Dollar heg key to upholding the LIO
Dr. Carla Norrlof 6/8, she is a nonresident senior fellow with the Atlantic Council’s center and her research is on theories of international cooperation with a special focus on great powers particularly US hegemony, 6/8/2023, “Dolar Dominance: Preserving the US dollar’s status as the global reserve currency”, Atlantic Council, https://www.atlanticcouncil.org/commentary/testimony/dollar-dominance-preserving-the-us-dollars-status-as-the-global-reserve-currency/) //KC
Dear Committee Members, thank you Chairman Luetkemeyer and Ranking Member Beaty for inviting me to testify on the important topic of dollar dominance and the preservation of the dollar’s status as a global reserve currency. I am honored. Despite numerous challenges, dollar dominance has persisted for nearly eighty years. Why does the dollar continue to play such a prominent role, is the dollar likely to reign supreme over the long term, and what are the most important threats on the horizon?
The extent of US dollar dominance and its preservation has become a principal theater for the great power struggle between the United States, China, and Russia—placing the future of liberal international order in the balance. The dollar is the only truly global currency in the world, and is widely used for transactions, pricing, settlement, and investment by governments and private actors outside the United States. These roles offer the United States economic, political, and social privileges. Economically, Americans benefit from the ease and convenience of transacting in dollars, from seigniorage, monetary flexibility, and safe-haven benefits in times crisis. Politically, the dollar offers the United States a non-military instrument of coercion with which to police international order. Socially, the United States gains status and prestige. Preserving the dollar’s status as the global currency is therefore in the United States’ interest, and potentially in other countries’ interest.
Dollar dominance refers to the disproportionate use of dollars in the world economy, a condition which has prevailed during the entire postwar era. The absolute dominance of the dollar is unlikely to change in decades to come, though the dollar’s relative dominance has receded from peak levels. Even though the dollar remains dominant, a relative weakening of the dollar’s status is considered a harbinger of the long-term power shift to the East, hastening the onset of a multipolar order in which the United States is less capable and less influential.