Pro/Cons of Using the Dollar as Foreign Currency?
Can someone explain to me the pros/cons of adopting a foreign currency instead of a countries own currency? For example, Ecuador which uses the US dollar instead of its own currency. What does it lose when it does not use its own currency? What about monetery policies? Can somoeone explain what a country gives up by not having its own currency?
Public Comments
- i was in Costa Rica and we had all of our money changed to collones. the dollar price, while convenient, was a gazillion times higher than the local collone price. not to mention the enlightening experience received from using one of their banks.
- Up until this year the dollar was strong and did not fluctuate like the Ecuador's. But that is changing because out government is allowing the dollar to sink like lead balloon. If that trend continues, it won't be long before such counties change to a more stable currency. The dollar (US) is backed by nothing except the faith and trust of the American people. The problem here is that we just keep making more and more greenbacks which is diluting the currency. Pretty soon it'll be worthless.
- The pro is price stability when the country lacks sufficient reserves to peg their currency's value. The con is they no longer have any monetary powers. All these people claiming the dollar will collapse forget that the value of all the other currencies out their are tied in to the dollar. There's just as many Euros in circulation as dollars. The trade balances eventually offset a decline in value.
- Pro : they don't spend money on printing it. less work for their treasury. economists will have a much easier job of forecasting and planning general economic stability currency will be more stable since US currency is stable (so far) it may attract foreign investor con - They are very dependent on US economy, dependent on monetary policies set by the FED It would be tough for their gov't to promote export or let us say protect importation because they cannot control their currency.
