The only foreign currency still pegged to the U.S. dollar is Hong Kong's, though Ecuador and other Latin American countries were recently pegged to the Unites States. Learn how pegging currency to another country is very beneficial during times of high inflation with information from a financial consultant in this free video on currency.
If you were running a country that had wild inflation and little fiscal discipline, what would you do? Well, this is Roger Groh of Groh Asset Management. Frequently, countries around the world have tied their own currencies directly to currencies of other major countries or areas, and specifically there are three majors: one, countries that have tied their currencies to the U.S. dollar; countries that have tied their currency to the Euro; and then last, countries that have tied their currency to the Yen. The good news is that once you have pegged, and that's the technical term for it, your currency to the U.S. dollar, then that's it, and what ever the exchange rate was at that moment sticks, as long as they have the financial discipline to make it stick. The good news is that quickly, inflation will drop, on the other hand, so will growth, and at some point it leaves the general public and economists wondering, well, is it to our benefit to remain pegged to this currency? And eventually, most currencies will bust, and they will remove the peg, and oh boy, when that happens, you don't want to be there. Today, there's one major peg left in the world, and that is Hong Kong to the U.S. dollar. Now you ask; why should that matter? Well, until very recently, the Chinese currency was pegged to the Hong Kong currency, and the Hong Kong currency was pegged to the U.S. dollar, so it matters a lot. Now, that's differed a little bit in China, but none-the-less, the Hong Kong peg remains intact. Other currencies around the world where recently they were pegged would include Ecuador, which has recently removed their peg, and certainly through much of Latin America, where they now have removed their pegs. Hope that helps, it works terrificly in an inflationary environment. I'm Roger Groh, Groh Asset Management. Thank you very much for spending time with me.