Instability Ahead as Shady Dealers Bail Out of Dollars

Dollar Loses Favor with Drug Dealers

You have already heard about the "weak U.S. dollar" and how it has lost a lot of value compared to the euro. Currencies have ups and downs, and this is not necessarily anything different or surprising. However, when you find specialized sectors, such as illegal "black markets" for drugs, or guns, or bribes, turning away from the U.S. dollar, it's really time to sit up and take notice. Here are a few items that we collected recently. Decide for yourself whether we're looking at something more than just a routine fluctuation in the dollar.

from stopthedrugwar.org -- The US dollar has long been the world's de facto common currency, but with it declining in value against the Euro and other currencies, it is beginning to lose favor with some cash connoisseurs including global drug dealers, Grant's Interest Rate Observer reported last month in a story picked up by Slate.com. With the dollar continuing to slide against foreign currencies, it is just not as handy as it once was for people who want to move large amounts of cash, Grant's reported. With more than half of the more than $700 billion worth of dollars in circulation being held outside the US, according to the Federal Reserve, the greenback has long been the favorite of drug dealers, black marketeers, arms dealers, and anyone else who would like to keep his transactions off the books and his assets in liquid form. But now, the dollar's reign as king of the cash economy is being challenged by the Euro. For the last two years, the number of Euros in circulation has been expanding faster than the supply of dollars, and it is becoming the currency of choice for those lovers of liquid cash. Part of the Euro's new appeal to the underground economy, Grant's reported, is its strength relative to the declining dollar. But equally important is the fact that while the largest US denomination readily available is the $100 bill, the European Central Bank has started in recent years to print 200- and 500-Euro notes. With a 500-Euro note worth $682 at today's rates, better those big Euro notes than bulky dollars. And those Euro notes are showing up in places where the dollar was formerly king -- such as the stomachs of drug couriers. Indeed, Grant's noted the October bust of a drug dealer flying between Spain and Colombia, who was carrying $197,000 in Euros -- not dollars -- in his stomach. While most may not shed a tear over the loss of drug dealers and other unsavory characters as clients of the dollar, Americans might want to ask what has happened to our much-vaunted dollar to cause it to lose ground as the world's common currency.

Meanwhile -- China Online reported more than a year ago, "Demand for euro picks up on currency black market -- While demand for the U.S. dollar on China's black market continues to shrink, the euro is being increasingly noticed." And from Daniel Gross of danielgross.net, "For most products, losing international drug cartels and corrupt Third World dictators as customers would seem to be a desirable outcome. But these guys represent part of our long-standing and faithful base. [Most U.S. currency circulates outside the country and the dollar's stability depends on that continuing.] If you think pundits are fretting about the slumping dollar now, just imagine what might happen if we start to lose the arms dealers."

Also see: Fred Foldvary on A Common Currency Creates More Wealth http://www.progress.org/archive/fold176.htm Alex Noury explores The Economy's "Informal Sector" http://www.progress.org/2003/noury03.htm

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