[Congressional Record (Bound Edition), Volume 147 (2001), Part 10]
[Extensions of Remarks]
[Page 14600]
[From the U.S. Government Publishing Office, www.gpo.gov]


[[Page 14600]]

                          EXTENSIONS OF REMARKS

                  INTERNATIONAL MONETARY STABILITY ACT

                                 ______
                                 

                             HON. PAUL RYAN

                              of wisconsin

                    in the house of representatives

                         Tuesday, July 24, 2001

  Mr. RYAN of Wisconsin. Mr. Speaker, today I am reintroducing the 
International Monetary Stability Act, which I introduced in the 
previous Congress. The need for such an act is more pressing than ever.
  Over the last decade there have been no fewer than seven major 
currency crises in developing countries. They have occurred in Africa's 
CFA franc zone (1993-94), Mexico (1994-95), East Asia (1997-98), Russia 
(1998), Brazil (1999), Turkey (2001), and Argentina (right now). In 
addition, there have been numerous minor crises.
  These currency crises have often brought recession, bank failures, 
and political upheaval to the countries concerned. Some have spilled 
over to other countries and have even affected our own international 
trade and financial markets. American workers who produce goods for 
export to developing countries have seen their international 
competitiveness whipsawed by currency crises. It is no accident that, 
for example, U.S. steel producers have complained about the practices 
of producers in Brazil, South Korea, Russia, Ukraine--all countries 
that have had currency crises in recent years.
  Amid the currency turmoil that has affected so many countries, the 
U.S. dollar has remained reliable. Though not perfect, the dollar is 
the standard by which other currencies are judged. The contrast between 
the performance of the dollar and the performance of most other 
currencies has created growing interest in official dollarization, 
whereby a country substantially or totally replaces its own currency 
with the dollar. By eliminating the national currency, dollarization 
eliminates currency crises. Until recently, Panama and a handful of 
microstates were the only independent dollarized countries. However, 
East Timor and Ecuador became officially dollarized last year, joined 
by El Salvador this year. Dollarization is being debated around the 
world, particularly in Latin America.
  An important barrier to official dollarization is loss of 
seigniorage, the profit from issuing a currency. Currently, a country 
that dollarizes loses seigniorage to the United States. Besides this 
economic cost, dollarization also has a political cost, which is the 
feeling that a country that gives up its national currency receives no 
consideration from the United States for doing so.
  The International Monetary Stability Act would permit the United 
States to share with officially dollarized countries some of the extra 
seigniorage we would earn from them becoming dollarized. The Act would 
not require the Federal Reserve to change U.S. monetary policy. Nor 
would the Act compel the United States to share seigniorage: if the 
Secretary of the Treasury judged that it was not in our best interest, 
he would not have to do so. Nor would the Act restrict countries that 
wish to dollarize: as is already the case, they could dollarize without 
qualifying to share seigniorage.
  Without the International Monetary Stability Act, other relatively 
small countries may join those I have mentioned and become officially 
dollarized in the years to come. However, the larger the country, the 
higher its government and people perceive the economic and political 
costs of dollarization to be. The larger developing countries are 
precisely those whose currency crises have had the greatest 
international effect, including on the United States. The International 
Monetary Stability Act would reduce the perceived costs of 
dollarization in a way that would benefit both the United States and 
countries interested in dollarizing. It would provide a creative 
alternative to the policy of big international bailouts, which are well 
intentioned but have failed to prevent further crises in many of the 
countries that have been the largest recipients.
  Mr. Speaker, monetary stability is in the interest of the United 
States and the rest of the world. Through the International Monetary 
Stability Act we can help extend its benefits.

                          ____________________