This argument is based on the misconception that people have no reason to want to accept fiat money. But actually fiat money is valuable because it performs a service for those who use it, namely the service of a medium of exchange. It's value derives from the fact that there is positive demand for a medium of exchange, and the fact that its supply is finite and controlled by a sufficiently benevolent agency.
It is true that there is positive demand for a medium of exchange. It is not true that fiat money is controlled by a sufficiently benevolent agency, and it is patently not true that there is a finite supply. National monies are in effect, and in demand, because they are mandated by a number of methods. The us$ was made the dominant form by punitive taxation of alternates in the late 1900s. Other countries like the UK managed to destroy competitors, and in the course of this, bankrupt honest note issuers, by subjecting the note issuers to The notion that the current issuer of that money is benevolent is easily tested by circulating alternate monies. Any casino in the US will tell you that the reason they won't permit their chips to go outside is because the feds have quiet words with them. Disregarding journalistic fairy tales like Hiawatha Hours (or whatever they were called), pretty universally, you run the risk of being locked up if you circulate something called money. Of course, the Internet has changed all this. But not as much as you'd think, I'd lay 10 to 1 that if you started an issuer of Internet money on the wrong side of the German border you'd be finding out what bored prison guards talk about. The Federal Reserve of the US has said fairly plainly that you can do this. But the ABA, FinCen, the FBI, the DEA, and any other moralistic department of the US government that wants to get in the act are going to be looking at this with jaundiced eyes. The value of any monopolistic product can be simplistically stated to be driven by supply and demand, but the truth is different. Only when there is free issue of money will we know if a government can compete against the best and brightest of the profit minded world. In the past, the answer was a resounding No, as otherwise, governments would not have had to resort to legislation, taxes and other arbitrary punishments in order to win the field.
Think about it this way. In the case of commodity money, its value comes partly from the industrial/aesthetic value of the commodity and partly from the usefulness of the commodity money as a medium of exchange. In the case of fiat money and b-money, all of its value comes from its usefulness as a medium of exchange.
And a government enforced monopoly. The value of that is calculated at the seignorage, assuming that we agree that no government could compete on fair grounds. That makes the US monopoly worth $25 Bn per annum. iang