions that are directly falsified by even the most cursory investigation, that's why. Money is considerably older than taxation in money is.
  - dools 2y ago
    Nope, it's not. Accounting is the first writing, and the earliest form of "taxation" as an obligation to the group was fines imposed upon people as penance.
    - thaumasiotes 2y ago
      > and the earliest form of "taxation" as an obligation to the group was fines imposed upon people as penance. This is a strange thing for you to believe. There is no evidence for it, nor any suggestion that it's likely. Taxation in money is a recent phenomenon, well within the historical period, pretty much everywhere; before that, you have taxation in kind. (And, often treated separately, taxation in conscripted labor.) Penalties are generally the same. Monetary penalties do show up before monetary taxation does, but they apply to people who have money, not to everyone in general.
dotancohen 2y ago
Hard disagree, even if you are quoting someone famous. Money is a fungible form of exchange so that I can sell widgets and can buy foobars later. Many of my Bedouin neighbors pay no taxes, but they use the same money I do - both accepting it and paying in it.
- dools 2y ago
  > Many of my Bedouin neighbors pay no taxes, but they use the same money I do - both accepting it and paying in it. The demand for that currency traces back to the willingness of the issuer to accept it back in payment of taxes. People use the USD in all sorts of places where taxes aren't due in USD, but if the US government said "you can't pay your taxes in USD anymore" then it wouldn't take long for the USD to have no value. Even when money is constructed from a commodity, its value is derived mostly from the nominal value ascribed to it by the sovereign. That's why ancient coins still exist.
  - dotancohen 2y ago
    It seems to me that you are conflating two issues: fungibility of currency with pegging that currency to a commodity. The US government is not the only entity that sees value in USD. So long as other bodies, especially commercial bodies, see value in USD, it will continue to be used as an exchange medium. Same for any other currency - just look to South America for examples where people have stopped trusting in the value of a currency and that currency failing, despite being able to pay taxes with it.
    - dools 2y ago
      > It seems to me that you are conflating two issues: fungibility of currency with pegging that currency to a commodity. Nope. > The US government is not the only entity that sees value in USD The US government doesn't see value in the USD at all. It sees value in the resources it wants to divert to the public sector by spending the USD, which it creates. > So long as other bodies, especially commercial bodies, see value in USD, it will continue to be used as an exchange medium The sole reason that the USD has value is because people in the US must pay taxes in USD. > Same for any other currency - just look to South America for examples where people have stopped trusting in the value of a currency and that currency failing, despite being able to pay taxes with it. It's different depending on the specific nation you're talking about but when a nation issues debt in a currency other than its own (in which of course it is logically impossible for it to borrow since the currency is already a liability of the issuer) and if a country relies on imports then it loses the ability to control its interest rate and price stability. In a sense this is like the liabilities being imposed by the foreign sector exceeding the domestic tax base, or another way of looking at it is that the resources required to provision government are not available for sale in the currency it issues. There's also issues like corruption in the tax system itself to contend with in some circumstances.
EGreg 2y ago
Warren Mosler, is that you? Seriously, though, I had this exact conversation with him when I first launched Intercoin back in 2018 and reached out about advising us on economics (I had interviewed many economists since then). He said he never saw any currency that was in use that wasn’t accepted for taxes. I asked what about Bitcoin and all those other cryptos. Actually, money doesn’t require government. It simply requires a network effect, same as language, religion and culture (which also don’t require government force). Money is just the most liquid asset in a specific network. Its value comes from others accepting it for goods and services. You may want to watch some of my discussions with economists of different schools: https://www.youtube.com/intercoin https://www.youtube.com/intercoin Or you might want to read articles like: https://community.intercoin.app/t/rolling-out-voluntary-basic-income-in-communities/1069 https://community.intercoin.app/t/rolling-out-voluntary-basi... https://community.intercoin.app/t/local-community-currencies/1067 https://community.intercoin.app/t/local-community-currencies...
- dools 2y ago
  > I asked what about Bitcoin and all those other cryptos. They're not money, they're a hybrid of commodity and payment system.

by dools 2y ago

methyl 2y ago

> Without taxes, there's no money why?

nsomaru 2y ago
I believe the argument goes like this: "fiat" depends on a declaration by a government that something has value. The way a government does that is by declaring something legal tender and accepting taxes denominated in that currency. Contrast with a time when currency was pegged to a physical asset like gold and GBP so no depreciation in something like 300 years. Savings actually had meaning.
- XorNot 2y ago
  What happens to the price of bread if the rate of gold mining outstrips the rate of bread production?
- dools 2y ago
  Not quite. The government imposes a tax, the tax is due in the state's unit of account. The government can then spend its unit of account into circulation, and later accepts it back in payment of taxes. > Contrast with a time when currency was pegged to a physical asset like gold Even when a currency is constructed from a commodity, it is not the commidity that is the money. It is a commodity that bears the stamp of the sovereign. > and GBP so no depreciation in something like 300 years. Savings actually had meaning. When money was constructed from a commodity there was a terrible shortage of coin to support the economy and it was a horror show for almost everyone. It's certainly possible to have price stability and full employment, but if you're going to choose, a bit of inflation is much, much better than deflation.
pstrateman 2y ago
It's the only thing you really need money for. If you don't pay your taxes in your nations currency you go to prison.
- grugagag 2y ago
  Do you not eat? How do you pay for food or utilities/rent? Do they take anything other than money where you live?
  - beaglesss 2y ago
    Those people only take dollars because every transaction has a third guy with a club demanding dollars from the other two, that makes it incredibly challenging for the currency to shift to something else. Without the third guy standing there with a club it's not clear if or why they would demand dollars.
    - ralferoo 2y ago
      I agree with the "taxes make the fiat currency" argument, but what you said isn't a good justification for it, because that third guy with the club probably isn't paying any taxes! Well, maybe sales taxes when he spends his ill-gotten gains, but that's indirect and if he's effective at intimidation with his club, he arguably doesn't need the money in the first place as he can acquire goods through other means. The more compelling argument is that we pay taxes primarily to enforce peaceful law and order, primarily through control of force - at home through the police and abroad through the army - so that our stuff isn't just taken by "someone with a club" and making it worth being part of a larger society.
      - IanCal 2y ago
        The third person in the analogy is the government, who demands payment specifically in dollars and who can use a remarkable amount of force if you don't pay.
        2y ago
beaglesss 2y ago
What would drive a currency with no demand? Money almost always ends up as a commodity itself (gold/silver/ramen packets/cigarettes), commodity backed, or as a token to prevent the state from tossing me in a tiny cage. In most crypto, the commodity isn't very clear. I attribute it's rise largely to the tax authorities and the FATF snuffing out anonymous banking and bearer shares and most high denomination notes around that time, creating massive demand for an alternative that crypto largely fills.
- dools 2y ago
  Crypto "currency" is a very successful libertarian propaganda project.
  - immibis 2y ago
    Or as I like to call them, propertarians.
Log_out_ 2y ago
https://en.m.wikipedia.org/wiki/Somali_shilling https://en.m.wikipedia.org/wiki/Somali_shilling
thaumasiotes 2y ago
Surprisingly many people are willing to argue for positions that are directly falsified by even the most cursory investigation, that's why. Money is considerably older than taxation in money is.
- dools 2y ago
  Nope, it's not. Accounting is the first writing, and the earliest form of "taxation" as an obligation to the group was fines imposed upon people as penance.
  - thaumasiotes 2y ago
    > and the earliest form of "taxation" as an obligation to the group was fines imposed upon people as penance. This is a strange thing for you to believe. There is no evidence for it, nor any suggestion that it's likely. Taxation in money is a recent phenomenon, well within the historical period, pretty much everywhere; before that, you have taxation in kind. (And, often treated separately, taxation in conscripted labor.) Penalties are generally the same. Monetary penalties do show up before monetary taxation does, but they apply to people who have money, not to everyone in general.

dotancohen 2y ago

Hard disagree, even if you are quoting someone famous. Money is a fungible form of exchange so that I can sell widgets and can buy foobars later. Many of my Bedouin neighbors pay no taxes, but they use the same money I do - both accepting it and paying in it.

dools 2y ago
> Many of my Bedouin neighbors pay no taxes, but they use the same money I do - both accepting it and paying in it. The demand for that currency traces back to the willingness of the issuer to accept it back in payment of taxes. People use the USD in all sorts of places where taxes aren't due in USD, but if the US government said "you can't pay your taxes in USD anymore" then it wouldn't take long for the USD to have no value. Even when money is constructed from a commodity, its value is derived mostly from the nominal value ascribed to it by the sovereign. That's why ancient coins still exist.
- dotancohen 2y ago
  It seems to me that you are conflating two issues: fungibility of currency with pegging that currency to a commodity. The US government is not the only entity that sees value in USD. So long as other bodies, especially commercial bodies, see value in USD, it will continue to be used as an exchange medium. Same for any other currency - just look to South America for examples where people have stopped trusting in the value of a currency and that currency failing, despite being able to pay taxes with it.
  - dools 2y ago
    > It seems to me that you are conflating two issues: fungibility of currency with pegging that currency to a commodity. Nope. > The US government is not the only entity that sees value in USD The US government doesn't see value in the USD at all. It sees value in the resources it wants to divert to the public sector by spending the USD, which it creates. > So long as other bodies, especially commercial bodies, see value in USD, it will continue to be used as an exchange medium The sole reason that the USD has value is because people in the US must pay taxes in USD. > Same for any other currency - just look to South America for examples where people have stopped trusting in the value of a currency and that currency failing, despite being able to pay taxes with it. It's different depending on the specific nation you're talking about but when a nation issues debt in a currency other than its own (in which of course it is logically impossible for it to borrow since the currency is already a liability of the issuer) and if a country relies on imports then it loses the ability to control its interest rate and price stability. In a sense this is like the liabilities being imposed by the foreign sector exceeding the domestic tax base, or another way of looking at it is that the resources required to provision government are not available for sale in the currency it issues. There's also issues like corruption in the tax system itself to contend with in some circumstances.

EGreg 2y ago

Warren Mosler, is that you? Seriously, though, I had this exact conversation with him when I first launched Intercoin back in 2018 and reached out about advising us on economics (I had interviewed many economists since then). He said he never saw any currency that was in use that wasn’t accepted for taxes. I asked what about Bitcoin and all those other cryptos. Actually, money doesn’t require government. It simply requires a network effect, same as language, religion and culture (which also don’t require government force). Money is just the most liquid asset in a specific network. Its value comes from others accepting it for goods and services. You may want to watch some of my discussions with economists of different schools: https://www.youtube.com/intercoin https://www.youtube.com/intercoin Or you might want to read articles like: https://community.intercoin.app/t/rolling-out-voluntary-basic-income-in-communities/1069 https://community.intercoin.app/t/rolling-out-voluntary-basi... https://community.intercoin.app/t/local-community-currencies/1067 https://community.intercoin.app/t/local-community-currencies...

dools 2y ago
> I asked what about Bitcoin and all those other cryptos. They're not money, they're a hybrid of commodity and payment system.