All Hail the Dollar

From some reason, the news media seems unable to report on issues regarding international currencies. I’m not sure why this is, but once people start talking “dollars” and “euros,” everyone’s eyes start to glaze over. Otherwise fine reporters become a mixture of alarmism and incoherence. It’s as if currencies are like, say, very large hurricanes.
Daniel Gross has an article on today’s New York Times on the growing trend of Latin American countries abandoning their sovereign currencies for the U.S. dollar. Is this a good thing, or a bad thing? I think Dr. Roubini answers the question well.

“If you have sound economic policies in a country, you don’t need dollarization,” said Nouriel Roubini, professor of economics at New York University’s Stern School of Business. “And if you follow poor policies, I don’t think dollarization will solve your problems.”

Currencies themselves don’t produce wealth, or the lack thereof. Currencies are only as strong as the economies they support. Disraeli said (rightly): “Our gold standard is not the cause, but the consequence of our commercial prosperity.”

Posted by on February 19th, 2006 at 4:53 pm


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