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Interesting. Other than the lack of control(which in some cases may be argued as a good thing), are there any downsides to adopting the USD as national currency

Interesting. Other than the lack of control(which in some cases may be argued as a good thing), are there any downsides to adopting the USD as national currency?

mughinn 3y ago
The downside is that you lose seigniorage (basically the "tax" the government gains from printing coin), so now the country gives that to the US and can only take money from debt and taxes This is, of course, a different way to name the "lack of control" you mention
TMWNN 3y ago
If (a big if) one accepts said lack of control as a given then, no, for a historically chronically mismanaged country like Argentina, there are no downsides. The situation is different for every country. The Eurozone includes many Western European countries with historically better records of monetary and fiscal discipline than Argentina, that have nonetheless decided that the benefits of using the same currency as its neighbors outweigh the loss of self-control. History will decide whether this view is correct; there certainly is no shortage of economists that argue that the likes of France or Netherlands having the same interest rate as Greece or Spain is a foolish idea. The UK never was a member of the Eurozone before Brexit, and no Scandinavian EU member is, either, all actively or passively remaining outside (not including non-EU member Norway). Conversely, the Bank of Canada has several times studied Canada adopting the US dollar.
- yorwba 3y ago
  > the likes of France or Netherlands having the same interest rate as Greece or Spain is a foolish idea Which is why countries in the Eurozone issue their own government bonds, each at a different interest rate. https://www.ecb.europa.eu/stats/financial_markets_and_interest_rates/long_term_interest_rates/html/index.en.html https://www.ecb.europa.eu/stats/financial_markets_and_intere... The currency a country uses and the interest it pays are two different things. You could also imagine a group of countries with separate currencies agreeing to take on debt at the same interest rate, with differences in perceived risk resulting in corresponding exchange rate drift.

Interesting. Other than the lack of control(which in some cases may be argued as a good thing), are there any downsides to adopting the USD as national currency?

mughinn 3y ago

The downside is that you lose seigniorage (basically the "tax" the government gains from printing coin), so now the country gives that to the US and can only take money from debt and taxes This is, of course, a different way to name the "lack of control" you mention

TMWNN 3y ago

If (a big if) one accepts said lack of control as a given then, no, for a historically chronically mismanaged country like Argentina, there are no downsides. The situation is different for every country. The Eurozone includes many Western European countries with historically better records of monetary and fiscal discipline than Argentina, that have nonetheless decided that the benefits of using the same currency as its neighbors outweigh the loss of self-control. History will decide whether this view is correct; there certainly is no shortage of economists that argue that the likes of France or Netherlands having the same interest rate as Greece or Spain is a foolish idea. The UK never was a member of the Eurozone before Brexit, and no Scandinavian EU member is, either, all actively or passively remaining outside (not including non-EU member Norway). Conversely, the Bank of Canada has several times studied Canada adopting the US dollar.

yorwba 3y ago
> the likes of France or Netherlands having the same interest rate as Greece or Spain is a foolish idea Which is why countries in the Eurozone issue their own government bonds, each at a different interest rate. https://www.ecb.europa.eu/stats/financial_markets_and_interest_rates/long_term_interest_rates/html/index.en.html https://www.ecb.europa.eu/stats/financial_markets_and_intere... The currency a country uses and the interest it pays are two different things. You could also imagine a group of countries with separate currencies agreeing to take on debt at the same interest rate, with differences in perceived risk resulting in corresponding exchange rate drift.