In a recent interview with CCN, Treasury Secretary Janet Yellen raised concerns about the potential threat to the US dollar’s global supremacy.
Yellen states that China, Russia, and Iran are making moves to move away from the dollar and find an alternative, after seeing how the US has used its reserve currency to impose financial sanctions.
While acknowledging that the weaponization of the US dollar can be an effective tool in deterring bad behavior on the global stage, Yellen highlights the risk of it undermining the hegemony of the dollar over time.
However, she also emphasizes that the US Treasury market is the deepest, most liquid, and safest asset and that the US has a strong institutional infrastructure that is essential in a currency used for global transactions.
Yellen points out that China and Russia have already taken steps to decrease their reliance on the US dollar. Last year, Russia agreed to sell oil to China in exchange for yuan, and in March, China brokered a deal that restored diplomatic ties between Iran and Saudi Arabia, two of the world’s largest oil producers.
While there may be a desire on the part of some nations to find an alternative to the US dollar, Yellen notes that it will be difficult to find a currency that offers the same fundamental properties.
She asserts that the dollar’s global usage is supported by its deep capital markets, institutional infrastructure, and rule of law, which are essential in a currency used for global transactions.