I really don’t buy the old taxes-make-the-money-work chestnut. Far too many counterexamples.
If you don't pay your taxes, you don't get to participate in the local economy for very long. Men with guns will eventually come to your home and take your stuff and/or take your freedom.
You can't even do direct barter without cash without incurring a tax obligation in the US, https://www.irs.gov/taxtopics/tc420, so even if you live your life like this, you still need to find a way to get actual dollars to pay your taxes. This is what creates the basic and permanent demand for dollars.
The simple truth is that every government is at its core the biggest, baddest gang in the land. The old royalty were literally mob bosses, and often presented themselves as gaudily and arrogantly as the street gang bosses in the modern age. They have the monopoly on violence in their realm and then printed a bunch of tokens that they demand as tribute for the promise of letting you live your life in peace. Because they control the issuance of these tokens, they effectively control the flow of the economy and can more easily manipulate people. They can't arrest everyone, so there's still a fine balancing act required to keep the masses generally consenting of the arrangement, with just the right show of force to reinforce the system.
But other things beyond currency are still money, like gold and bitcoin, because money is just something scarce that you hoard in the hope that in the future, you can trade it for at least as much goods and services as you originally traded for the money, if not more. Anything scarce can be monetized when the currency becomes less scarce, which is part of what is driving up housing as people hoard it as a better store of value than currency. And importantly, making the thing you store this ethereal "money" in even more scarce relative other things increases the value of your own, which is part of the driving force behind NIMBYs who block new housing developments.
Yes, this is the part where the government (state or federal) delivers value, such as education, healthcare, natsec, and generally facilitates the ability to do business via the court system. I think it’s disingenuous to make the argument you’re making without acknowledging the value that government provides.
Were.
I don't know if you subscribe to the political analysis of Adam Curtis but in the past two decades governments have been passing their power to private banks, corporations, QANGOs and "non majoritarian" think-tanks like it's a hot potato. The new breed of politicians are not statesmen but revolving-door temporary managers who would sell-off and outsource the whole country for personal convenience.
Other than a monopoly on violent power (which is vanishing fast in the USA as private cops and prisons take over) it's hard to locate the power of government sometimes. Even the military is dissolving into a loose collection of defence contractors. In the UK our intellgence services were more or less sold to Amazon.
The OP article seems dead set against anarcho-libertarianism but it is by no means pro-government, or explicitly pro-democracy. With regard to money and economics, from my moderately pro-government/state stance I see the great mistake governments are making is giving up on cash.
Physical currency is an absolutely vital component of a stable economy. Its very lack of instantaneous fluidity (it relative inconvenience) means it acts like a capacitor to stabilise markets if you can manage circulation and interest. Moreover, governments have a strict monopoly on that, and physical currencies can take on many new guises with modern cash technology. Abandoning that would be suicide.
If governments get into a battle to take the ground of purely digital currencies against crypto, they will lose. They are making this mistake in an attempt to gain legibility (surveillance). Ultimately they will have to choose between surveillance and economic control. And since the value of surveillance is massively over-rated I am optimistic we'll pull out of the Orwellian misadventure in time.
Anyone genuinely interested in defending against the "ideology of crypto" (as this article posits) should be investing in new cash technologies (some of which I have mentioned in earlier comments here). They should be promoting a plurality of diverse cash equivalents (many of which can be implemented using cryptographic technology - not necessarily block-chain).
Governments are made of individual actors, in the US these are often buying cryptocurrency. Their friends have invested in and built cryptocurrency companies. They hold investments in cryptocurrency companies.
Cryptocurrency IS the capacitor you're talking about, the policy of the US is showing this more weekly.
Based on this statement, the currency need not be physical. It sounds like all that’s really necessary is to moderate the money supply (something that is already done in a federal reserve banking system).
What am I missing? Is there some other aspect of physical currency that makes it advantageous?
Even if it’s just an economist weirdo I’d be curious to see what the argument is there
https://www.irs.gov/businesses/small-businesses-self-employe...
This idea is at odds with the concept of the modern nation state. You can't have running state institutions and an army that, in theory, should provide some level of security of the state borders. Having many groups of people, each exchanging peanuts, beans or stones would lead to a decreased level of trust and no concept of national unity.
Good.
The notion of property rights is only relevant with a central authority who is able to enforce it. Which could be a nation state, tribal chief or a lord. In the jungle you only own whatever you are able to defend. Even your own life.
The innovation of bitcoin is precisely making this statement no longer true. The "property" might only be digital data, rather than physical things, so you can argue that it is no longer true in only a limited context, but it is not longer absolutely true.
Maintaining BTC itself requires physical inputs and physical property rights. You need fiat to buy energy. Your house with mining rigs needs enforcement of property rights.
> You need fiat to buy energy.
This is a circular argument and not true. You can buy energy today with gold or bitcoin.
The same was true for salt, and many more local kinds of money that existed.
It's also the same trust you need for fiat money. This, and trust that your government won't create a huge lot of it in an instant (slow rates of money creation are fine). Turns out that governments have a lot of leverage to enforce the first, more relevant kind of trust, so the total trust required decreases.
The idea of cryptocoins was to remove the trust on nobody creating a lot of money very fast. But in doing so, they also lost the leverage to enforce that people will accept it.
For 'fiat currency', it's the fact that the state has a monopoly on violence and has decreed both [A] that they will accept the fiat currency for fulfillment of tax obligations, and [B] that they will not enforce a claim of debt if you have offered to pay it in fiat currency and the debtee didn't accept your offer.
For gold it's the fact that gold is considered intrinsically pretty by some, and has industrial uses.
The same can be said for iron, wood, or even air - but those are far less rare. Wood has value just as gold does - it's just that folks tend not to trade trailers full of wood as a fungible because it is unwieldy.
Stocks have intrinsic value too: It's a tiny voting share, and gives the right to enjoy a share of dividends.
Bitcoin has __nothing__. Whatsoever. It's real easy to look at the ridiculous price of stocks in companies that make it incredibly difficult to use your vote and which never pay out any dividends, or the sheer unfathomable levels of business done in terms of USD or EUR and how it seems to dwarf the intrinsic, and conclude that the intrinsic is just not important...
But is that a jump you can make?
As you said:
> I accept 100 euro bills for my labour because I believe I'll continue to be able to trade them for food and shelter.
You sure? Maybe it's 1% 'because I have absolute guarantees I can pay my taxes with this, and I have a guarantee that I can trade them for food and shelter because if I pay my bills with dollars and the recipient no longer wants them, they have no legal recourse to force me to make good in any other way'. Presumably you have certain outstanding debts that work like this (if not just simply your tax bill, which is inevitable, then your power bill, your rent or mortgage, etc), so that euro bill __already has value__ the moment you receive it. You can take your mental bookkeeping of 'oh yeah the month is halfway through so I absolutely do, unambiguously, owe my bank half a month's mortgage at the very least', and immediately reduce that amount by €100,-, given that you are holding a €100,- bill in your hands and the state has decreed that they will tell the bank to get fucked if they decide they no longer want to accept your euro for paying off that mortgage.
As for Bitcoin, the original Bitcoin paper talks about replacing trust with code, and I just don't buy it. Sure, you can trust that Bitcoin aren't spent more than once and all that, the maths take care of that. But it fails to consider all the institutions that integrate the Bitcoin world with the rest of social/economical reality, and all that arises there like price volatility, transactions taking forever, exchanges getting hacked, and that Bitcoin-as-a-casino, excuse me, object of speculation, has a far bigger impact on its day-to-day than for e.g. the Euro. The paper doesn't consider that reality at all, but those things mean that 1000EUR worth of Bitcoin is a lot less useful than a stack of fifties.
There arent really many counterexamples and arguably the counterexamples have extenuating circumstances (e.g. dinar under saddams occupation).
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What are some of the counterexamples?
No one facing a hyperinflationary death spiral says "oh well, at least the government will take taxes in this crap" they desperately cast around for a stable place to put wealth.