Latin American countries moving away from dollar

[cyu]

Good move in terms of moving away from the dollar... as for what they are replacing it with, time will tell. Replacing one fiat money with another may give you more control if it's your own fiat money, but it is still fiat money.

Excerpts from http://www.presstv.ir/detail.aspx?id=108916&sectionid=351020706

Leftist Latin American leaders have agreed on using a new intra- regional trading currency, dubbed as Sucre, instead of the US dollar.

During the seventh ALBA summit, the leaders agreed on the currency reform as well as approving plans to impose economic sanctions against the coup leaders in Honduras

The nine members of ALBA, conceived by Venezuelan President Hugo Chavez, are Cuba, Dominica, Venezuela, Ecuador, Nicaragua, Honduras, Saint Vincent and Antigua, Bolivia and Barbuda.

Excerpt from http://www.vheadline.com/readnews.asp?id=84934

The Cochabamba summit is also expected to lay the groundwork for a regional arbitrage mechanism to replace the International Center for Settlement of Regional Disputes, a World Bank organization.

Most ALBA members have already withdrawn from the ICSRD, with Ecuador announcing last July that it would pull out of the group.

[ellipsis]

Cuba still has a vibrant black market run in USD.

[cyu]

Recent news on the dollar:

http://www.reddit.com/r/Economics/search?q=dollar&sort=top&t=month

[farleft]

The Independent (http://www.independent.co.uk/news/business/news/the-demise-of-the-dollar-1798175.html) had an article similar to this, though it's not just latin America.

"In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar. Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.
The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years."

[cyu]

may help to explain the sudden rise in gold prices

As far as gold goes, from http://knol.google.com/k/j-y/gold-standard/gcybcajus7dp/2

Before the invention of money (long long ago, in a galaxy not so far away), people used barter in order to get the things they didn't have enough of. This became quite cumbersome, so they agreed on a representative unit of wealth. Rather than having to carry around anvils, or fish, or wool whenever you had to buy something, they instead carried around this unit of currency - in many cases, it was gold (today, it might be dollars).

At some point in the history of banking, this unit of currency was no longer used, but was instead replaced by the writing of paper checks from one bank account to another. However the gold remained in the bank, even though it was no longer used - this was an attempt to give some legitimacy to the new paper notes being used - the gold standard.

The problem with this idea is that it is similar to the creation of a "dollar standard" - creating a new currency to use, while holding a reserve of dollars in the bank to give the new currency some legitimacy. The problem is that the commodity held in reserve was merely a unit of exchange and derives its value mainly from its previous use as currency. The original backing of the currency is lost.

The Sumerians, as part of their development of a standard of weights and measures, placed the royal stamp on each piece of gold to guarantee that it was the same amount as every other similarly stamped gold piece. They simply agreed that this was worth a bushel of wheat - the value was never in the gold. For each amount of gold issued by the king, a certain amount of wheat is kept in reserve in order to ensure that gold has some value. This ensures that the value of the gold with respect to wheat did not change - no inflation. When the gold is returned to the king, it is redeemed with the wheat that it represented. This, in effect, is a "wheat standard".

It would actually be a good thing if we could convince all wealthy capitalists to convert their entire fortunes into gold. If all the gold is in their hands, all the rest of us have to do is stop accepting it as payment for anything. This in effect renders all their gold worthless. We produce the food, we produce the electricity, we build the homes, we make the clothes. If they can't trade gold for any of that, then they are screwed.

I am not arguing that fiat money is better than gold - just like an atheist wouldn't be arguing that Zeus is better than Osiris. An atheist would be arguing that both Zeus and Osiris are worthless. Similarly, I'm arguing that no country should set a goal of trying to collect either foreign currency or gold in their reserves. Instead, they should be building up their productive ability - y'know, like what Adam Smith said was the real Wealth of Nations.
===============

So why is gold still considered valuable? See Demand is not measured in units of people, it is measured in units of money (http://knol.google.com/k/j-y/demand-is-not-measured-in-units-of/gcybcajus7dp/4)

[Raúl Duke]

Cuba still has a vibrant black market run in USD.

Well I won't deny this could be true (due to money sent by the Miami exiles to Cuba, etc), but recently I heard that the euro is becoming more favorable due to high influx of European tourists. Although since now the U.S. is easing their travel restrictions then perhaps this USD dominance may be able to compete with the euro's rise in Cuba (in terms of black market; I myself would think that the Cuban government, in terms of money reserves, would be follwing the same trend as these other Latin-American countries).

[ellipsis]

Well I won't deny this could be true (due to money sent by the Miami exiles to Cuba, etc), but recently I heard that the euro is becoming more favorable due to high influx of European tourists. Although since now the U.S. is easing their travel restrictions then perhaps this USD dominance may be able to compete with the euro's rise in Cuba (in terms of black market; I myself would think that the Cuban government, in terms of money reserves, would be follwing the same trend as these other Latin-American countries).
Well I haven't been there in almost 8 years now, so thing may have changed. Euros were still being used when I was there, but dollars are king. At some point they accepted that there was a demand and use of dollars so they had a dual currency system with pesos and dollars. But now they have a cuban equivalent(CUCs?) that replaced the dollar officially, which are seperate from peoples salaries and can be used outside of gov. farmers markets, bill paying etc. But I imagine that dollars and euros are still the choosen currency of the black market, oh and cigarettes.