**Is It A Good Thing For Ordinary Americans If The US Loses Reserve Currency Status?**
Is It A Good Thing For Ordinary Americans If The US Loses Reserve Currency Status?
_Authored by Ryan McMaken via the Mises Institute (https://mises.org/power-market/its-good-thing-ordinary-americans-if-us-loses-reserve-currency-status),_
Earlier this month, Larry Kudlow insisted (https://www.foxbusiness.com/media/larry-kudlow-its-incumbent-us-maintain-reserve-currency-status-dollar)that it is **"it's incumbent on the U.S. government, no matter who's in power, to maintain the reserve currency status of the dollar."** Kudlow laments that a toppling of the dollar from that perch "seems to be the direction we're going in."
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Kudlow's remarks came a day after Donald Trump declared (https://thedalesreport.com/trends/donald-trump-china-trying-to-displace-the-u-s-dollar-as-the-worlds-reserve-currency/) that China is trying to displace the U.S. Dollar \[sic\] as the NUMBER ONE CURRENCY" and that if this occurs, it would be the biggest defeat for our Country \[sic\] in its history."
**Neither Trump nor Kudlow actually explain why maintaining reserve currency status is so important.** After all, it's clear that it is not necessary for a country's currency to be a reserve currency in order for that country to have a high standard of living and a high degree of economic freedom. We could simply look to Norway and Switzerland to see that.
What's Good for the Government Isn't Necessarily What's Good for the People
Trump and Kudlow seemingly can't tell the difference between what is good for the US government, and what is good for the people. The idea that global reserve currency status for the dollar is essential to "America" relies on the false notion that the interests of the US regime and the interests of ordinary taxpaying Americans are one and the same. These interests rarely coincide, however, and they _certainly_ don't when it comes to reserve currency status. **This is especially the case when the dollar is unbacked by any commodity like gold, and is simply a floating fiat currency that can be inflated at the will of the regime at any time.**
That global reserve currency status benefits the regime itself is obvious. This status for the dollar does indeed allow the regime to more recklessly inflate the dollar and increase deficits. This enhances the US regime's ability to bribe voters with enormous welfare programs and involve the US regime in a dazzling array of wars that have nothing to do with defending US territory. **None of this, however, improves the standard of living of Americans who pay the bills**. Even worse, when the dollar ceases to be the dominant reserve currency—an event that is inevitable—holders of dollars will see their purchasing power plummet. Yet, it not the end of reserve currency status that is to blame for the inflationist pain. Rather, the fault will lie with the decades of monetary and fiscal mismanagement made possible by the dollar's status as global reserve currency.
**To demand the regime continue to cling to global reserve currency status is to demand a continuation of the policies that have hollowed out the financial well-being of Americans for decades**.
Trump and Kudlow, however, are not troubled by this. For them, it appears that the supposed importance of reserve currency status is not about economic concerns, but is really a _political_ project. This shouldn't surprise us given many of the narratives surrounding the dollar's status—which focus on China and Chinese geopolitical power as the main reason to fear a decline of the dollar. This isn't about protecting your wealth or reining in government power. It's about increasing US government power in the name of fighting the latest foreign "axis of evil."
In fact, China's currency, the yuan, doesn't even pose a threat to the dollar (http://mises.org/wire/why-dollar-still-beats-euro-and-yuan). The yuan is a fifth-place also-ran in the currency race. So, for now, the dollar still reigns supreme, and being the regime whose currency enjoys global reserve status comes with many advantages.
Why Reserve Currency Status Enhances State Power at the Expense of the Taxpayers
**The first advantage is reserve currency status brings a greater global demand for dollars**. This means more of a global willingness to absorb dollars into foreign central banks and foreign bank accounts even as the dollar inflates and loses purchasing power. Ultimately, this means the US regime can hoodwink the voters into accepting more monetary inflation, more financial repression, and more debt for many years before domestic pric…