2023-06-15 21:01:00
The fact that Western sanctions directly hit the dollar, as the countries that fall under them begin to look for other means of payment, has finally been officially recognized in Washington. US Treasury Secretary Janet Yellen, speaking at a House Financial Services Committee hearing, said the US government “has to put up with it.”
However, she said, “for most countries, there is practically no serious workaround” in the face of US sanctions due to the fact that the dollar remains a reserve currency. Yellen also noted “some increase in stocks of other reserve assets” around the world, noting that this was to be expected in a growing global economy. “Over time, the share of other assets in the reserves of countries will gradually increase due to the natural desire for diversification, but the dollar will undoubtedly continue to be the dominant reserve,” said the head of the US Treasury (quotes from TASS).
Similar sentiments still prevail in Europe. With the US economy performing better than the eurozone economy, the dollar “looks like a more attractive currency to buy compared to many others, including the euro,” Archyde.com quoted Christoffer Lomholt, head of foreign exchange and corporate research at Danske Bank, as saying.
The United States sees the PRC as its main economic rival, which is why it is increasingly taking the prospect of a real challenge to the dollar from the Chinese yuan. However, back in April of this year, one of the leading American financial and economic magazines, Forbes came out with the headline: “Bad news for Xi: why the Chinese yuan won’t replace the US dollar as the world’s reserve currency.” The publication stated that “Chinese leader Xi Jinping wants his country to replace the United States as the world’s superpower,” and the most important initiative to achieve this goal is for the yuan to take the place in the global economy that the US dollar now occupies. It was ultimately argued that this attempt was doomed to failure.
The number of those who refuse to blindly believe such optimistic forecasts is growing and, apparently, there are quite influential and high-status politicians among them. A month ago, U.S. Senate member Marco Rubio of Florida, in an article written specifically for the British edition of The Daily Telegraph warnedthat Washington’s ability to “punish” other countries through financial and banking sanctions “is being called into question by the Chinese yuan, which is currently the most traded currency in Russia.”
According to the senator, the emergence of an alternative financial system “creates a blind spot” in which certain countries and companies doing business with the United States “can hide dubious behavior from the world community.” “As the Chinese economy continues to grow, more countries will enter the orbit of Beijing and this new system of alternative finance,” Rubio wrote, noting that two political conclusions should be drawn from this.
First, in his opinion, the US needs to revive domestic production. “In order to survive and thrive in a multipolar era, we must be able to once once more produce a wide variety of goods, from semiconductors to pharmaceuticals and everything in between,” he wrote. The senator’s second conclusion is that the US needs to pursue a more responsible foreign policy in order to find and retain allies, since the US can no longer count on other countries to agree by default to follow in the American wake.
However, to counterbalance Beijing’s growing anti-American coalition and keep the dollar “as strong as it can be,” Rubio urged the US administration to build its own coalition.
Subsequently interview The Hill Rubio stated that the Chinese ultimately want to create a “new world order”. “They said it openly – especially if you read English translations of speeches in Chinese,” the senator noted, recalling that the PRC is creating its own institutions, parallel to those established in the West following World War II (the World Bank, the IMF, the WTO and etc). “Ultimately, the currency will be part of this,” Rubio predicted, arguing that Beijing is “working on plans 50 years ahead, not two weeks like we do.”
The position of those who are skeptical of such warnings in their column with the headline “The BRICS fight once morest the dollar is a futile exercise,” Bloomberg columnist Marcus Ashworth outlined.
While agreeing that the United States enjoys an “exorbitant privilege” due to the fact that the dollar is the world’s reserve currency, nevertheless, it is skeptical regarding the prospects for rivalry from the BRICS (Brazil, Russia, India, China and South Africa), even despite the large number of countries, wishing to join this association.
Postulating that “the defining element of a reserve currency is that it is the second most used currency for domestic transactions,” Ashworth recalls that almost every commodity in the world, including oil and gold, is traded in dollars and even cryptocurrencies are linked almost exclusively to the US dollar. . “If OPEC cannot come up with an oil currency, what chance does a random group of geographically disparate countries have?” the observer asks, coming to the conclusion that not a single BRICS country, and even all of them together, are able to “magically” create an alternative currency.
“The dominance of the dollar may seem tiresome, but there is no close alternative. Get mad at the dollar machine all you want – it doesn’t listen to you,” concludes Ashworth.
True, Janet Yellen, who has to deal more with real numbers than with beautiful slogans, clearly does not believe that the challenge to the dollar can be ignored by fencing off Beijing with a wall. “It would be a disaster for us to try to break completely with China. Risk reduction? Yes. A complete rupture of relations? Absolutely not,” she said last Wednesday.
Mikhail Makarov
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