"We can learn a lot by following the dollars":
Other People’s Dollars, and Their Place in Global Economics, by Paul Krugman, Commentary, NY Times: Soon after arriving here, I stopped at an A.T.M.; I needed some dollars, and all I had were dollars.
O.K., weak joke. What I needed were Australian dollars... There are actually four English-speaking countries with dollars of their own; the others are the Canadian loonie and the New Zealand kiwi. And you can learn a lot about the global economy, busting some popular monetary myths, by comparing those currencies and how they serve their economies.
All four dollar nations are, if you take the long view, highly successful economies..., we’re all wealthy nations that have weathered economic storms better than most of the rest of the world. ...
So what can we learn from these dollar success stories? What myths can we bust?
First, we learn that even relatively small countries closely linked to big neighbors can maintain monetary independence..., that should have been made obvious by the example of Canada...
Second, we learn that what right-wingers call currency “debasement” ... can be a very good thing. Canada was able to combine spending cuts with strong growth in the 1990s because exports were raised by the depreciation of the loonie. Australia rode through the Asian financial crisis of 1997-98 with little damage thanks largely to a falling Aussie. In both cases times would have been much tougher if the countries had been using U.S. dollars, or worse yet been on the gold standard.
Third, we learn that people pay far too much attention to the role national currencies play in the international monetary system..., a glance at Australia shows that both positive and negative claims about the international role of the dollar are wildly exaggerated. The Aussie dollar plays no special role in the world monetary system, yet Australia has consistently attracted bigger inflows of capital relative to the size of its economy — and run proportionately bigger trade deficits — than the United States.
What’s important for both capital and trade, it turns out, is whether your economy offers good investment opportunities under an umbrella of legal and political stability. Whether you control an international currency is a trivial concern by comparison.
So we can learn a lot by following the dollars... And what we learn in particular is that monetary economics should be approached pragmatically, not in terms of mystical notions of value.
Take it from those who share our language, but not our currency: There are many ways to make money work.