You have to have real guts to scrap your country’s currency and just start using the U.S. dollar. It’s hard. You might not be a gringo but every time you buy or sell something, you have to look at U.S. heroes on the face of the money you are using.

But the benefits of doing it — to you — are absolutely amazing.

Never again can your government confiscate your savings account by devaluing the money in it. You will never again wake up and find your life savings worth nothing because the government wanted to please some inefficient banana exporter by giving him crummy money so he can sell more bananas. At your expense. Never again.

Not only that, your government cannot PRINT money, because only Alan Greenspan can print U.S. dollars. Governments print money so that they don’t have to earn money. They don’t have to create an economy that produces anything of value so as to create a realistic tax base. No, it’s much easier to turn on the printing press and as far as where those crispy printed notes go eventually, just let what happens, happen. Your government can spend all the money it likes on all the bureaucrats it likes (and their relatives) just through the power of the printing press. But not if they are dollarized. In that case, every dollar must be accounted for.

And what’s more, interest rates will go down in your country so that instead of paying Brazil’s 18% interest rates on your new washing machine installment plan or your business loan, you’ll pay Alan Greenspan’s 4% rates on those same items. It’s a massive interest rate cut for dollarizers. And inflation goes down to U.S. levels, something like 3%, a miracle if you’re used to 14% inflation rates. Or worse.

The marvels of dollarization in checking government power, strengthening banks and institutions, and empowering people are really revolutionary. If your country can’t manage its monetary situation, the easy solution is to just borrow Uncle Sam’s – and other than seignorage, it costs nothing. Nothing!

But it takes cojones.

Anyway, I spent time in Ecuador in 2000 for the explicit purpose of seeing dollarization in action. People were scared of the new setup and some didn’t like it. The transition scared some people, although the prospect of 75,000 sucres to the dollar scared others.

Today, six years later, things are different. Today’s the six-year anniversary of Ecuador’s dollarization and what it’s done for Ecuador is something truly wonderful. So much uncertainty is gone from the scene. Politics is still lousy there, and for free-spending politicians, it’s nothing but a dog-collar they don’t like. But for Ecuador’s private sector, now there are certainties. Those certainties come with dollarization and today Goldman Sachs reports that Ecuadoreans are almost all firmly in favor of it. The item is here:

Support for Dollarization Remains Strong

According to a Cedatos/Gallup poll, at the sixth anniversary of the inception of dollarization, 76% of those interviewed support the maintenance of dollarization and 62% consider that the dollarization of the country contributed to increase the purchasing power of the population.

Comment: (+) The strait-jacket imposed by a dollarized foreign exchange regime requires discipline and macro consistency with other policies (namely fiscal and income). Unfortunately, in recent years, lack of genuine reform and significant increases in public sector wages and salaries eroded a significant part of the benefits brought about by dollarization and foreign exchange stability.

However, over the last couple of years dollarization has served the country well because it insulated the banking system and other financial variables from the persistent political noise and recurring crisis. Without dollarization, the chronic political disarray would most likely have triggered an overshooting of the exchange rate and push nominal interest rates to distressed levels. This would again have impaired confidence in a recovering financial system and affected the real fundamentals of the economy even more.

Although the population at large seems appreciative of the benefits brought about by dollarization, in recent months government officials have regrettably questioned in public the benefits of a dollarized regime. Former Finance Minster Correa made public statements to that effect and more recently the new Interior Minister, Alfredo Castillo, has also criticized the dollarized regime. These are unfortunate remarks from high public officials that elicit fears of policy volatility and do not contribute to build confidence among investors.