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RE: Have You Heard of Modern Monetary Theory?
Fiat currency is not backed by some commodity but basically by the trust people have of whoever emits any given currency. And it's very easy to trust a currency backed by the most powerful country in the history of the planet, for example. Backed by its infrastructure, workers, productivity, economy size, etc. As for what this lady is talking about, it makes a lot of sense to me.
Fiat currency is backed by the threat of punishment as it relates to your tax liability. If the government only accepts that currency for the payment of taxes and nothing else, then you're going to want that currency so that you don't go to jail or have your assets sold off.
But I agree, Pavlina Tcherneva knows what she's talking about.
Cryptocurrency can never take over as a main currency because if it has a guarantee from a government it becomes a fiat currency. A cryptocurrency is only worth something if people trade it, which is a big hurdle to overcome. There isn't much cryptocurrency trade outside the circles.
Except I don't pay any taxes to the USA (certainly not directly), for example. Nor do any number of foreigners who rely on the US dollar for their savings and even do U$S transactions within their own country. Same (or similar) applies to bond holders. They trust it. No threat.
Can you be more specific about the countries to which you're referring?
I know that Timor Leste uses the US dollar as it's currency. If you don't pay your taxes to them in US dollars, you go to jail.
If you're talking about black market transactions, they hurt the local economy.
People living in any number of third-world countries whose national currency is shitty and prone to exorbitant inflation rely on the US dollar instead.
Are you talking about black market transactions?
Not really, you can buy US dollars in official exchange houses virtually all over the world.
Okay, but those dollars aren't bought for countries to use in their own private sector - they use them for importing goods (that's the foreign sector).