[beaglesss]

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]

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]

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.

[ralferoo]

Hehe, I interpreted the comment as being in the absence of government, and in terms of how older societies used to pay a third party protection money (effectively a tax) to protect them from thefts etc from others, but who would intimidate, steal or destroy property if the money wasn't paid.

You could argue that government isn't much different to a mafia, except that modern taxation is generally more transparent, fairer, impartial, and perhaps more considerate to the people with the least money. Also, they generally don't use force to enforce taxation, only the threat of a prison sentence.

[dools]

And also issues the money so "paying taxes" in a currency you issue is meaningless.