Yellen’s de-dollarization fears will only get worse

In the middle of an otherwise mundane Congressional hearing on July 9, US Treasury Secretary Janet Yellen made an extraordinary admission: De-dollarization is now her biggest fear.

Though it might sound obvious to many, it’s a stark about-face for a US economy czar who’s long denied the dollar is in danger of losing its status as dominant reserve currency because of sanctions or other policy missteps. In March 2022, for example, Yellen said “I don’t think the dollar has any serious competition and it’s not likely to for a long time.”

The former Federal Reserve chair noted that “when you think about what makes the dollar a reserve currency, it’s that we have the deepest and most liquid capital markets of any country on earth. Treasury securities are safe, secure and immensely liquid. We have a well-functioning economic and financial system and the rule of law. There really is no other currency that can rival it as a reserve currency.”

What a difference two years have made. Fears of a “weaponized” dollar have the Global South joining forces with increasing urgency to find an alternative.

And two dynamics in Washington are accelerating this dynamic in real time. One is the US national debt careening toward the US$35 trillion mark. The other is an increasingly off-the-rails US election cycle the likes of which global investors have never seen.

Already, Donald Trump is telegraphing 60% tariffs on all Chinese goods, at least. The former US president is threatening a 100% tax of all cars entering the US. That has Joe Biden’s embattled White House looking to out-Trump Trump on trade with its own China trade war.

Add in uncertainty about whether Biden will even be the Democratic Party nominee. Questions abound about the