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Strategies & Market Trends : Asia Forum
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To: DMaA who wrote (7901)1/22/1999 1:04:00 PM
From: Henry Volquardsen  Read Replies (2) of 9980
 
Wether they should dollarize probably depends more on their willingness to adopt real market oriented reforms than on wether or not they have the reserves to pull it off. Take Russia as an example. If they dollarized without instituting significant reforms on both the legal and economic front the resulting strains would be very difficult to withstand. So my opinion is that Russia shouldn't even remotely consider such a move at this time.

Brazil is probably in a better position but at this point in time still has work to do.

FWIW I do not believe that Argentina will dollarize any time soon. I believe the current talk about dollarization is their way of showing how firmly commited they are to the currency board.

As far as an upside and downside for the US. The upside is that our businesses have absolutely zero currency risk when dealing in those markets. Plus it should eventually stabilize and encourage growth in those markets. The downside is more of a political question. Once a country dollarizes they are at the whims of our monetary policy. While they don't have direct input they certainly can lobby. So if at some point the number of countrys that dollarize becomes significant they and those members of the US business community that deal in those countrys might lobby for moves in US policy based on economic events outside of the US. But all in all that is not a huge downside as non US economic events are already exerting more and more influence on US economic policy.
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