• Treasury Secretary Janet Yellen says other countries are starting to look for alternatives to the US dollar due to US sanctions.
• Yellen concedes that while it can be difficult for countries to use other currencies, there is no meaningful workaround for the dollar as a reserve currency.
• Countries around the world have already started diversifying their reserves beyond just the dollar, which is expected in a growing economy.
Sanctions Pushing Countries Towards Alternatives To US Dollar
Treasury Secretary Janet Yellen recently spoke at The Annual Testimony of the Secretary of the Treasury on the State of the International Financial System meeting, where she discussed how US sanctions may push other countries to diversify from using solely the US dollar. According to Yellen, it is reasonable for these countries to gradually look for alternatives as geopolitical changes occur.
Yellen Acknowledges Difficulty Of Finding Other Currencies
Answering Texas Representative Vicente Gonzalez Jr’s question about whether or not US sanctions were causing “paranoia” in other countries, Yellen conceded that it was true that governments are being forced to form contingency plans when doing business. She noted that while it can be difficult for most countries to find another tool apart from the dollar when engaging in transactions, there is virtually no meaningful workaround due its status as a reserve currency.
Diversification Of Reserve Assets Expected In Growing World
Yellen also mentioned that countries around the world have already started diversifying their holdings outside of just the dollar and this trend will likely continue in a “growing world” where nations desire diversity in financial assets. Although she noted that some increase has been seen in holdings of other reserve assets, she said that overall, the dollar remains far and away dominant.
It appears that Treasury Secretary Janet Yellen acknowledges both how powerful and vulnerable the US dollar is; given its dominance as a reserve currency and its vulnerability due to foreign policy decisions made by governments such as through sanctions imposed by Washington DC. While it may be difficult for many nations to find alternatives currencies when engaging in transactions, they are increasingly looking towards them given these reasons and this trend will likely continue due its natural desire for diversity within financial assets held by nations worldwide.
US sanctions and foreign policy decisions are pushing nations away from solely relying on dollars and towards diversifying their reserves with other currencies; something which could have lasting implications on global markets if continued over time