Post
Topic
Board Economics
Re: What gives a fiat currency its initial value?
by
hugolp
on 01/07/2011, 15:42:00 UTC
Aside from taxes and and certain types of debts that may not be strictly voluntary, how do legal tender laws impose anything on someone who hasn't willingly incurred a debt?

It destroys your right to contract and makes it useless to create a contract in a currency that is not the legal tender one. Imagine that you sign a contract with me: You do some task in exchange for me paying you 3oz of silver. Now you do the task, and when I comes to pay you, I tell you that Im not going to pay you with silver, but with fiat currency. You dont agree and you demand silver because the contract specifies it. Your only option now is to take me to court where the judge will force you to accept fiat currency to settle my debt with you. You see there is no point on setting the contract in something that is not legal tender since you are going to be forced to accept it anyways.

This is a big incentive towards not using any other currency. Add that you can only pay taxes with fiat currency and you have a de facto monopolly.