U.S. economic predominance has been increasingly tested in recent years, with the rise of the Chinese powerhouse and a resurgent Russia advocating alternatives to the dollar. Still, the dollar’s strength over the past year has demonstrated its primacy and underscored its unique status.
“I just don’t think that there’s a connection,” said John Taylor, a Stanford economist who served as the Treasury’s undersecretary for international affairs from 2001 to 2005.
Juan Zarate, a senior White House and Treasury official in the George W. Bush administration, said “it’s a very binary argument being made to sell the deal, and it overstates the risks that we face.” He has raised concerns in recent years that the overuse of sanctions could over the long run degrade the dollar’s elite status, but he says in the current context, the administration’s argument isn’t credible.
Moreover, Mr. Zarate said the argument is “undermining the power of the dollar itself at a time when it’s actually the strongest currency in the world, and you’re undercutting the effect of sanctions.”
Others said the administration’s concern could be valid but was possibly overstated.
“It’s a reasonable debating point…but it’s probably one of the weaker aspects,” said Edwin “Ted” Truman, a longtime international finance official at the Federal Reserve and the Treasury Department.