limited to twenty percent of the total economy is feasible in the manner I have outlined above. there is no evidence of a non convertible currency that wasn't required for some kind of tax payment having value. nor can theory or logic support your contention. "My question is whether, in the absence of taxes, the public would accept State fiat currency as legal tender for the settlement of all debts, public and private. I believe that the answer is affirmative. There is plenty of evidence for this in economies where taxes are very low or non-existent." I run into this a lot -- that people believe money has value simply because everybody has agreed to accept that it has value. It is a theory that is not entirely without merit, but I think that such a faith-based system could not remain a stable system in the long term. In Ithaca, NY (where Cornell is), there is something called the Ithaca HOURS which is such a fiat currency that exists in the absence of explicit taxation. It probably only works to some extent because it represents a very small fraction of total transactions and savings (so nobody is holding enough of them at any one time that he would be worried about the risk of it becoming worthless). Of course, one (perhaps I) could argue that gold is such a faith-based system. Gold has little industrial use, and its value appears to stem primarily form its scarcity and its history of