Part 1: The US Dollar There are several advantages for a nation to have its own currency. The biggest advantage is probably that having one's own currency allows a nation to print more money, which can help it to avoid debt default (Wood, 2011). This is tied to other issues of sovereignty, and especially fiscal and monetary sovereignty, where a nation can manage the value of its currency and use the currency as a means of influencing trade, and by extension the nation's economy (Wood, 2011).

In Europe, where most nations are on the Euro, the fact that these advantages do not exist became a critical issue during the recession of 2008-2009. Several smaller Eurozone nations faced high debt loads, but were unable to do anything about those debt loads. The reason is that the Eurozone economy as a whole is driven primarily by three large industrial nations – Germany, France and Italy. Those nations, Germany in particular, had fairly robust economies, such that the euro was relatively strong. Normally, a nation facing economic slowdown would seek remedy by seeking to reduce the value of its currency. Such a tactic would do two things – it would make it easier for the country in financial distress to pay its debt and avoid default, and it would allow its exports to be more competitive on the global market. In essence, some countries were able to do this in order to kickstart economic growth, along with other tactics, but the smaller Eurozone nations were not. The condition in those countries was one of acute fiscal distress with stagnant or shrinking GDP, high risk of debt default, but with high interest rates reflecting the overall strength of Europe – strength driven by Germany and other northern nations. The lack of what is known as devaluation liberty left many southern countries much less equipped to manage their economic crises (Seth, 2015).

The United States, by contrast, having its own currency, was able to hold interest rates lower for longer. Lower rates encouraged investment, and as such the US was able to exert more control over its economy, at least in terms of monetary policy. Where the countries in the Eurozone lack the flexibility to manage the value of their currencies, the US retains this ability. As such, the US has more sovereign control, and is not beholden to the economies or interests of other nations. Whatever policy the government and Federal Reserve wish to have with respect to the US...

Some nations have high interest rate sensitivity, based on the level and structure of borrowing in the country, something which is normally determined at the national level. But for countries on a common currency, the ability to manage interest rates must take into account the needs of a common central bank and the other countries that are driving the economies within that currency union. Greece and Spain, for example, have high interest rate sensitivity, but very limited ability to influence the European Central Bank with respect to setting the interest rates that affect their countries (Seth, 2015).
Further, managing inflationary pressure is also typically done through interest rates. The European Central Bank might raise interest rates to combat inflationary pressures in the north, but this will suppress economic growth in the south. The US sort of has the same issue in the sense that if coastal economies are strong, the Fed might raise rates, and hurt more struggling economies in smaller states. But when viewed on a national level, of course, the US as a whole and the different constituent countries of the Eurozone are comparable because they enjoy the same sovereignty. The difference then is that the European countries without their own currency will struggle if interest rate, or other policy, does not align with their needs, but aligns instead with the rather different needs of larger neighbors.

Krugman (2011) points out that if interest rates and therefore currency values are not capable of making the needed adjustments to bring a country back to equilibrium, that has other implications. First, it means that the adjustments have to happen elsewhere in the economy. He notes that in the case of Spain, its housing boom had given it rapid wage inflation, and now with the housing bust it was wages that needed to drop in order to adjust the Spanish economy back to equilibrium. If a country lacks its own central bank, economic adjustments will still occur, but the government of that country will have less control over how, when and where those adjustments occur, which likely means more economic chaos.

Further to that, a country without a central bank, or its own currency, might prefer to adopt economic policies that reduce risk, to avoid scenarios such as what happened with Spain, or Greece. Lower overall debt…