[neilwilson]

"So what actually makes the US dollar work as a currency is that it is backed by the long dick of the US government. This is a combination of economic, military and even cultural might."

It's the ability to demand and enforce tax payments in that denomination - with the consequence of not doing that being you will lose property and liberty.

Obtaining the denomination to settle the tax then becomes the discounted option, since the other option is far more expensive.

That alone makes the currency worth holding, since you can always get rid of it to somebody with a tax bill to pay.

As we have seen with Russia that power extends wherever the denomination is used. The US government has 'taxed' Russia anything it holds denominated in US dollars - completely unilaterally and wherever it was held.

[afiori]

I would say that what makes any currency valuable is the market using that currency; the necessity of paying taxes is both a jump-start and a stabilizer of that market preventing fragmentation of the currency.

[analog31]

I would say yes, in the sense that the government would cease to exist if it were to declare: "Compute your taxes in whatever unit of account you prefer."

But I think a broader statement is that the "long dick of the US government" is the collective expectation for the behavior of major world governments. On the other hand, it's worth noting that US currency is not absolutely stable.

[spyder]

Yea, and also it's not just tax: "This note is legal tender for all debts public and private"

[triceratops]

"All debts public and private" - but only debts denominated in USD, right? If you loan me gold and specify repayment in gold or Canadian dollars or gerbils, I can't just give you a fistful of dollar bills to settle it, can I?