4 ms·
> 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
by 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 agoIt 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.
- ericd 2y ago> The sole reason that the USD has value is because people in the US must pay taxes in USD. Ehh what about the petrodollar?
- immibis 2y agoNo, taxes are not the only reason anyone ever uses USD. People use gold - which country accepts taxes in gold? Which country accepts them in bitcoin? (El Salvador doesn't)
- dools 2y ago> No, taxes are not the only reason anyone ever uses USD It literally is the only reason. Taxation is the only reason the USD even exists. I can’t parse the rest of your comment.