OPINION:
Americans can expect the dollar to continue declining as a global reserve asset, Treasury Secretary Janet Yellen warned in recent congressional testimony, asserting that it’s “only natural” that countries would flee the dollar.
In fact, it’s not nature but the Biden administration that is chasing countries away from the U.S. dollar.
For over a year now, unprecedented U.S. sanctions against Russia — designed as retribution for Vladimir Putin’s invasion of Ukraine — have been driving friendly countries, from Brazil to Saudi Arabia, away from the dollar and into the arms of the BRICS coalition of anti-dollar nations led by China.
Of course, Russian aggression is unacceptable, but this flight from the greenback should have set off alarms in Washington.
Instead, the Biden administration is now poised to ramp up its weaponization of the dollar, but rather than punishing countries for invading their neighbors, these new sanctions are designed to discipline countries for their failure to fall in line with Washington’s sexual agenda.
On May 29, President Biden called for the immediate repeal of Uganda’s new sodomy law, which raises the punishment for a variety of homosexual acts.
The president has even directed his National Security Council to “evaluate the implications” of Uganda’s law on “all aspects of U.S. engagement with Uganda,” and officials have indicated that they will go so far as to review Uganda’s eligibility for duty-free access to the U.S. for hundreds of products, which could be catastrophic for the economy of the impoverished nation.
Meanwhile, the U.S. ambassador to Japan, Rahm Emanuel, has been harshly criticized for interfering in Japan’s domestic debate over sexual ethics, crossing a long-respected red line that neither country hold their military alliance hostage to purely domestic politics.
Letting “woke” politics drive economic foreign policy is simply reckless. At a time when Mr. Biden’s unprecedented freezing of Russia’s central bank collars was already straining the dollar’s status as the global reserve currency, weaponizing America’s economic policy against allies — over “Pride,” of all things — could have serious consequences.
For starters, it benefits America’s chief rival on the world stage. An aggressive China already offers billions to lure countries out of the dollar orbit and into its BRICS anti-dollar grouping.
The China-led BRICS coalition already represents one-fifth of world trade, one-fourth of world gross domestic product, and almost half of the world population.
And with Washington increasingly imposing its radical LGBTQ agenda — not to mention needless deficits and inflation — the coalition is growing fast. Dozens of countries are clamoring to join.
Thanks to this concentrated push by China, the dollar’s share in global commerce is plunging. Today, only 40% of world trade is settled in U.S. dollars, down from 52% just a decade ago.
It is worth noting that the U.S. accounts for 26% of global GDP, meaning that you might expect the dollar to be used in 26% of trade simply from our size. That means, when it comes to trade, the dollar’s reserve status has been cut in half in less than a decade.
Worse, a study by the currency analyst Stephen Jen found that the dollar’s share of global reserves collapsed from 73% in 2001 to just 55% by 2021, then dropped off a cliff, falling 8 points to 47% in a single year.
Mr. Jen squarely blamed Mr. Biden’s seizure of Russian central bank dollars for the decline, which convinced other countries that the dollar is now a political football that can be weaponized anytime Washington doesn’t like your policies.
In March, for example, the president of Indonesia, a longtime U.S. ally, cited the Russia sanctions in a speech urging countries to move away from the dollar.
If Washington now intends to use the dollar to punish developing countries for their policies on sexual matters, many more nations are likely to conclude that the greenback is too risky to use as their central bank reserve asset.
Despite these risks, the Biden administration seems determined not to heed the late Sen. Arthur Vandenberg’s advice that the needs of the nation should supersede partisan conflict, or, as he put it: “Politics stops at the water’s edge.”
Instead, from the dollar to our military alliances, the administration is forcing allies to choose between groveling before Washington — which often includes accepting radically progressive social policies — and fleeing to Beijing.
The line of countries clamoring to join BRICS is only getting longer. As Ms. Yellen said, it’s “only natural.”
• Peter St. Onge (peter.stonge@heritage.org) is the Mark A. Kolokotrones Fellow in Economic Freedom at The Heritage Foundation.
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