President Joe Biden’s top pick to lead economic policy says there is evidence that China is trying to remove the US dollar from its world reserve currency status.
In his confirmation hearing, Jared Bernstein, nominee to be Chair of the Council of Economic Advisors, says the US would “definitely not” be better off if USD is dethroned.
Bernstein, who was chief economist adviser to Biden when he was Vice President, says that there are obvious reasons why the US should protect the dollar’s status as the world’s reserve currency.
“I think there are extremely important privileges and, even in the realm of security, reasons to have the benefits from having the reserve currency.
One of the most obvious is of course sanctions. If you control the world reserve currency, you’re able to impose sanctions as we’ve done in Russia of considerable effect. But there are other positive aspects as well.”
Bernstein tells Republican Senator Bill Haggerty that the US should raise its debt ceiling in order to protect the dollar’s integrity. He agrees with Haggerty that raising the debt ceiling should be done while also tackling out-of-control spending and fiscal responsibilities.
“One thing we could really do to help both the dollar maintain its reserve currency status but also to protect the value of the dollar, would be to raise the debt ceiling. I think having that kind of default out there as a political tool is antithetical to what you and I are talking about right now.”
Despite its overall importance, Bernstein says there are certain costs to having the world reserve currency.
Those disadvantages particularly affect US manufacturers who deal with higher export costs and often lose out on revenue due to dollar strength.
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