JupiterIndustries
Banded Mongoose
I haven’t read the entire thread yet, so I may be repeating some earlier points, but I’ve given this topic some thought in the past and here’s my take.
In an economy backed by fiat-currency, the value of money is based primarily on the stability and authority of the issuing state rather than on any physical commodity. As long as the Imperium remains intact, Imperial Credits can continue to function as a universal medium of exchange. However, they are not redeemable for gold, silver, fancy baubles, etc. The value of credits rests solely on the continued existence and legitimacy of the Imperium. From the issuer’s perspective, fiat currency is effectively “worthless” in the sense that the state can create it at will and is not constrained by supply in the same way private users are.
Taxes in such a system are not about “paying for” state activity and are instead about regulating the money supply. Since the state can always issue more currency, its true financial power lies in controlling fiscal and monetary policy. Taxes are key because they create supplier side demand for the currency which creates a mandate on those using it, not because the government needs it to pay for things.
If the government significantly increases currency issuance without corresponding increases in taxation or other stabilizing measures, inflation results: because there is more money circulating without a matching increase in goods and services, leading to higher prices due to increased demand for the same supply.
However, the scale of the economy matters. A vast interstellar economy like the Imperium has can absorb much greater spending before experiencing severe inflationary pressure compared to a planetary super power. This enormous economic capacity is what allows the Imperium to undertake massive megaprojects without the destabilizing effects of hyperinflation.
Another key factor is that since the Imperium generally does not manage local planetary economies; its concern is primarily interstellar infrastructure, trade routes, and security. Local economic fluctuations only become relevant when they threaten interstellar trade. This allows the Imperium to focus its fiscal power on maintaining and expanding interstellar trade networks, which obviously rebalances the economic budget in favour of a military industrial complex that can continue to sustain such an economy.
The Imperium also has the leverage that this creates to levy taxes or duties on specific regions or trade activities to help balance the system. Again, these taxes do not “fund” specific projects (since we don't pay for things with tax directly); they simply serve as a tool to regulate currency circulation and maintain economic stability, nothing more.
In an economy backed by fiat-currency, the value of money is based primarily on the stability and authority of the issuing state rather than on any physical commodity. As long as the Imperium remains intact, Imperial Credits can continue to function as a universal medium of exchange. However, they are not redeemable for gold, silver, fancy baubles, etc. The value of credits rests solely on the continued existence and legitimacy of the Imperium. From the issuer’s perspective, fiat currency is effectively “worthless” in the sense that the state can create it at will and is not constrained by supply in the same way private users are.
Taxes in such a system are not about “paying for” state activity and are instead about regulating the money supply. Since the state can always issue more currency, its true financial power lies in controlling fiscal and monetary policy. Taxes are key because they create supplier side demand for the currency which creates a mandate on those using it, not because the government needs it to pay for things.
If the government significantly increases currency issuance without corresponding increases in taxation or other stabilizing measures, inflation results: because there is more money circulating without a matching increase in goods and services, leading to higher prices due to increased demand for the same supply.
However, the scale of the economy matters. A vast interstellar economy like the Imperium has can absorb much greater spending before experiencing severe inflationary pressure compared to a planetary super power. This enormous economic capacity is what allows the Imperium to undertake massive megaprojects without the destabilizing effects of hyperinflation.
Another key factor is that since the Imperium generally does not manage local planetary economies; its concern is primarily interstellar infrastructure, trade routes, and security. Local economic fluctuations only become relevant when they threaten interstellar trade. This allows the Imperium to focus its fiscal power on maintaining and expanding interstellar trade networks, which obviously rebalances the economic budget in favour of a military industrial complex that can continue to sustain such an economy.
The Imperium also has the leverage that this creates to levy taxes or duties on specific regions or trade activities to help balance the system. Again, these taxes do not “fund” specific projects (since we don't pay for things with tax directly); they simply serve as a tool to regulate currency circulation and maintain economic stability, nothing more.
