CHICAGO (AFX) - Federal Reserve chairman Alan Greenspan late yesterday said countries which are considering swapping their currency for the U.S. dollar must understand that they cannot rely on the U.S. central bank for back-up.
"Dollarisation is and has to be an activity which has to be taken unilaterally by the country involved," Greenspan said in a speech to the Economic Club of Chicago.
"The Federal Reserve is the central bank of the United States. We are, by law, required to focus solely on the interests of this country and its financial system.
"We have to make it very clear that we cannot be the sort of guarantor, or supervisor, or regulator, or the lender of last resort to economies who chose to dollarise," he said.
Greenspan noted that the Ecuadoran government's decision to replace its native currency, the sucre, with the dollar last year had proceeded "reasonably well" thus far, but concluded it was "a high-risk operation."