However, the former premier still argues that despite the growing questions about the dollar’s reserve status, he does not see any real prospect of that changing anytime soon. Instead, he envisions these alternatives becoming part of a basket of reserves in which the dollar still dominates.
Experiences From the 2008 Financial Crisis
Speaking in an interview, the former premier uses Canada’s experiences in the aftermath of the 2008 financial crisis to illustrate why he thinks the dollar’s reserve currency status is not under threat. According to Harper, after the financial crisis left the U.S. economy in a worse off position, Canada, on the other hand, emerged from the crisis relatively unscathed.
This better economic standing led to the increasing demand and subsequent appreciation in the value of the Canadian dollar. Yet as Harper explains, Canada, as well as the few countries that survived the crisis, lacked the capacity to “absorb the money that was floating.” This experience according to Harper demonstrated then that the U.S. dollar cannot easily be displaced from its position.
Lack of Alternatives
Still, the former premier does suggest the euro and the Chinese yuan can be seen as the two currencies that can realistically challenge the dollar. Nevertheless, Harper thinks that both currencies have their own shortcomings that will stop them from overtaking the dollar. Commenting on the euro’s chances, Harper says:
There is every reason to have as much more doubt about the long term value and stability of the euro than the U.S. dollar.
However, the former premier is much more skeptical about the Chinese currency which he says “you have no idea of what it is really worth at any given moment.” Furthermore, he says the yuan is susceptible to “arbitrary measures that the Chinese government will take in order to revalue its obligations or the value of the currency itself.”
