Former Treasury Secretary Larry Summers dismissed concerns about the dollar losing its dominance in the global economy, citing China’s limitations in offering an alternative reserve currency. China’s recent capital outflows do not suggest that it will be a major reserve currency, Summers said, as “people are not going to decide they want to hold reserves on a massive scale” there. He also highlighted the lack of political stability and predictability of the Chinese economy. In contrast, Summers praised the Biden administration’s efforts to strengthen the US’s long-term financial health and global appeal compared with China.
Dollar share declining faster than expected
While the International Monetary Fund’s (IMF) database on foreign-exchange holdings showed a drop in the dollar’s share to 58% by the end of December, the lowest since 1995, the greenback’s share has fallen even faster when adjusting for changes in exchange rates, according to analysis by global macro analyst Stephen Jen and his colleague Joana Freire. Their analysis suggested that the US-led efforts to freeze Russia’s currency reserves and seize the assets of Russian oligarchs without “due process” of law undermined confidence in the dollar, particularly among developing nations that are major holders of reserves.
The US’s sanctions against Russia
Jen and Freire argue that moves led by the US to freeze Russia’s currency reserves and seize the assets of Russian oligarchs without “due process” of law undermined confidence in the dollar, particularly among developing nations that are major holders of reserves. However, Summers countered that as long as the US collaborates with Europe in implementing sanctions, the euro would not offer a viable alternative. He also dismissed the “classic ‘how to exaggerate with statistics’ thing” and urged policymakers to focus on strengthening the US’s financial health and appeal compared with China.
US trade policy with China
Larry criticised the Biden administration’s refusal to use trade policy as a tool to compete with China and its declining to reduce tariffs, stating that it could improve the competitiveness of US exports. He also noted that the US has renounced new trade agreements as a major strategy tool, which the Chinese are providing on a larger scale. Instead, he called for greater efforts to show Beijing that the US is not aiming to hobble China’s economy and that it is willing to allow the country to take a place in the global economy.
Source: ©AHMAD AL-RUBAYE/AFP via Getty Image ; Bloomberg
Additionally, you can find more news on: www.sendasnews.com
Yustika Kusuma Putri, she is social media marketer from Indonesia. I currently work as a Media Manager in Technologie Omicrom Sendas inc.
I'm passionate about staying up-to-date with the latest news and trends. I believe that being informed about what's happening in the world is essential to making informed decisions, both in business and in life.
That's why I'm excited to share my insights and provide you with updated information on these topics.