Some of these are U.S. possessions or territories, such as Guam, the Northern Marianas, Puerto Rico, the U.S. Virgin Islands and American Samoa. Others, such as the Marshall Islands, Micronesia, Palau and Panama, are independent. The rest are British dependencies. From the U.S. Point of View For the United States, dollarization means foreigners will demand even more dollars than the large amounts they use now. The United States would have to print more money to meet the increased demand but would benefit from the increased seigniorage.
Seigniorage is the profit a government makes from printing money.
When they dollarize, countries allow the United States to earn seigniorage in these countries instead of earning seigniorage for themselves by issuing their own money. Conclusion Simply speaking, dollarization is one way for countries to establish fiscal and monetary credibility, hold down inflation and probably lower interest rates. But dollarization has costs, including the sacrifice of seigniorage and the government's role as lender of last resort to a troubled banking system. .