07.11.19

Senator David Perdue Questions Fed Chair On Reserve Currency

Powell: We Have To Address Fiscal Issues To Keep Dollar As Reserve Currency

WASHINGTON, D.C. – U.S. Senator David Perdue (R-GA), a member of the Senate Banking Committee, asked Federal Reserve Chairman Jay Powell how emerging technology and the United States’ national debt will affect the dollar’s ability to remain the world’s reserve currency.

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Senator Perdue: “I tried to buy a cup of coffee in China last year with a credit card and cash, and you just couldn’t do it. It was all Alipay, WePay, etc. With cryptocurrency and all the technology that’s coming, it seems to me that technology is running ahead of us in our ability to look at how currency is managed around the world, how cash flows are managed, and the impact it could have on how we have used reserve currency in the world for about the last 100 years. We’ve benefited from that in the United States. The ability to borrow $22 trillion of debt and potentially $10 trillion more over the next decade depends heavily on our ability to have the dollar as a reserve currency. What risks do you see to the structure of our payment systems and the economy itself, and to the fact that the dollar has been the reserve currency for about 100 years?”

Chairman Powell: “Being the reserve currency does confer benefits and costs. One of the potential costs is that you are a little bit immune from market discipline because everyone wants to be in the most liquid asset. It tends to be a pretty stable equilibrium so there tends to be one or two reserve currencies, and it tends to last for a long time. But if you’re going to keep that role, you’ve got to run your fiscal house successfully. You’ve got to be running a sustainable fiscal policy. We’re not. I don’t think in the near-term there’s anything to threaten our status of reserve currency, but in the medium- and longer-term, we’ll have to address our fiscal issues.”

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When Senator Perdue was elected, he was the only Fortune 500 CEO in Congress. He is serving his first term in the United States Senate, where he represents Georgia on the Armed Services, Banking, Budget, and Agriculture Committees.