Tuesday, February 11, 2014

Yellen asked about the US dollar reserve status in Congress today

I had not seen this before. A Congressman from New Mexico asked Chairwoman Yellen if the FED was concerned the US dollar would lose its reserve status. She gave a bland, uneventful answer. But the interesting point is that she was asked directly about this in front of Congress. Just in case you think no one cares about the fact that other nations are bypassing the dollar more and more.

And since this is fairly brief I will also paste it just below here.

TUESDAY, FEBRUARY 11, 2014 - 13:29

Yellen Excerpt: Fed Preserves Dollar's Value for World

WASHINGTON (MNI) - The following is a series of replies of Federal Reserve Chair Janet Yellen to some questions Tuesday afternoon from the House Financial Services Committee, transcribed by MNI:
Question from Rep. Steve Pearce (R-N.M.): You said at one point that interest rates are lower because of too much savings and yet you have a policy, the Fed has a policy, of paying interest on excess reserves which would be a de factor way of encouraging more savings?
Yellen: Well the Fed is paying an extremely low rate on the interest on reserves -
Pearce: It's higher than zero, though, because zero - one quarter of one percent - is what seniors are getting right now so banks can make more than seniors. So again, they see the advantage going to the rich, not to the poor and I repeat sometimes the appearance of a war on the poor. My district is also very low income. Manufactured housing is a big deal. Fifty percent of homes in my district are manufactured housing. Yet the QM policies really made it very difficult for banks to lend on that:
Yellen: QM was a policy adopted by the Consumer Financial Protection Bureau. I think they are trying to address a set of practices that resulted in unsafe and unsound lending but it is very important to monitor their impact on credit availability.
Pearce: One of the reasons we've been able to get by with QE is that we are the world's reserve currency. Has the Fed thought any at all about what's going to happen when more nations express discontent that we're printing money and then we're devaluing what they're holding. And so we've seen countries trade with other currencies this past year. Any thoughts about what happens if the world says you're not the world's reserve currency any more?
Yellen: The dollar plays a critical role in the global economy and it's the Federal Reserve's job to make sure that inflation remains under control so that the dollar remains a safe and sound currency and continue to play that role.
--MNI Washington Bureau; tel: +1 202-371-2121; email: dgulino@mni-news.com

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