Dollarization

If you did a double-take when you first heard the word “dollarization,” no, it’s not a fake word made up by a 12-year-old trying to impress his friends (he’s just really that smart). Dollarization is when someone uses a foreign currency instead of the domestic currency to conduct some business.

Basically, it’s substituting the local currency for a foreign currency in a transaction. For instance, in Cambodian cities, your average corner store has three currencies in the drawer: Cambodian riel, Thai baht, and USD. Yeah, being a cashier in Cambodia is no joke.

Why would they do this? Well, we don’t really do it in the U.S. (at least for now), because the dollar is pretty a-okay, but countries with weaker currencies often do to gain some stability in value and buying power.

Some countries still on the up-and-up might be facing crazy inflation, which makes their money worth nothing (imagine if the price of everything you buy on the reg went up 3,000%...the stuff of true nightmares). If you switch to doing some transactions in a foreign currency that’s stable...instead of your currency, which is off its rocker...you can benefit off that stability and retain the value of your money.

Dollarization, baby.