According to the United States Treasury Secretary, Janet Yellen, no other currency, including China’s, can replicate the significant role played by the dollar in the global financial system. Yellen expressed this viewpoint while addressing members of the U.S. Congress, stating that despite attempts by some countries to create alternative reserve currencies, it will not be easy for any nation to surpass the dollar’s influence.
Utilizing Alternative Reserve Currencies to Evade U.S. Sanctions
During her appearance before the Financial Services Committee of the U.S. Congress on June 13, Treasury Secretary Janet Yellen acknowledged the growing trend of countries pursuing alternative reserve currencies to challenge the dominance of the greenback. Yellen recognized that such initiatives were driven by a desire to avoid the impact of U.S. sanctions.
Yellen’s acknowledgement highlights a response to the alleged weaponization of the dollar by the United States. It has led to an increased global call for de-dollarization in the economy. Several Asian and South American countries have already agreed to settle cross-border transactions using their local currencies. Furthermore, numerous nations, even those facing U.S. sanctions, have shown support for the currency proposed by the BRICS alliance (Brazil, Russia, India, China, and South Africa).
The Absence of Capital Controls
While Yellen acknowledged the efforts of the United States’ rivals in de-dollarizing, she emphasized that the dollar’s role in the global financial system is unparalleled. Consequently, dismantling its influence will be a formidable challenge.
Yellen explained, “The dollar plays its unique role in the world financial system due to factors that no other country, including China, can replicate. These factors include deep, liquid, and open financial markets, a strong rule of law, and an absence of capital controls.” Her response came in reply to a question posed by Ohio U.S. House Representative Warren Davidson.
The Treasury Secretary further asserted that finding a way to bypass the dollar will not be a straightforward task for any country. However, in earlier remarks, Yellen expressed her concern that Congress’s failure to timely raise the debt ceiling limit was tarnishing the reputation of the United States as a nation that honors its financial obligations.
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Frequently Asked Questions (FAQs) about reserve currencies
What is the opinion of the US Treasury Secretary regarding alternative reserve currencies?
According to the US Treasury Secretary, Janet Yellen, no country, including China, can create a currency that replicates the role played by the dollar in the global financial system. She believes that the dollar’s role is unmatched due to factors like deep, liquid, and open financial markets, a strong rule of law, and the absence of capital controls.
Why are countries seeking to establish alternative reserve currencies?
Countries are pursuing alternative reserve currencies to avoid the impact of US sanctions. They want to reduce their reliance on the US dollar and mitigate the potential consequences of the United States allegedly weaponizing the dollar.
Are there any ongoing efforts for de-dollarization?
Yes, there are ongoing efforts for de-dollarization. Several Asian and South American countries have agreed to use their local currencies for cross-border transactions. Additionally, countries facing US sanctions have shown support for the BRICS currency proposed by the alliance of Brazil, Russia, India, China, and South Africa.
Will it be easy for any country to surpass the dollar’s influence?
No, according to the US Treasury Secretary, it will not be easy for any country to surpass the dollar’s influence. The dollar’s role in the global financial system is considered unparalleled due to the unique combination of factors such as deep, liquid, and open financial markets, a strong rule of law, and the absence of capital controls.
What is the concern expressed by Janet Yellen regarding the debt ceiling limit?
Janet Yellen has expressed concern that Congress’s failure to raise the debt ceiling limit in a timely manner is damaging the reputation of the United States as a country that pays its bills on time. This concern highlights the potential consequences of not addressing the debt ceiling issue promptly.
More about reserve currencies
- Janet Yellen: No Alternative Reserve Currency Can ‘Replicate’ Role Played by the Dollar
- Countries Look to Set Up Alternative Reserve Currencies to Skirt U.S. Sanctions
- De-dollarization: Countries Seek to Reduce Reliance on US Dollar
- BRICS Currency: An Alternative to the US Dollar
- Janet Yellen Expresses Concern Over Debt Ceiling Limit