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China’s new digital yuan could compete as a reserve currency and undermine America’s financial dominance.
By Kevin Warsh
China is giving the U.S. a run for its money. The recent launch of a digital form of the Chinese yuan—bolstered by a disruptive new technology—threatens the dominance of the U.S. dollar and American hegemony. U.S. policy makers should heed the moment and respond with a strengthened form of the dollar in service to the national interest.
The greenback is trading at its strongest level since 2002, up more than 10% year-to-date against most major currencies, including the yuan. U.S. authorities, however, shouldn’t misread the dollar’s strength. American output has fallen, just not as far or fast as that of our big trading partners. The Federal Reserve is raising rates belatedly to slow inflation, but there is a high price still to be paid for high prices.