Why Do Some Countries Use Foreign Currencies?

currencies throughout the world that there are approximately 180 currencies circulating at around 197 countries this means that there are several countries in the world that don't use their own currency either sharing one with neighboring Nations through a monetary Union or simply choosing to use a foreign country's currency due to their own being too weak or unstable or simply to facilitate trade in the last case the foreign currency can either replace or be used alongside the national one we see examples of this all the time in Montenegro and Kosovo as well as San Marino the Vatican and Monaco the euro is commonly used despite the countries not being in the Eurozone and Dora did this too until they officially joined in 2013 and the US dollar is widely used across the world despite only being an official currency in a couple of countries as we'll see ahead in this video I want to go through those countries that don't use their own currency understanding which they are and why that is the case it's very rare that a country doesn't have their own currency in fact I believe that if you exclude monetary unions where countries share a currency rather than using someone else's there's very few countries in the world that don't have their own currency at least officially I believe the only ones are Ecuador who adopted the US dollar in 2000 to try and solve a monetary and financial crisis El Salvador who in 2001 replaced their old currency the colon with the US dollar Zimbabwe which since 2008 is a complete Mass currency-wise I'll get into it in a minute and Palestine where both the Israeli new shekel and the Jordan dinar are used plus although small states in Europe we saw use the euro with all others what happens is that sometimes local currencies are so weak and unstable that a foreign currency becomes the de facto currency used in the country alongside it meaning that the national one exists but no one really uses it on a day-to-day basis sometimes times they are so devalued that you would have to carry around insane amounts of physical money to be able to use it the most common unofficial de facto currency in the world seems to be the US dollar I won't get too deep into explaining why I myself am not sure but I believe it has to do with the 1944 Breton Woods agreements where countries agree to back up their own currencies with dollars instead of gold reserves it's also a reasonably strong currency and allows for countries with poor monetary statuses that have a stable currency circulating we can see it in this article from The New York Times in 2011 which states that for Ecuador adapting the dollar was a way of imposing strict fiscal discipline in effect by turning monetary policy over to the United States Federal Reserve board this means that the fate of dozens of countries rests on the U.S fiscal health and millions upon millions of people even outside its own borders you see this dependence on the US makes the state of their economy that much 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fact each of their 12 sales so far has has delivered positive returns and last year they handed back 25.8 million dollars in total net returns to their investors over 670 000 users have signed up so far so there's usually a wait list to invest but my subscribers can skip it by using the special link in the description now back to the video so which countries use foreign currencies along with their own with the foreign one usually taking over countries using the US dollar as their currency include the American Associated States like the Marshall Islands and Micronesia but also the British Virgin Islands Palau Turks and Caicos or Aruba but also full-on countries like Cambodia the Dominican Republic Iraq Lebanon El Salvador or Venezuela which are all examples of this but arguably there's a gigantic list of countries in the world where you could purchase things with both US dollars or Euros Ecuador Panama Timor lest and El Salvador do the same but differ in the aspect that they have legally established the US dollar as a co-official currency along with their own and I believe Zimbabwe as well Zimbabwe is a good example of how other currencies other than the US dollar and the Euro are used abroad due to its hyper inflation the government there allowed the circulation of foreign currencies since 2008 and it currently has eight accepted currencies in addition to the US dollar the South African rand the Botswana Pula the British pound the Australian dollar the Chinese Yuan the Indian rupee and the Japanese Yen are all used and for instance the Hong Kong dollar is widely used and accepted in the neighboring Macau despite not being officially a currency there the Australian dollar is also widely used along many Pacific Islands and this also takes place in dependent territories all the dependent territories of the United Kingdom use the British pound and all overseas territories of France use the euro to sum up this part across the world at least 13 countries don't have their own currency using a phone one instead in addition various countries also use foreign currency simultaneously to their own there are so many and in most cases in unofficial form that it's hard to know exactly how many and which they are so now that we've understood this let's get into the other category which is countries that also don't have their own currency but because they share one with other nations being a part of a monetary or currency Union there are at least 10 currency unions in the world some fully embraced and official While others are slightly informal at times but still exist I'm just going to mention them briefly if you want I can make a full video on all the monetary units that exist in their history here we're just gonna find out which they are and where they exist we can first have a general overview of which these unions are and where they are located in the world with countries being grouped up by color in this map and as we can see there's a bunch of them and a good amount of countries in the world are in fact grouped up in monetary unions but let's get into specific examples first the Eurozone 20 countries of the European Union use a single currency like we saw special territories of these countries across the world also use them in addition to some other European countries that use them unofficially there's also the lesser-known monetary Union in Europe between lichenstein and Switzerland who both use the Swiss franc this exists since 1920 with Switzerland accepting to Aid lichenstein after they were struggling at the end of world war one due to being arguably unfairly associated with the Central Powers the other two bigger ones are somewhat connected to each other and they are the CFA Frank unions since 1945 two groups of African countries began using the same currency which I believe are also interchangeable there is a West African Frank used by Benin Burkina Faso cotivoire Guinea pisau Mali Niger Seneca and Togo and a Central African Frank used by Cameroon the Central African Republic Chad Equatorial Guinea Gabon and the Republic of the Congo 14 countries overall both have a fixed exchange rate the Euro the Caspian report did a great video on this because that fixed rate is determined by different government it's important to note all of these countries were previously French colonies arguably still controlling the monetary policy of all of these now independent nations the decision to have a fixed rate of a currency Associated to another also happens a lot with US Dollars there's at least 13 countries in the world that have their currency with a fixed exchange rate to the dollar Bahrain Belize Cuba Djibouti Eritrea Hong Kong Jordan Lebanon Oman Panama Qatar Saudi Arabia and the UAE there are also three overseas French territories that don't use the euro using instead a similarly named French Pacific Frank these are French Polynesia New Caledonia and Wallis and Fortuna and the Caribbean another monetary Union exists the Eastern Caribbean dollar used by eight countries and Gila Antigua and Barbuda Dominica Granada mosura Saint Kitts and Nevis Saint Lucia and Saint Vincent and the Grenadines as you may notice throughout the video there's a lot of countries currencies that are also called dollar although in modern times this may be a direct influence of the US dollar name the etymology of the word is quite interesting in 1520 the kingdom of bohemia began minting coins from Silver mined locally in Joachim style the coins were called Joaquin staller after the mine location this became shortened in common usage to dollar or taller the German name eventually found its way into other languages Czech and Slovenian Tolar Hungarian talet Danish Norwegian and Swedish dollar Ethiopian talari and into English as dollar next precisely the Australian dollar this is an informal Union but Australia along with its external territories uses this currency in addition to the countries of kiribas nauru and tuvalu arguably this is the case of the three countries using F1 currency rather than a monetary Union the British pound sterling is a semi-formal monetary Union it's used by the UK and all constituent countries Scotland Northern Ireland Wales and England along with the British overseas territories are fun fact British Antarctica is listed among these but I doubt there's many purchases going on down there Crown dependencies such as Guernsey Jersey or the Isle of Man also use it there is however some differentiation and many of the overseas territories have their own pound like the Gibraltar pound or the Falkland pound the regular British pound also circulates and the local currencies have their value Associated to the GBP which means there's a fixed exchange rate between them the New Zealand dollar is similar being used in their territories of Cook Islands but also the pit current Islands despite this one being a UK territory the Indian rupee like the Australian dollar is an informal Union and arguably a case of foreign usage it's used in Bhutan and Nepal as well although not much in the latter in southern Africa there's also a monetary Union the South African rand is officially used by South Advocate itself but also Namibia Botswana lesoto and iswatini and finally a one-of-a-kind monetary Union exists between Singapore and Brunei the Singapore dollar and the Brunei dollar are since 1967 mutually accepted in both countries and managed together by the monetary authority of Singapore they also match in value so those are the countries in the world that don't use their own currency understanding that there are three cases in which that happens first countries that never had or chose to abandon their own currency entirely adopting a foreign one this may have happened to facilitate Trade Express a desire to join a political union or as a response to a financial crisis resorting to that other countries mechanisms of monetary management second countries that still have their own currency but where one or more foreign ones are also accepted this one can also be separated into those that have officially accepted a foreign currency as being legally part of their monetary system very few across the world and those who see US dollars or Euros used on a daily basis by tourists foreigners or even their own people but not legally viewing it as an official currency this happens for instance in Venezuela due to their hyperinflation as well as in many African or Middle Eastern countries here we also got to learn why the US dollar is mostly used due to its role as the global Reserve currency and third countries which are a part of a monetary or currency Union therefore not having their own currency but also not using another specific country's currency instead sharing it with one or more nations are there any other crises of countries that don't use their own currency that I forgot to mention and do you have any corrections or additional informations about this topic let me know in the comments thanks so much for watching this video subscribe if you want and I will see you next time for more general knowledge

Channel: General Knowledge

Views: 124,031

Keywords: generalknowledge, funwithflags, countriesthatdon'texist

Id: chnRVv8mz-c

Length: 13min 16sec (796 seconds)

Published: Fri Apr 28 2023