USD Preference in Unstable Economies
The cluster discusses why people in countries with volatile local currencies like the Russian Ruble or Argentinian Peso prefer holding or transacting in US dollars, including dollarization, black markets, and avoiding local currency instability.
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So government says pay taxes in USD etc? How would people not hold a lot of usd.
Check out FX charts for Russian Ruble, Argentinian Peso, Turkish Lyra or even the British Pound. Then ask yourself which of these countries have financial institutions that allow their clients to seamlessly transact in more stable currencies like US dollar or Euro and you have your answer.
Why else would you want to avoid transacting in USD?
Are you referring to the fact that their currency is USD which they don't control therefore can be pushed around by the USG?
Those people would rather be using USD.
My understanding is that in those circumstances the people move to US dollars.
That might be a thing in countries with less stable currencies. You won't see anyone with dollars in Europe or Japan.
It's only up or down if they are planning on exchanging it for USD, instead of using it as a currency.
Ah, I read that as the opposite way around - wanting to avoid their own currency because of volatility. My bad.
Wouldn't it be a fault of the currency's physical nature?