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Janet Yellen on Jobs, Debt, Taxes, Climate and Cryptocurrency

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Private equity managers should also take note of the following: She implied that she would like to deal with “interest income” which allows some financiers to pay taxes on their income at capital gains rates as if they had invested the money themselves.

Ms. Yellen seemed less convinced of a financial transaction tax, which some have suggested could bring in $ 80 billion a year by imposing a small fee on every trade that would hit Wall Street especially.

“It might deter speculation, but it could also have negative effects,” she said.

Ms. Yellen duplicated the “buyers watch out” message to Bitcoin investors. “I don’t think Bitcoin – I’ve already said that – is widely used as a transaction mechanism. I’m afraid it is often used for illegal finance, ”she said. “It’s an extremely inefficient way to conduct transactions. And the amount of energy that goes into processing these transactions is staggering. But it’s a highly speculative advantage and I think people should be careful. It can be extremely volatile and I am concerned about possible losses that investors could take. “

Ms. Yellen is more interested in the prospect of the Federal Reserve developing what is known as a digital dollar than she has first made public comments on the prospect. Crypto backers might interpret this as confirmation of the idea – Ms. Yellen’s immediate predecessor, Steven Mnuchin, seemed less interested – that shares some of the technologies underlying Bitcoin and other cryptocurrencies.

“It makes sense for the central banks to look at this,” she said. “We have a financial inclusion problem. Too many Americans really don’t have access to basic payment systems and bank accounts, and I think this is something that a digital dollar – a central bank digital currency – could help with. I think this could lead to faster, safer, cheaper payments. “

There are a number of “problems” that need to be resolved before central banks move into digital currencies, she said. “What would be the implications for the banking system? Would this lead to a huge movement of bank deposits into the Fed? Would the Fed deal with retail customers or try to do so at the wholesale level? Are there any concerns about financial stability? How would we deal with money laundering and illegal financial problems? There’s a lot to consider here, but it’s definitely worth checking out. “

Ms. Yellen said dealing with climate change is part of a broader mandate for the Treasury Department, as well as other departments under President Biden. One of the most intriguing comments she made was about the role of financial institutions and the risk they are exposed to by investing in or lending to companies exposed to climate change.

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Robert Dunfee