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I should give up on this, but I keep hearing this argument about tax collection. You can make an argument that fixed dollar amount taxes (almost like property taxes) drive direct demand for the currency. I need to pay $100, so I need to get that $100 -- if it costs me all my horses and gold to get it, then I have to buy it. You can even argue historically (in a manner analogous to the "Mises Regression Theorem") that some of the value of fiat currency derives from this historical usage.

But all modern taxes (really, even, over time, property taxes) are driven by the underlying value, not by a fixed amount, and thus create no actual demand for the currency. If the government requires that I pay 10% of my income, and my income is 10 cows, it does not matter what the price of cows in dollars is -- I owe the dollar equivalent of a cow. If dollars are expensive, then I trade one cow for a few dollars and pay that, if dollars are cheap, I trade one cow for a lot of dollars and pay that.

There is no net demand created by this, and I don't know why people keep claiming that.

The other side, the "actual use", is definitely a real thing -- price discovery is very difficult when there is no real commerce, and until a complete supply chain can be priced in the currency, it's going to be hard for there to be any stabilizing pressure.






The US federal government financed itself for the 19th century using land sales, tariffs, and little else.

Selling land, for USD, and USD only, is certainly one way that it made USD valuable.

Property taxes are very much the same kind of thing, as you mention. In effect, it makes landowners into tenants to the extent that the land is taxed.

The government, being defined as the entity with sovereignty over a given region and a monopoly on force in that region, it is in effect a landlord at root. And it can make people pay to live in the area it controls. It currently strays from this role by taxing other things as well, and in so doing is generally destructive to output.

But taxes on land and natural resources have no deadweight loss and historically have been the major source of government revenue.

So, in effect, fiat currency is land-backed. And land value comes from the value of the location, the desirability of living there, and the productive capacity of the region... which are in turn affected by government policy.


Like I said, you can make a historical argument. Though tariffs were usually based on the value of the goods, so my argument applies there, and land sales (as far as I'm aware) were done by auction, so do not represent net demand for dollars. Not to mention that for most of the 19th century we had some form of hybrid metal backing for the currency.

But in modern times, ~90% of government revenue [1] is from taxes that are relative to income, and thus create no net demand for USD. I don't know when this became the case (at least the 60s), but I suspect for a very long time. The federal government, as far as I'm aware, has no property taxes; those are at the local or municipal level. And there, they are based on the assessed value of the property, so if dollars are expensive, then the taxes are lower, and if dollars are cheap, then the taxes are higher. Because the liquidity is required, you could argue that there's some marginal effect, but given that equity is easily converted to debt at scale, I'm dubious that that would ever be a factor.

In my opinion, fiat money is the closest that we've been able to come to "good" money in a sense -- easily transactable, scarce, fungible, hard to counterfeit, easy to validate. The value derives from these characteristics. The "scarce" aspect is the one that bothers me the most, because it doesn't have the same guarantees about scarcity as something like gold (although it excels at the other points). The notion that money is "backed" by anything is and always has been a red herring in my mind; in almost every case, disconnects between the thing that explicitly "backed" a currency and the currency itself have had little to no medium-term effect on the value of the currency, because the currency typically "inherits" the scarcity aspects of its backing. To what extent cryptocurrencies can succeed is still up in the air, but I remain very optimistic.

[1] https://www.cbo.gov/about/products/budget-economic-data


The brute power relationships underpinning landownership ultimately distill down to military power, and landownership is determined that way.

No amount of institutional complexity can negate this fact. Land is necessary for all production and for all life. Control of land enables the owner to demand a rent, and to demand it in whatever form the landowner wishes.

That form could be as terrible or as optimal as conceivable, but that choice is ultimately up to the sovereign. None of your traits for optimal money matter by comparison. Those factors will surely enter into the consideration of any wise sovereign currency issuer, but only if they are wise.

The currency that is demanded could be a cryptocurrency, although a sovereign currency issuer would be foolish to ever choose that, and would put them at a strategic disadvantage during war.


The current total value of all US land and natural resources is in the tens of trillions, by most estimates.



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