To my knowledge there have only been two countries in recent memory that officially declared the US Dollar to be their only national currency: Liberia and Panama. (There are however many countries that have pegged to the dollar without taking this radical position.) As both Liberia and Panama were created by the US, there may be some validity to the conspiracy theory elaborated below.
However, it should be noted that the US did not do much for Liberia when its government lost control of the monetary system in the late eighties (to my knowledge). As for Panama, the US would interfere in its domestic politics no matter what currency it adopted, given the role of the canal. So I have some doubts that a dollarization of Afghanistan would impose any "protectorate" status on Afghanistan or special obligations on the US Federal Reserve System (the use of the dollar was epiphenomenal in these instances as far as US foreign policy was concerned).
The US does not have a history of caring for countries that are linked to the dollar. In the Bretton Woods system, the US did not care about the rest of the world when it inflated the dollar during the Vietnam War & War on Poverty, so I am not sure I follow how the dollarization of Central Asia poses any particular obligations on the US.
The problem that I can see for Afghanistan is that the country's stock of domestic currency will be restricted by the net receipts of foreign exchange. I don't think this will be a good move for a country that is trying to rebuild, but I'm no expert on this stuff. The turn toward the dollar may simply be a desperate attempt to curb hyperinflation and rampant counterfeit currency practices.
The only other country that I can think of which uses another country's currency as its official currency is Kirabati, which relies on the Australian dollar. Does anyone know of other cases in the post-WWII era? As for the Gulf States mentioned in the article, does anyone know if they have officially pegged their currencies to the dollar?
Best,
Vikash Yadav
-----Original Message----- From: owner-lbo-talk at lists.panix.com [mailto:owner-lbo-talk at lists.panix.com]On Behalf Of Hakki Alacakaptan Sent: Sunday, February 17, 2002 12:01 PM To: Lbo-Talk Subject: Dollarizing Central Asia through Afghanistan
Afghanistan: The 51st American State? By theGlobalist
http://www.theglobalist.com/nor/richter/2002/02-01-02.shtml
News reports indicate that IMF officials advising Afghanistan want to delay the introduction of the new local currency. Could it be that - by "dollarizing" Afghanistan - the International Monetary Fund is secretly scheming to make that country a protectorate of the United States?
(...) The 51st state?
Bringing the dollar now to Afghanistan would eventually make the country America's responsibility. It might also bring neighboring Pakistan into the U.S. dollar club as well - as Afghanistan's dollars slip across the border. In fact, dollarization might become a regional trend.
That would be quite an irony indeed. The dollar is already the de facto currency in the Gulf States. Afghanistan and Pakistan would only be following suit.
The Europeans, for their part, hope that dollarizing Afghanistan will force the Bush Administration to put up more of its own dollars - which will help rebuild the country's non-existent economic and social infrastructure.
After all, at a recent Tokyo Conference, Washington offered less than $300 million in aid commitment for Afghanistan's reconstruction.
Against that backdrop, for the United States to give war-torn Afghanistan its very own currency would represent a more potent gift than the aid funds pledged to the country. And, of course, letting Afghanistan have the buck might allow the United States to realize a true geopolitical aim - quietly keeping the euro out of Central Asia.