China wants weaker US dollar as reserve currency, says Biden economist nominee
Dr. Jared Bernstein testifies on his nomination to be Chairman of the Council of Economic Advisers during a Senate Banking, Housing and Urban Affairs Committee hearing on Capitol Hill in Washington, U.S., April 18, 2023. REUTERS/Amanda Andrade-Rhoades
WASHINGTON (Reuters) – There was “some evidence” that China wants the dollar to weaken as the international reserve currency, said a White House nominee for a top economist position on Tuesday, and he urged Congress to raise the U.S. debt ceiling to protect the dollar’s value.
Jared Bernstein, a member of the White House Council of Economic Advisers, told a Senate Banking Committee hearing on his nomination to head the body that U.S. control of the world’s reserve currency offered a number of benefits, including the ability to impose sanctions, as Washington had done on Russia over its war against Ukraine.
Asked about an essay he published in the New York Times in 2014 entitled “Dethrone King Dollar” and whether the U.S. would be better off if it were to lose that status, Bernstein told the committee, “Definitely not.”
Bernstein, who wrote the piece while serving as a senior fellow at the Center on Budget and Policy Priorities, said the essay was intended to show both the “very solid benefit” of having the world’s reserve currency, but also the costs, including the ability of China and other countries to manage their currencies to have a trade advantage.
Asked by Republican Senator Bill Haggerty where he stood now, Bernstein said, “I share your view on the importance of the dollar as the dominant reserve currency.”
Bernstein used the exchange to underscore the administration’s concerns about the looming deadline this June for Congress to raise the debt ceiling or risk default, and Republican efforts to condition that approval on budget cuts.
He said raising the debt ceiling would help maintain the dollar’s reserve currency status and protect its value. “Having that kind of kind of default out there as a political tool is antithetical to what you and I are talking about right now.”
While Bernstein did not elaborate on China, the U.S. Treasury in November found no major U.S. trading partners manipulated its exchange rates to gain unfair advantage through June 2022, but would monitor China and six other countries.
The Treasury report criticized China for not publishing foreign exchange intervention and lack of transparency around its exchange-rate mechanism. China has previously denied intervening to weaken the yuan.
Weak tax collections in April could mean the U.S. government’s deadline to raise the $31.4 trillion debt ceiling will happen sooner than expected, analysts said on Tuesday.
The Treasury Department has warned that the federal government might no longer be able to meet its financial obligations as early as June 5, while the nonpartisan Congressional Budget Office has forecast that moment would come between July and September.