Janet Yellen image clip from Youtube video
YouTube Video Clip
Those wishing to watch the Full Presentation can do so at the preceding link.
Video Statements of Note
- She warned those countries that were still "sitting on the fence, perhaps seeing an opportunity to gain by preserving their relationship with Russia and backfilling the void left by others" that their motivations were short-sighted.
- "The future of our international order, both for peaceful security and economic prosperity, is at stake," she said. "And let’s be clear, the unified coalition ... will not be indifferent to actions that undermine the sanctions we’ve put in place."
- Washington and its allies have sought to pressure India, China and other "fence-sitters" to take a clear stance opposing Russia and what it has called a "special military operation."
- In a question and answer session, Yellen said that the United States needed to work hard with China to avoid a bipolar global financial system that pits democracies against autocratic countries. China has benefited from the U.S.-led financial architecture but its reliance on state-owned enterprises and other economic practices puts U.S. national security interests at risk.
The above clips from Reuters.
The comment on a bipolar global financial system kicked off a huge discussion on Twitter, most of it silly.
Funny this statement doesn't foot with her earlier comment that the US dollar will never lose its reserve currency status.
— Lawrence Lepard, "fix the money, fix the world" (@LawrenceLepard) April 13, 2022
Even without playing the above videos, it was clear from the Tweet that Yellen was concerned over the failure of US sanctions to stop Russia, not the loss of US dollar reserve currency status, China backing the yuan with gold, hyperinflation concerns or any such nonsense.
I engaged in the following Tweets before watching the video or reading the Reuters article.
Reserve Currency
Never say never but US loss of reserve currency is nowhere in sight.
— Mike "Mish" Shedlock (@MishGEA) April 13, 2022
People confuse small increases in other currency trading with loss of reserve status @michaelxpettis
Still no viable replacement! Amusingly, no country even wants it! EU and China don't for export reasons.
No and No.
— Mike "Mish" Shedlock (@MishGEA) April 13, 2022
For starters, there are 8 requirements to achieve reserve currency status. China fails 7 of them.
Second, reserve currency status impedes export mercantilism so China does not even want it!
China will NOT back the Yaun with gold.
— Mike "Mish" Shedlock (@MishGEA) April 13, 2022
Absurd assumption.
For starters pegs to gold do not work!
— Mike "Mish" Shedlock (@MishGEA) April 13, 2022
Second. China would not like the result.
China does not want a strong yuan it wants a relatively cheap one for its export mercantilism.
Third, China does not even float the yuan. It let's it move in a tight ban.
In short, impossible.
...or is worried about - to a bi-polar currency system. How have China and Russia made Yellen so concerned? Are they going to do this by simply using their existing fiat currency? Of course not. Energy and gold will drive this change. 2/2
— Loren Boston THE FIAT WORLD IS WORRIED (@LorenBoston) April 13, 2022
Why Impossible?
Loren needs to give this more thought, not me.
It's impossible because short of ending fractional reserve lending it's not possible to maintain convertibility of fiat currency to gold.
The system will always break down which is why Nixon ended dollar convertibility.
There is no country willing to end fractional reserve lending.
Energy as a currency is ridiculous for hopefully obvious reasons. And as I have stated many times China does not want to have reserve currency status nor does it want a strong yuan because neither is compatible with export mercantilism.
Hyperinflation Nonsense Yet Again
The discussion over reserve currencies led to another silly idea, hyperinflation.
Vince - Do you know what hyperinflation means?
— Mike "Mish" Shedlock (@MishGEA) April 13, 2022
Complete loss of faith in currency. Near 100% loss vs everything else.
For the US dollar to experience hyperinflation, the dollar would have to go to zero vs the Euro, the Yen, the Yuan, and even the Ruble.
How likely is that?
Zero chance of hyperinflation unless we put progressives in Congress in charge of money supply AND the Fed made its liabilities legal tender.
— Mike "Mish" Shedlock (@MishGEA) April 13, 2022
Hyperinflation is a political event, not a currency event. To presume it could happen now is preposterous.
It takes political change.
Every county on the planet is monetizing debt.
— Mike "Mish" Shedlock (@MishGEA) April 13, 2022
That is why signaling out the US for hyperinflation is nonsensical.
I gave you the conditions. They are political.
Lacy Hunt is in agreement: The concern is making Fed liabilities legal tender, then putting Congress in charge.
It's really quite amazing how misconceptions on the meaning of "bipolar global financial system" led to discussion not about sanctions but reserve currency status and hyperinflation.
To me it was obvious what Yellen was concerned over but I sought out the videos to prove it.
What Would It Take for the Yuan to Dethrone the Dollar?
- China would have to float the yuan.
- End capital controls
- Respect property rights
- Have a bond market big enough (China has virtually no gov't bond market)
- Inspire global trust
- Be willing to have trade deficits
- Stop export mercantilism
- Have a currency market big enough
Perhaps China meets condition 8. It flunks the first 7.
The Yuan Will Not Replace the US Dollar, Nor Will It Be Backed by Commodities
For discussion of why China will not back the yuan by commodities, please see The Yuan Will Not Replace the US Dollar, Nor Will It Be Backed by Commodities
What Does China Do With a Dollar That's No Longer Risk Free? Buy Gold?
To understand escaping the dollar in greater detail please see What Does China Do With a Dollar That's No Longer Risk Free? Buy Gold?
Ramifications of US Actions
The main ramification of disastrous sanction policy started by Trump and escalated by Biden is that many countries including Russia, China, India, Iran, Pakistan, and Saudi Arabia are all damn tired of it.
Janet Yellen is very concerned over China working with Russia to avoid US sanctions.
Numerous countries will establish ways of avoiding the US dictating sanction policy for the world.
That will not cause hyperinflation nor the US its loss of reserve currency status. The latter needs a suitable replacement and none is remotely on the horizon.
Weaponizing the US Dollar
To tie all of this together, please see US Sanction Policy Forces Russia to Default. Let's Go Over the Ramifications
I view the ramifications as primarily a good thing. And although I would like to see a 100% gold-backed currency no country will accept the conditions, primarily fiscal and trade discipline, that commodity backing of currency requires.
Inflate at will remains the global mantra. Dollar hyperinflation is not possible in this setup.
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