Federal Reserve Chairman Jerome Powell has discussed the threat of de-dollarization and the risk of the U.S. dollar losing its world’s reserve currency status. He believes that the USD hegemony is a consequence of America’s economic dominance.
Fed Chair Powell on Threat of De-Dollarization, USD Losing Reserve Currency Status
Federal Reserve Chairman Jerome Powell addressed de-dollarization concerns during his testimony before the House Financial Services Committee on Wednesday.
Congressman Ritchie Torres (D-NY) asked the Fed chair: “As you know, the U.S. has foreign adversaries, particularly the CCP, that seem intent on de-dollarization. How seriously should the threat of de-dollarization be taken in your view?”
Powell replied: “The status of the United States, of the dollar as the world’s reserve currency, is a very important thing to us.” He added:
I think the reason we have that status is largely due to our great democratic institutions, the rule of law, and the fact that we have, generally speaking, had strong levels of price stability.
“And, I think the dollar will remain the reserve currency as long as those things are in place,” he opined.
The lawmaker further asked Powell whether he thinks the U.S. dollar’s global reserve currency status is “the cause of America’s economic dominance or a consequence of it. The Fed chair replied:
To me, it’s more of a consequence.
“Also there tends to be an equilibrium where one currency becomes the accepted global standard and that has been the dollar for some time, and I expect that it will, for some time, continue to be,” Powell further explained.
Some people disagreed with the Fed chairman. Economist Peter Schiff, for example, tweeted: “Powell is wrong. The dollar’s reserve currency status was originally a consequence of America’s economic dominance, but it has since become the main prop upon which that economic dominance now rests. Once the dollar’s reserve status is lost, U.S. economic dominance will topple.”
Meanwhile, a growing number of countries worldwide are ramping up their de-dollarization efforts, including members of the BRICS economic bloc and members of the Association of Southeast Asian Nations (ASEAN). The BRICS also has a proposal for a common currency that is expected to be discussed at the group’s upcoming leaders’ summit.
What do you think about the statements made by Fed Chair Jerome Powell regarding de-dollarization and the U.S. dollar’s reserve currency status? Let us know in the comments section below.
