Luetkemeyer Delivers Remarks at Hearing on Preserving the U.S. Dollar’s Status as the Global Reserve Currency
Washington,
June 7, 2023 -
Today, the House Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions, led by Chairman Blaine Luetkemeyer (MO-03), is holding a hearing entitled “Dollar Dominance: Preserving the U.S. Dollar’s Status as the Global Reserve Currency."
Watch Chairman Luetkemeyer’s opening remarks here.
Read Chairman Luetkemeyer’s opening remarks as prepared for delivery:
“First, thank you to our very impressive set of witnesses for being here today. You each possess tremendous expertise on the U.S. Dollar and global economics, and we look forward to your insights.
“The U.S. Dollar has been the preferred global currency since the end of World War II, providing our nation inherent economic advantages as well as responsibilities.
“Today an estimated 88% of all currency transactions by value are conducted in U.S. Dollars. Among other things, this limits the risk of a balance-of-payments crisis which inherently lowers our exchange rate risk.
“The Dollar’s position also allows the United States – and Americans – to borrow at rates as much as 50-60 basis points lower.
“Our currency’s strength not only benefits the U.S. Government, but also helps the American consumers by lowering the price of imported goods, resulting in an estimated 25 to 45 billion dollars a year in savings.
“Further, the dominant Dollar offers investors dependability and a safe haven in times of economic uncertainty, as seen during the 2008-2009 financial crisis and more recently in the economic shock caused by the coronavirus pandemic.
“Finally, possibly the most important advantage of having the global reserve currency within our country is embedded in the title of our Subcommittee…National Security.
“The Dollar’s status allows us to apply powerful economic sanctions, which when used properly as a targeted tool, can alter our adversaries’ actions in a way that advances U.S. and global security.
“Today, the biggest threat to American and global security is the Chinese Communist Party.
“Next week Treasury Secretary Yellen will appear before our committee, and one thing that I hope to find out is, “Does this administration have a plan for when China, inevitably, attacks Taiwan?”
“I asked the same question to Under Secretary Nelson in April and was not impressed by his answer.
“Committee Republicans see the writing on the wall and have acted decisively by putting forward meaningful legislation. I only hope that the administration also has some foresight.
“Sanctions are a powerful tool, and their use should not be considered lightly. As such, diverse opinions exist on the effectiveness of the U.S. approach to sanctions.
“Some believe that carrying out sanctions too broadly, rather than in a targeted manner, can have a negative effect and ultimately undermine dollar dominance. Others believe we should use every tool in our kit to maximum effect.
“Because of the formidable impact that even U.S. unilateral sanctions can have, adversaries – and even some friends – have sought alternative payment methods and systems.
“It is anticipated that when the ‘BRICS’, which stands for Brazil, Russia, India, China, and South Africa, have their annual Summit this summer, they will discuss the feasibility of a common currency mechanism for trade among their countries as an alternative to the Dollar.
“Other countries, including Saudi Arabia, Iran, Argentina, the UAE, Algeria, Egypt, Bahrain, and Indonesia, have also expressed interest in such a mechanism.
“While I don’t think this idea is practical at the moment, something like it could materialize in the not-so-distant future.
“China is also engaged in creating an alternative in the form of a central bank digital currency, or CBDC, which the Chinese Communist security agencies intend to use to surveil the financial activity of any user.
“Because the e-CNY presents an assault on financial privacy and a risk to our national security, I introduced H.R. 804: the Chinese CBDC Prohibition Act of 2023.
“This bill prohibits U.S. money services businesses from engaging in transactions involving a central bank digital currency issued by China.
“Eventually, the United States will need to make a decision, do we open the door to the expansion of the CCP’s digital dollar or do we slam it shut? My bill slams the door and locks it.
“Finally, our own domestic actions could make Dollar-based assets less attractive, particularly the unsustainable federal spending trajectory and the resulting inflation that spread around the world.
“We must take this risk seriously. It is all too clear that inflation is undermining U.S. national security.
“The good news is that despite attempts by the Chinese government and other bad actors, the Dollar seems secure for now, as there is no clear or immediate alternative to serve as the global reserve currency.
“But to ensure that remains the case, we must keep our eye on the ball and preserve and protect this key national asset.”
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