[marvinalone]

USD is backed (among other things) by the government accepting taxes in it. If you don't pay, they will come to your house with guns and take you away. This creates a demand for USD that is completely unlike any demand for crypto.

[conanbatt]

Again this weird argument. If the USD were valued due to its tax-demand, raising taxes would increase the value of the dollar!

Also the gov creates more supply to the dollar than the tax demand always, so its not really clear. And most taxation is a percentage of income or value measured in dollars itself.

This argument never clicked for me: where is it coming from?

[rocqua]

The argument is not that this is controls the USD value. Instead, the argument is that this gives an intrinsic base value to the USD. This base value means people have some reason to hold USD, which causes them to make other transactions in USD. The actual current value from USD comes from the other transactions, but that is not intrinsic to USD. Instead, it is an emergent property.

The intrinsic value of USD is consoling, because it prevents the value of USD dropping to 0, hence there will always be a possibility of the emergent value reappearing.

[samdfonseca]

This is correct, raising taxes would increase demand for dollars. Supply is greater than the tax demand, but much of the additional demand comes from the tax in dollars requirement. Since businesses have to pay sales tax in dollars, they're inclined to only accept dollars to avoid complex accounting and exchange rate liability. Being able to transact with US businesses is a large source of dollar demand.

It's also worth pointing out that income doesn't always translate to inflows of physical dollars. Complex corporate accounting standards often result in recognizing revenue before any cash is received, and non-cash transactions that affect income.

[h1d]

> with guns

Umm, yes?

[nostrademons]

...the same way that Bitcoin could, in theory, be backed by hired goons (or drones) that come to your house with guns and take you away. It wouldn't surprise me if that's how people in the underground Bitcoin economy (drugs, gambling, sex trafficking, arms dealing) actually operate, though I try to stay away from those peoples so I wouldn't actually know. There is certainly a difference in degree - the U.S. military is orders of magnitude more powerful than whatever goons you can hire with Bitcoin - but not a difference in kind.