While I’m not a big fan of Aruba, I visit the island occasionally to see my parents when they vacation there. Mom and dad, who live full time in Canada, have spent their vacation time in Aruba for the past 15 years. They prefer the island to others because of its affiliation with Holland.
My usual routine on trips, and everywhere I go, is to ask the locals how business and the local economy are faring. Tourists from outside North America are my particular favorite conversationalists–I really like to know what’s happening outside our continent.
Anyhow, I could not believe the buzz I heard on the island recently. In fact, I’m still not sure I believe it. But I need to share this rumor with my PROFIT CONFIDENTIAL readers… especially since it’s been on mind so much lately.
In Aruba, both Aruban florins and American dollars are easily accepted as currency. But, what I heard from one knowledgeable, retired tourism businessman I met was that if the U.S. dollar continued to fall on world markets, the euro would replace the American dollar as an acceptable currency in Aruba.
At first, I did not believe this hearsay. But the more I thought about it, the more it started to make sense. Aruba is tight with Holland, and in Holland, the currency is the euro. Similarly, Grand Cayman is affiliated with the British, but the Brits never adopted the euro, preferring to keep the pound instead. If Aruba is sending currency off to Holland, I’m sure the Dutch would prefer to receive euros right now, as opposed to U.S. dollars.
The ramifications on a popular tourist spot like Aruba switching to euros from American dollars would be far reaching. Would Americans travel to Aruba any longer? Likely not. Would Europeans start to vacation in Aruba? Likely so.
Could such an event even come to pass? I doubt it would, but, then again, anything is possible. To me, just the thought of such a small country thinking of changing its preferred outside currency demonstrates how seriously the world is watching the U.S. dollar’s actions.
The combination of a weak currency, a spiraling U.S. deficit and record low interest rates could cause serious problems. What foreigner would want to buy U.S. debt instruments under this scenario? Could higher rates be far off and is that what the current stock market contraction is signaling? Stay tuned. We’re in for some very interesting times ahead… very interesting indeed.