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North American Monetary Union: A United States Perspective


Few issues of public policy roil Canadians more than the idea of a North American Monetary Union (NAMU), establishing one currency for Canada and the United States. As other contributions to this special issue testify, opinions among Canadians differ sharply and divisions run deep. From the maritimes to the Pacific, Canadians are far from consensus regarding the future of their national money, the much belittled "loonie."

But what about opinion south of the longest unguarded border in the world? Largely lost in the din of debate among Canadians is the perspective of the United States, Canada's putative partner. America's interest in NAMU is rarely addressed in any systematic manner. This is surely a critical omission. Even if Canadians could unite in favor of currency union as a policy goal, a vital imperative would remain – namely, the need to gain support from Washington. How would Americans view a monetary initiative from Ottawa? Would the prospect of NAMU be greeted with open arms or with hostility? As a practical matter, a common currency would be impossible without the concurrence, or at least the compliance, of the United States.

This essay explores the NAMU issue specifically from a U.S. point of view, addressing both economic and political aspects. The big question is: What does the United States have to gain? The short answer, which will disappoint many Canadians, is: Not much. The U.S. greenback, as the world's leading international currency, already generates considerable benefits for Americans. That is the starting point from which analysis must proceed. As compared with the status quo of America's de facto market dominance, a formal monetary union with Canada, though not without advantages, would threaten more risks and losses for the United States than gains. Moreover, this negative assessment holds true no matter what form NAMU might take – whether modeled on Europe’s euro, substituting an entirely new North American money for the continent’s two existing dollars; or if instead it were simply to replace the Canada’s loonie with the greenback, a "dollarization" model. Either way, under present circumstances, the idea can be expected to elicit little interest among Americans and even less encouragement.

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