Carney’s call for alternatives to the U.S. dollar will get backs up in Washington

OPINION Carney’s call for alternatives to the U.S. dollar will get backs up in Washington KONRAD YAKABUSKI PUBLISHED 2 HOURS AGO COMMENTS SHARE SAVE FOR LATER Listen to this article Learn more about audio Log in or create a free account to listen to this article. What does Prime Minister Mark Carney have against the U.S. dollar? Plenty, it turns out. And his recent calls for an alternative to the U.S. greenback as a global reserve currency will not go over well in Washington, where the dollar’s dominance is seen as an indispensable tool in the conduct of U.S. economic and foreign policy. The U.S. dollar accounts for about 57 per cent of foreign exchange reserves held by the world’s central banks. While the proportion is down from about 70 per cent in 2000, it far outweighs the U.S. share of the global economy (about 26 per cent) and global trade (12 per cent). Most international trade between non-U.S. countries is conducted in dollars. The dollar’s pre-eminence stems from the sophistication, liquidity and depth of U.S financial markets, and the perception that U.S. Treasury bonds remain the world’s safest asset. The latter assumption is increasingly being called into question as the U.S. federal debt surpasses US$40-trillion and as President Donald Trump undermines the rules-based foundations of the international trading system that the United States created. Both Republican and Democratic administrations have used access to the dollar-denominated payment systems as leverage against U.S. adversaries, mostly through sanctions, prompting China and other BRICS countries to seek substitutes for the dollar in global trade. U.S. dollar ascends to fresh two-month high on inflation worry, Fed hike expectations Still, none has emerged. The renminbi cannot be a dollar substitute as long as China limits capital flows and its legal system remains under Communist Party control. There is simply no credible alternative to the U.S. dollar in global finance. And any attempts to promote one risks being seen as a threat in Washington, where, regardless of party, dollar dominance is sacrosanct. That has not stopped Mr. Carney from going there. In his speech last week before the European Parliament, he warned that “financial mechanisms are being used for coercive purposes.” He hinted at closer Canada-Europe co-operation on “payments systems” to bypass U.S.-controlled ones. In a Wednesday interview with The New York Times, Mr. Carney said the dollar’s dominance…