CBO: If China, Iran, Brazil Get it Together, Our Reserve Currency Status Is in Danger, Which Would 'Have Serious Financial Repercussions'
On Wednesday’s broadcast of the Fox Business Network’s “Cavuto: Coast to Coast,” Congressional Budget Office Director Phillip Swagel stated that the U.S.
has been able to keep interest payments on its debt lower because the dollar is the reserve currency, but if China, Iran, and Brazil “were to get their act together,” we could lose that status and “that would have serious financial repercussions for us.” Host Neil Cavuto asked, “It is still high, when you talk about the cost of our debt, because it’s double what we were paying on our debt, a little more than, what, a-year-and-a-half ago when all this rate hike stuff started. So, the cost of what we owe is getting to be problematic. Do you think there’s any progress on the part of countries like China and Iran and Brazil that hope to come up with a rival currency, a rival basket of currencies to the dollar? That could push some action, because that’s the kind of thing that credit rating agencies look at.” Swagel answered, “[Y]ou’re combining two key issues there. One is our rising net interest payments, and so they’ve gone from less than $500 billion a year ago, north — probably north of 600 billion this year and [are] set to triple over the next ten years. So, the rising interest rates, as you’ve said, [mean] we’re paying more in interest costs. On the other hand, we’re still the reserve currency, and that’s keeping those rates and those payments lower. If those other countries were to get their act together, it doesn’t look like it right now, but it’s a danger, that would have serious financial repercussions for us.” Follow Ian Hanchett on Twitter @IanHanchett.
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