The toughest market on earth, the black market, still only take U.S. dollars.
From Vietnam to Venezuela, dollars are used as a trustworthy measure of value in underground transactions, despite whatever opinions of the dollar politicians may hold.
WSJ: “The U.S. dollar is losing value, but not here in Vietnam,” said Vu Manh Quynh, an auto trader who regularly exchanges dong for dollars in the winding streets of Hanoi’s Old Quarter. “Vietnamese people still keep U.S. dollars and gold.” While the U.S. dollar fetches 17,858 dong on the official rates, the black market rate is closer to 18,600. Hai Duong, a currency trader, said he had 20 or more customers buying U.S. dollars on a recent Wednesday, compared with two customers buying euros.
“Typically, dollars are king in the black markets of the world,” says Kenneth Rogoff, professor of economics at Harvard University and former chief economist at the International Monetary Fund.
Prof. Rogoff estimates that as much as 75% of U.S. notes in circulation, or more than $600 billion, are held outside the U.S. Most of that is likely in what he calls the underground economy, where transactions are made beyond the oversight of government — much of which is juiced by the black market.
“This money is not in cash registers, it’s not in bank vaults,” Prof. Rogoff says.
For Venezuelans, where the black market plays a crucial role in the financial system, the dollar has retained its status. Residents seeking protection against inflation or a devaluation of the bolivar turn to currency traders. Large companies that need dollars for operations abroad also visit the unregulated market.
“Having dollars is like a barricade,” says Arnaldo Morales, a cabby who moonlights as a currency trader, buying dollars from travellers as they enter the country, then selling them to Venezuelans.