(Bloomberg) — Former Treasury Secretary Steven Mnuchin said a strong dollar will help the U.S. finance its large budget deficit for now, while the winner of November's presidential election will likely have to make a new bid to rein in the federal debt burden. He called on the government to lead the initiative. .
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Asked if a strong dollar is good for the U.S. economy, Secretary of State Mnuchin said, “I think it's a good thing.” “First of all, the dollar is the world's reserve currency, and that's what allowed us to finance these very large deficits.”
The dollar has surged about 13% against the Japanese yen over the past 12 months, but has gained modestly against other major currencies. Confidence in the dollar as a long-term store of value has helped support demand for U.S. Treasuries, the world's largest and most liquid bond market.
Mnuchin worked under former President Donald Trump and sometimes advocated for a weaker exchange rate to help the U.S. trade position. In July 2019, he said a very strong dollar “is a beautiful thing in some ways, but it makes it harder to compete.”
“I think the dollar will remain the reserve currency for some time, but we have a responsibility to get our finances back on track,” Mnuchin said Tuesday on Wall Street Week with Bloomberg TV's David Westin. Stated. “Over time, you won't be able to rely on the strong dollar to support demand for U.S. federal debt,” he said.
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Mnuchin, who now runs the private investment firm Liberty Strategic Capital, said whoever becomes the next president needs to start working with the House and Senate to tackle the deficit. The nonpartisan Congressional Budget Office predicted in February that the budget deficit would rise from $1.58 trillion this year to $2.56 trillion by 2034.
“These deficits are going to come back and they're going to be a serious problem,” Mnuchin said. “My suggestion is to establish a bipartisan commission and start looking into it now.”
The former Treasury secretary also said he was concerned that sanctions on Russian and Iranian oil were not fully implemented. “We are seeing serious violations of these and we think this should be enforced.”
He also said there was a need for a “healthy debate” about what to do with the frozen Russian funds. “The use of Russian funds to rebuild post-war Ukraine should be seriously considered,” he said.
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