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I recently got back from a Caribbean cruise I took with my family. It was a wonderful time of relaxation, adventure and reconnecting.

But since I’m often thinking about economics and finance it was also a proxy for the global economy.

The first stop of the cruise was Roatan, an Island in Honduras. We drove from the port (pictured below) to the other side of the Island to go snorkeling.

Roatán Island, Honduras

Driving around the Island I saw mostly what I would have described as lower income areas if I’d been back in the United States.

I’ve certainly seen worse neighborhoods in the US.

I still got LTE mobile phone coverage with data (made a few stock trades), we drove by pharmacies, gas stations, supermarkets, a bank with rifle toting guards outside and a modern looking power plant.

One of the houses we drove by had some chickens in the front yard which at first seemed quite rustic until I remember I’ve seen that same thing an hour south of Columbus, Ohio.

The people I encountered were very friendly. I didn’t know what to expect but it was fascinating to spend time in another country.

Spending US Dollars outside the United States

My sister and I at Roatan. The Hawaiian shirt shows my commitment to leisure.

We returned to the port after snorkeling and I walked around the shops near the ship.

I bought a Hawaiian shirt for 22 US dollars (USD) as well as a small hand carved mahogany box that cost 45 USD.

The next day the ship stopped off the coast Belize and we took a tender into the City of Belize.

From there we went on a semi-guided snorkeling tour in which we got to swim with stingrays and nurse sharks.

It was incredible.

Afterwards we stopped at an Island called Caye Caulker for lunch. I could get a burger and fries for about 10 USD (Hey! Lobster wasn’t in season!).

It was on the Island of Caye Caulker that I first saw a Belize dollar. We paid for lunch in cash and the waitress gave us change in a mix of Belize dollars and USD. All the other transactions both on Roatan in Honduras and Belize up to that point were solely in USD.

This restaurant on Caye Caulker, Belize accepted dollars

It was the same in Cozumel, Mexico. The vendors priced items in dollars. One hotel we stopped at had drinks priced in pesos, but they accepted dollars without question.

US Dollars as the World Reserve Currency

Even on the relatively remote Isle of Caye Caulker the vendors on the street took US dollars as if I was in the US. And goods were priced in USD.

Welcome to the Caribbean love. – Captain Jack Sparrow

It struck me as odd that I was transacting in dollars in other countries. If someone came to the US and wanted to pay me in Belize dollars I probably wouldn’t accept them.

Part of the reason why the people of Honduras, Belize and Cozumel accepted dollars is likely because dollars still are the reserve currency of the world.

I doubt they think about world reserve currencies (I wouldn’t if I didn’t really enjoy this stuff) but the people I encountered who accepted dollars know that dollars are valued and can be used to buy useful things.

A Microcosm of the Global Economy

On the ship itself the vast majority of crew members are not from the United States. Amongst the crew there are around fifty home countries, such as Mauritius, Hungary, Ukraine, India, Romania, France, United Kingdom, Canada, Nicaragua, Philippines and dozens more.

I did find a couple US crew members as well as one from Canada, and the UK. But the majority of the home countries in my informal assessment of the crew were Philippines, India and Mauritius.

The passengers, while not wearing name tags with their nationality listed on it, seem to be mostly from the United States.

I think this trip represents a microcosm of the global economy.

The US dollar is strong, it’s accepted by other countries, and people from the US participate in a lot of consumption and spending of US dollars.  People from other countries work to provide goods and services for the Americans and accept these dollars.

My brother and I outside of El Cid La Ceiba in Cozumel, Mexico.

This is a great deal for the Americans.

But the fundamentals of the US dollar are not strong.

Even when it isn’t bullying foreign banks the US government has made no serious effort to balance the budget, reign in entitlement spending or reduce the debt. A few quarter point hikes notwithstanding the Federal Reserve has not seriously attempted to reduce it’s balance sheet or normalize interest rates.

These factors are not positive for the US dollar as evidenced by it losing over 90% of it’s value.

It made a lot of sense why everyone wanted dollars 50-60 years ago. It makes less and less sense as time goes on.

As Simon Black likes to say this isn’t a consequence free environment. More to follow on this topic in the next article.