Tuesday, June 25, 2013

Ecuador's Strange Currency Policy

Heroic whistleblower Edward Snowden, who is being pursued by the Obama government for exposing its lies, its hypocricy and its violations of people's privacy, has been criticized by some for hiding in countries which violate human rights, like China, Russia and in the future possibly Cuba, Venezuela or Ecuador.

But that doesn't reflect sympathy for such governments (as a Ron Paul-supporter, Snowden is of course opposed to all political authoritarian policies) or unawareness that they're not consistent guardians of human rights. What it likely means is that Snowden knows that governments that for various reasons wants to "stick it" to the U.S. governments are precisely the ones that would resist U.S. pressure to have him extradited. By contrast, for example Iceland, who was previously mentioned as a possible haven for Snowden is a country that is eager to maintain good relations with the U.S. government, and is dependent on it through the Icelandic membership in NATO (and its lack of an own military)  for its national defense. If I had been Snowden, I would therefore have felt a lot less safe in Iceland than in Russia, Venezuela or Ecuador.

However, the fact that Ecuador might be Snowden's final destination makes its currency policy seem very strange. Ecuador is one of the Latin American countries that has unilaterally imposed the U.S. dollar as its currency. But unlike the countries that are formally part of the euro area, Ecuador's participation in the dollar area does't give the country any part of the seigniorage profits that the printging of the dollars used in its country creates. Instead, all these profits goes to the U.S. government, the government that Ecuadoräs government wants to "stick it to", by for example giving Snowden asylum. Having the U.S. dollar as currency thus in effects amounts to foreign aid to the U.S., by a government supposedly committed to fighting its imperialism.

Considering that a key reason for wanting to share a currency is to promote trade relation and considering that the Ecuadorian government's hostile relationship to the U.S. government is likely to limit trade, the choice of U.S. dollars as currency is all the more strange


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