The U.S Treasury Secretary Janet Yellen has acknowledged that the use of financial sanctions could undermine the hegemony of the United States dollar in the long run.
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The former chair of the Federal Reserve (the US Central Bank) during an interview on Sunday by CNN’s Fareed Zakaria admitted that the role of the US dollar as the world reserve currency could diminish due to Washington using its leverage over the global financial system to pursue its geopolitical goals through sanctions.
The Secretary of the Treasury was responding to a question on about the efficiency of the anti-Russia sanctions and about Washington’s track record of what he described as the “weaponization of the dollar.”
Having cited recent statements by Brazil’s President Lula da Silva and other politicians about the risk of dependency on the US currency, Fareed Zakaria asked whether the present time would be remembered as the moment when “the dollar’s hegemony and its status as a reserve currency began to falter.”
On the long run, the financial sanctions “could undermine the hegemony of the dollar,” Yellen acknowledged before moving on to promise that Washington was using this “important tool” judiciously and with the backing of its allies.
She went further to add that the role of the American currency is explained by factors such as the volume of the US treasuries market, its wide use in international trade, and a “rule of law” in the US that other nations cannot offer.
“We haven’t seen any other country that has this basic infrastructure and institutional infrastructure that would enable its currency to serve the world like this,” she explained.
Following the sanctions on Russia over its military activities in Ukraine, the leadership of the country prioritized a transition away from the dollar and into regional currencies.
The West’s use of unprecedented sanctions against Russia, including bans on trade, seizure of national reserves and denial of financial services to Russian companies, has merely sped up the transition, in their view.
Nnamdi Maduakor is a Writer, Investor and Entrepreneur
