Thomas Grant Edwards <tedwards@src.umd.edu> writes: TS+Actually, the "backing" of a fiat currency is the need to have some +around to pay your taxes, else you go to jail. You are taxed on many +types of income, even if they are not directly exchanged in the fiat +currency. Somehow you have to get some. This is pretty much true, but does not logically justify your conclusion: TS+This also means that higher taxes can make the currency more
desirable, +lower taxes less, higher government spending less, lower government +spending more, etc.
This is only somewhat true. The most important factor is that currencies are traded on a fairly free market. This means supply and demand, not any firm intrinsic qualities of anything, dominate. If a country is running a positive net balance, whether by trade, capital investment, or influx of rich refugees, there will be a demand for its funnypaper, and that paper's price, in other currencies will rise. The same will apply to currencies not attached to countries -- such as the NetCredit, which I am working to put into reticulation. That's electronic for "circulation". :-) The hardest currencies, roughly in order, are those of Switzerland, Taiwan, and Japan. Germany is no longer on the list because Kohl bought the second last election in the most expensive bit of bribery in the history of democratic politics: the couple of trillion dollars he spent by assigning par value to the OstMark. Hong Kong is not on the list because of the huge outflows for the development of China, which tends to balance supply and demand at a lower/softer level than it would otherwise have. The US is no longer on the list because Reagan booted the whole thing into the can. Best, -dlj. -dlj. david.lloyd-jones@canrem.com * 1st 1.11 #3818 * Who won't do the arithmetic will live by stupid policies.