Dollarization Essay, Research Paper

Richard W. Stevenson s article Greenspan View on Wider Use of Dollar discusses a process he refers to as dollarization. According to Mr. Stevenson, A number of countries have been considering abandoning their national currencies and adopting the American dollar the accepted international benchmark of stability as a way of reducing interest rates, inflation, and exchange rate volatility. It is this process that he refers to as dollarization. According to the article, several countries already use the dollar as their official currency and many, such as Russia and the Philippines, have yet to make it official even though the dollar is widely circulated there. In fact So strong is foreign demand for dollars that roughly two-thirds of all American currency is in circulation outside the United States.

The demand for dollars outside the US is understandable, especially in the instance of Russia. The businessmen have little trust in their national currency due to the fact that inflation is out of control, it is therefor more prudent to conduct business in a more stable currency, such as the American dollar. Under the circumstances, it seems that official conversion to dollars is the next logical step, and economically speaking it is. However no government can operate based strictly on economic reasons, there is the issue of nationalism. Most people would be insulted to know that their country is adopting a new national currency. It must also be noted that the US is only willing to go through with this possibility if the countries are looking to adopt not only the dollar, but also the types of policies that are required to create stability. In other words, the US is on a political Crusade to convert other countries to its economical policies. That is where the comparison to the Euro (present throughout the entire article) fails. The Euro signifies an economical and political union of several able countries. Dollarization is yet another attempt of the US government to exert its influence on other countries affairs.