TOKYO: Economist Paul Sheard says the decision by the United States to freeze assets of foreign powers it conflicts with is a huge mistake and undermines the dollar.
Speaking to reporters at the Foreign Correspondents’ Club of Japan on Tuesday, Sheard strongly denounced American’s move, which he refers to in his new book “The Power of Money.”
“Viewed from a kind of a narrow economic perspective, I think it’s a very bad idea,” the former Vice Chairman of S&P Global stated.
Sheard pointed out that many countries are using the dollar for international commerce, and some – China, Japan, Saudi Arabia, Russia – create considerable stockpiles.
Sheard explained why the policy of the US was wrong. “Now, if from time to time for geopolitical purposes, the US turns around and says, ‘Oh, we’re going to grab those reserves, we’re going to freeze that money; that’s not your money anymore. We’re going to use that money for some other purpose such as reconstruction in Ukraine,’ that seems to me a very short-sighted policy.”
“From an economic point of view that will set in train a series of reactions. Countries that up until now have been very willing to use the US dollar as a reserve currency, there’ll be a reluctance to do so, and I think we’re already seeing things happening in the world around China, Russia, Iran, BRICS, where people are having these conversations.”
“When those sanctions in Russia were applied, I was interviewed by the South China Morning Post and I made the comment, which I’ll put on the public record here, that I can’t believe that the Fed and the Treasury were in the room when those decisions were taken. Because if they had been, they should have said, “Mr. President, no! Please don’t do this.’ You can do a whole lot of other things, but this will not be in the national interest of the US to bring into question the integrity of the US dollar as the dominant reserve currency.”
Paul Sheard is an Australian-American economist who is globally well-known and respected. He held chief economist positions at S&P Global, Standard & Poor’s Rating Services, Nomura Securities, and Lehman Brothers and was Japan Strategist and Head of Japanese Investments at Baring Asset Management.