That's where "or someone you want to trade with" comes into play. It turns out it's highly useful to have the currency that ~300M people with the largest tax debts in the world need. There's no other currency backed by that much violence.

You can always be assured there is some American who desperately wants to stay out of jail, and someone will want to buy their stuff.

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JumpCrisscross 14 hours ago | parent | next [-]

> it's highly useful to have the currency that ~300M people with the largest tax debts in the world need

The drivers are consumption and investment. Not taxation.

If you want to sell to the richest consumers in the world, you get dollars. If you want to finance something from the deepest financial market in the world, you accept (and repay with) dollars. (Both of which drive demand for, and thus deepen liquidity around, dollar-denominated financial assets.)

Demand for currencies and the level of taxation are barely correlated.

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mothballed 14 hours ago | parent [-]

I'm not sure why you would expect linear correlation with taxation. Sitting in a jail cell is just as bad whether it's because you owe $1M in tax evasion or $1B. You're conflating backing of violence (which isn't well correlated with actual tax rate, so long as it's above zero so that people have to pay taxes in USD) with backing of nominal taxation.

USA provides more goods and services in nominal value than any other country. The people providing those goods and services have the threat of jail for not paying taxes. Even if you pay them in something like gold they have to account for the USD value and then pay taxes plus taxes on any appreciation vs USD, so there's too much friction for them whether taxation is 10% or 30% not to just accept dollars. Many would probably like to be paid in gold or something but they still have to get USD to settle the debt so you end up with "other thing" + "USD" no matter what, forcing USD as a lingua franca when all those "investments" and "financial markets" settle.

Taxation is the underlying "backing of violence" that helps makes USD so attractive. It's not the level of non-zero taxation but the level of mass potential violence against a large body of relatively productive people for not paying taxes. The IRS will raid someone just as easily no matter the tax rate, so I wouldn't expect raising taxes to do much to raise global demand for USD because the level of violence backing it doesn't change much.

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JumpCrisscross 12 hours ago | parent [-]

> Taxation is the underlying "backing of violence" that helps makes USD so attractive

It really isn’t. If the U.S. shifted to a system of tariff-only taxes, the dollar would still be in demand. If the U.S. let income taxes be paid in the currency of the payer’s choice, most Americans would pay in dollars and irrespectively the dollar would be globally demanded.

There simply isn’t much empirical proof for the taxation hypothesis of the value of money.

	▲	mothballed 12 hours ago \| parent [-]
		Every single taxable US transaction having a non-zero component that must be settled in USD seems like a pretty strong empirical piece of evidence as to why the transaction would settle in USD. You can point to back when US funded itself mostly on tariffs, but I don't know what that would prove, because at that time USD was backed by gold (or silver).

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reactordev 14 hours ago | parent | prev [-]

Storage Wars exists for this