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Comment by md_ | Hacker News Reader

Why is #1 a goal? I’m assuming because of some desire to maintain the independence of a central bank in the occupied country?

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That's right. In the US's case, if it was protecting a weakened friendly country or trying to rebuild a not-so-friendly one, dollarizing the economy would have undermined the occupied government and interfered with the US's overall goals. Using cancellable paper certificates like MPC or a closed loop electronic system like EagleCash prevented leakage of US dollars into the local economy.

You couldn't be more wrong.

The US Army shipped 12 _BILLION_ dollar in cash, multiple cargo flights to Iraq filled with pallets of nice fresh stacks of cash.

but they care to avoid dollarizing conquered countries? LOL.

They just want control over soldiers finances, so that there are no black markets, no soldiers buying drugs and paying hookers, becoming targets for petty crime, or selling weapons/ammo/info.

Dollarization of other nations is in the US national interest, read up some congressional transcripts.

Those cash shipments to Iraq were the Iraqi central bank withdrawing funds from accounts in the US. The money was Iraqi money, mostly from oil sales. They asked for it back. The US handed it over to the Iraqi central bank officials. Most of it was used to pay Iraqi government employees during reconstruction.

Yes. Very much so. In the beginning of my first deployment, the provisional government of Iraq rejected the BSA, so we pulled out and I redeployed to Afghanistan. During my second deployment, the Karzai government significantly reduced the BSA, and all regular forces pulled out around me. Both times, one of the biggest issues was dollars coming into the economy through US contracts and on-base merchants. This is good for them at first, but it turns the country into an import economy, and kills internal business. You can see this effect visually in the buildup of trash from imports replacing sustainable practices. 1000-year-old family farms gone fallow and covered in trash mixed with human waste. We tried to fix this with teams of Americans going around teaching Afghans how to do all the things they used to do before the onset of foreign aid.

I don’t understand why using USD results in an import economy. There’s nothing that stops dollars from circulating domestically, is there?

I was suggesting it reduces the government’s ability to apply monetary policy, but that’s a bit different than your point I think, no?

There are a couple of things. The simplest one is that dollars leave the economy as soon as you deposit them in a bank because they get lent internationally versus local currency loans that stay local. The other is that imports are generally preferred in developing economies. It’s also hard for the government to tax transactions made in a foreign currency because they only really see local bank transactions and foreign exchanges.

I imagine part of it is reducing the incentive for nation state actors to engage in counterfeiting.[1]

[1]: https://en.wikipedia.org/wiki/Superdollar

I don’t really buy that. USD is still sufficiently used (in cash) in high denominations. Reducing that usage to the point that it deters counterfeiting would presumably reduce the impact of the dollar globally, which is likely against the US’s national interest.

Dollarization of other countries is in the national interest of the US.

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