Chairman Spencer Bachus
Markup of H.R. 4096 and H.R. 4818
July 19, 2000
The first bill we will consider today was introduced at the request of the Administration. H.R. 4096 would authorize the Bureau of Engraving and Printing to print currency for foreign countries and other security documents, such as bonds, for foreign countries and other political divisions of the United States besides the federal government.
Currently, the Bureau of Engraving and Printing may only produce security products for Federal entities. The Bureau also produces currency for the Federal Reserve and postage stamps for the United States Postal Service.
Passage of this legislation would allow the United States to assist foreign nations in developing more stable currency systems. While helping to facilitate international commerce, the Bureau of Engraving and Printing at the same time would gain valuable experience. The Bureaus superb engravers would have the opportunity to work with new designs and technologies, and the Bureau could experiment with anti-counterfeiting and security features in short production runs. Many of these new features may eventually find their way into United States currency.
HR 4096 stipulates that all printing for foreign nations be done on a strictly reimbursable basis and not interfere with the Bureaus production capacity. In addition, the Secretary of State must make a determination that the printing is consistent with the foreign policy of the United States.
Next, the subcommittee will consider H.R. 4818, "the International Monetary Stability Act of 2000." This bill was introduced by one of our most active subcommittee members, Rep. Paul Ryan from Wisconsin, and I commend him on his leadership on this issue. The goal of this legislation is to create stable monetary policy in countries such as Guatemala, Honduras and El Salvador where those governments are currently considering dollarization.
For decades Latin American countries have suffered from a vicious cycle of overspending and deficits, followed by sudden devaluations and high interest rates. There is no question that ordinary citizens and small businesses have suffered greatly from the tendency in Latin American countries to have inflationary monetary policy followed by bouts of devaluation. Workers in Latin America continue to have their life savings wiped out in one day, and as a result, American workers suddenly find themselves competing against even lower wage earners in those countries. It is a cycle that must be broken. It is in the truest sense a "lose-lose" situation.
On the other hand, dollarization creates a "win-win" situation. It creates monetary stability and ends the vicious cycle of devaluations that severely hurts North American workers and devastates the savings of the South American middle class.
Dollarization would also lower the currency risk for American investors and therefore lower barriers to trade and investment. Reducing currency risk would allow American exporters to increase their exports and provide U.S. investors with more opportunities for investments.
As an incentive to dollarize, this bill would allow the Treasury Secretary to return some of the currency profits that a dollarizing country would lose. Under this bill, 85% of any additional currency profits resulting from dollarization would be returned to a country after a 10-year waiting period. This ensures that the United States will not lose its current level of currency profits, and that the dollarizing country is serious in its commitment. Even though this bill ensures continued currency profits, the U.S. would benefit many times more from the increased trade and investments opportunities that would flow from dollarization.