Janet Yellen on Jobs, Debt, Taxes, Climate, Cryptocurrencies

Treasury Secretary Janet L. Yellen has conducted only a handful of interviews since taking office about a month ago. Business leaders and investors stick to every word of her, trying to understand how she and the Biden administration lead policies and how this affects the economy and markets.Yellen, formerly chairman of the Federal Reserve Board, is good at delivering messages, but in an interview with me DealBook DC Policy Project, She usually hinted at some policy priorities in a conservative way.

Here are the highlights of what she said about some of the biggest issues and my interpretation of what that means.

When asked what indicators Yellen would use to measure success in her new role, she revealed that one problem was higher than the other. “The simple problem is the level at which we enjoyed unemployment before the crisis,” she said.

But don’t just look at the headline unemployment rate as an indicator.She is using More severe measuresThis means she is likely to push stimulus and other policies to goose the economy beyond expectations. “Remember that the unemployment rate was at least 3.5% for the first time in 50 years,” she said of the pre-pandemic situation, in contrast to the current 6.3%. “But in reality, if you add about 10 million people who are registered as unemployed and 4 million people who have dropped out of the workforce due to childcare responsibilities for health reasons, the two will have time. And millions of people who have reduced their payments are actually seeing an unemployment rate close to 10 percent. “

How much is it? This is an important issue that economists are discussing as government debt soars, and some argue that old fiscal rules no longer apply. Known for his dovish tendency to lead the Federal Reserve Board, Yellen doesn’t go that far.But she had discussions like “traditional metrics” Debt to GDP ratio It’s wrong to look to determine if a country can afford to pay more debt. “I remember 2007. Before the financial crisis, the debt-to-GDP ratio was 35%, and now it’s about 100,” she said.

A more important measure for her is the cost of debt. “For example, look at interest payments on debt as a share of GDP. Currently it’s less than 2 percent,” she said. “And it’s not higher than 2007. So I think we have more financial space than before, thanks to the interest rate environment, and I think we should use it now to deal with emergencies. I will. “

Yellen said he wasn’t planning a wealth tax Senator Elizabeth Warren — “It has a very difficult implementation problem.” — But in her most direct comment on this topic, the Treasury Secretary said that tax treatment could have serious implications as well. He said he was ready to consider the end. She will consider stopping the rule that allows assets to be passed after death at their current (or “stepped up”) value without paying taxes on profits generated over time.Center on budget and policy priorities Crunch the numbers Unrealized capital gains are estimated to account for 55% of real estate assets worth more than $ 100 million.

Private-equity executives also need to be careful. She hinted that she wanted to see a “carry interest” where some lenders could pay taxes on their income at a capital gains rate as if they had invested themselves.

Yellen didn’t seem very confident about the financial transaction tax. Some suggest that this can raise $ 80 billion annually by imposing a small fee on all the transactions that hit Wall Street the most. “It may thwart speculation, but it may also have a negative impact,” she said.

Yellen has doubled the message to Bitcoin investors, “Buyers should be careful.” “I don’t think Bitcoin (which I said before) is widely used as a transaction mechanism. To the extent it is used, I often find it due to illegal finances. I’m afraid of that, “she said. “This is a very inefficient way to execute transactions. And the amount of energy consumed in processing those transactions is staggering. But it’s a very speculative asset. Yes, I think people need to be careful. It can be very volatile and worried about potential losses that investors may incur. “

Yellen is more interested in the prospect that the Federal Reserve could develop the so-called digital dollar. It seems that she is the first to publicly comment on the outlook. Cryptocurrency supporters may interpret this as a support for the idea — Yellen’s predecessor Steven Mnuchin didn’t seem to be very interested in it — some of the technologies behind Bitcoin and other cryptocurrencies. I’m sharing. “It makes sense for the central bank to see it,” she said. “We have problems with financial inclusion. Too many Americans don’t have access to simple payment systems or bank accounts. I think the central bank’s digital currency, the digital dollar, will help. Faster. , I think it will be safer and cheaper to pay. “

She said there are some “problems” to be solved before the central bank enters the digital currency. “What is the impact on the banking system? Will it cause a huge transfer of deposits from the bank to the Fed? Will the Fed deal with individual customers or will it try to do this at the wholesale level?” Are you concerned about financial stability? How do you manage money laundering and illegal financial issues? There are many things to consider here, but they are worth a look. “

Yellen said addressing climate change is part of the Treasury’s broader mission, as are other departments under President Biden. One of the most fascinating comments she made was about the role of financial institutions and the risks faced by investing or lending to companies exposed to climate change. “There is a new move towards stress testing for financial institutions,” she said, and financial companies face the risks of climate change in terms of “physical risks and risks from price fluctuations, stranded assets, etc.” I admit that.

“It’s encouraging,” she said, that the Federal Reserve Board is considering this. “And I think that’s what the Treasury could be able to discuss and promote.” “Although these tests are not expected to have the same status regarding payment and capital requirement limits. I think it will be revealed to both the regulator and the company itself, “she added.

Janet Yellen on Jobs, Debt, Taxes, Climate, Cryptocurrencies

Source link Janet Yellen on Jobs, Debt, Taxes, Climate, Cryptocurrencies

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