U.S. Treasury Secretary Admits Washington’s Policy Has Failed

Is U.S. Treasury Secretary Janet Yellen regretting her decision to steal over 300 billion dollars of Russian assets at the onset of the war in Ukraine? As we reported earlier, EU Commission President Ursula von der Leyen deployed then Prime Minister of Italy Mario Draghi to practice his “wizardry” on Yellen at the time, and he did convince her to freeze the assets (cf. SAS 15-16/22).

That decision accelerated the flight out of dollar reserves by central banks in the Global South and beyond, making the “de-dollarization” of the world economy irreversible, albeit not short-term. Janet Yellen belatedly aknowledged the catastrophic consequences of her own actions in an interview with Fareed Zakaria of CNN on April 16. “There is a risk when we use financial sanctions that are linked to the role of the dollar that over time it could undermine the hegemony of the dollar”, she said, adding that “Of course, it does create a desire on the part of China, of Russia, of Iran to find an alternative. But the dollar is used as a global currency for reasons that are not easy for other countries to find an alternative with the same properties.”

Yellen also attempted to redeem herself on another issue, by warning on April 20 against the strategy of “decoupling” the U.S. economy from China. Speaking at the Johns Hopkins School of Advanced International Studies, she proposed that the U.S. “seek a constructive and fair economic relationship with China. Both countries need to be able to frankly discuss difficult issues. And we should work together, when possible, for the benefit of our countries and the world.”

“We do not seek to ‘decouple’ our economy from China’s”, she insisted. “A full separation of our economies would be disastrous for both countries. It would be destabilizing for the rest of the world.” In her view, as long as China plays by the international rules, both countries “can benefit from healthy competition in the economic sphere. But healthy economic competition — where both sides benefit — is only sustainable if that competition is fair. We will continue to partner with our allies to respond to China’s unfair economic practices.”

Ms. Yellen is certainly not alone in her effort to put the brakes on aspects of President Biden’s failing strategy. On April 14, in an interview with Bloomberg, her predecessor in the Clinton administration, Larry Summers, warned that the U.S. is becoming isolated in the world. “There’s a growing acceptance of fragmentation, and — maybe even more troubling — I think there’s a growing sense that ours may not be the best fragment to be associated with”, he quipped.

“Somebody from a developing country said to me, ‘what we get from China is an airport. What we get from the United States is a lecture’”, he added. Summers, who is currently president of Harvard University, believes that America is “on the right side of history — with our commitment to democracy, with our resistance to aggression in Russia. But it’s looking a bit lonely on the right side of history, as those who seem much less on the right side of history are increasingly banding together in a whole range of structures.” He also recognized that the failure of the Bretton Woods institutions to deliver development is a leading factor in the reshaping world.