WELCOME BACK TO "THE LATE SHOW"! FOLKS, MY FIRST GUEST THIS
EVENING IS THE ONLY PERSON IN AMERICAN HISTORY TO HAVE LED THE
WHITE HOUSE COUNCIL OF ECONOMIC ADVISORS, THE FEDERAL RESERVE,
AND THE TREASURY DEPARTMENT. PLEASE WELCOME TREASURY
SECRETARY JANET YELLEN! ♪ ♪ ♪
( APPLAUSE )
>> THANK YOU FOR THE INVITATION. >> Stephen: HAVE YOU EVER BEEN
ON A LATE-NIGHT SHOW BEFORE? >> I'VE NEVER BEEN.
>> Stephen: YOU'RE GOING TO LOVE IT.
IT'S GREAT. YOU'VE BEEN CALLED A JEANNEEROUS
EXPLAINING ARGUMENTS SIMPLY AND CLEARLY.
YOU HAVEN'T SAID THIS YOURSELF. CAN YOU EXPLAIN HOW INFLATION
GOT SO HIGH BECAUSE TWO YEARS AGO, EVERYTHING SEEMED FINE,
EVEN IN 2021, YOU AND OTHER MEMBERS OF THE ADMINISTRATION
BELIEVED THAT INFLATION WAS A SMALL RISK.
WHAT HAPPENED, SIMPLY AND CLEARLIY?
( LAUGHTER ).
>> SO, WE HAD RAPID RECOVERY FROM THE PANDEMIC.
WHEN PRESIDENT BIDEN WAS ELECTED, UNEMPLOYMENT WAS QUITE
HIGH. IT WAS CLOSE TO 7%.
AND WE PUT POLICIES IN PLACE THAT GENERATED A VERY RAPID
RECOVERY. UNEMPLOYMENT QUICKLY FELL BACK
INTO THE THREEs. >> Stephen: WHAT IS IT NOW?
WHAT IS IT NOW? >> 3.7.
SO NORMALLY YOU WOULDN'T EXPECT, JUST BECAUSE YOU HAD A RAPID
RECOVERY, FOR INFLATION TO RISE VERY MUCH, IF AT ALL.
BUT IT TURNED OUT THE PANDEMIC HAD VERY SPECIAL IMPACTS ON THE
ECONOMY. REMEMBER, EVERYBODY STOPPED
SPENDING ON SERVICES. THEY WERE IN THEIR HOMES FOR A
YEAR OR MORE. THEY WANTED TO BUY GRILLS AND
OFFICE FURNITURE. THEY WERE WORKING FROM HOME.
THEY SUDDENLY STARTED SPLURGING ON GOODS, BUYING TECHNTECHNOLOGU
KNOW, SUDDENLY WORKING THROUGH TECHNOLOGY.
AND BOTTLENECKS STARTED DEVELOPING WHERE SUPPLY, IN
PARTICULAR IMPORTANT SECTORS OF THE ECONOMY, JUST COULDN'T KEEP
UP WITH DEMAND. >> Stephen: AMAZON, JPMORGAN,
MET TA, DISNEY, PARAMOUNT-- THEY'VE ALL DONE BIG CUTS IN
ANTICIPATION OF A RECESSION. ONE DOESN'T SEEM TO HAVE SHOWN
UP YET. WHO IS RIGHT?
ARE WE HEADED FOR A RECESSION? YOUR COUNTERPART IN ENGLAND SAYS
THEY ARE ALREADY IN RECESSION AND IT WILL BE THE LONGEST ONE
SINCE THE GREAT WAR. >> I BELIEVE THERE IS A PATH
BRINGING INFLATION DOWN WHILE MAINTAINING A STRONG HEALTHY
LABOR MARKET. >> Stephen: YOU THINK IT'S
POSSIBLE WE'RE NOT HEADING INTO A RECESSION?
>> WE HAD RAPID RECOVERY. GROWTH HAS SLOWED DOWN.
I EXPECT THE PACE OF JOB CREATION TO SLOW DOWN.
THAT'S NATURAL AND EXPECTED WHEN THE UNEMPLOYMENT RATE IS CLOSE
TO THE LOWEST IN 50 YEARS. SO I THINK WE CAN TAKE THE HEAT
OUT OF THE ECONOMY. AND, REMEMBER, RUSSIA HAS
CONDUCTED A BRUTAL WAR AGAINST UKRAINE.
AND THAT CAUSED GAS PRICES TO SPIKE.
IT'S CAUSED FOOD PRICES TO SPIKE.
IT'S CREATING HARDSHIP ALL OVER THE WORLD.
AND WE'RE REALLY TRYING TO ADDRESS THOSE-- THOSE STRAINS AS
WELL. THAT'S ANOTHER REASON INFLATION
WENT UP, AND WE'RE TRYING TO HOLD THAT DOWN.
>> Stephen: NOW, YOU USED TO BE, AS I SAID BEFORE, YOU USED
TO BE THE HEAD OF THE FED, CHAIRMAN OF THE FED.
WHAT GOES ON IN THERE?
THEORIES THAT THE FED IS A CABAL, AND YOU WEAR RO ROBES AND
SACRIFICE A GOAT, AND RIGHT BEFORE THE GOAT BURSTS INTO
FLAMES IT TELLS YOU THE NEW INTEREST RATE HIKE YOU'RE
SUPPOSED TO SAY-- WHY IS IT SO SECRETIVE?
WHY IS THE FED SO SECRETIVE? >> WELL, IT USED TO BE VERY
SECRETIVE, AND THERE WAS A FAMOUS BOOK CALLED, "SECRETS OF
THE TEMPLE." AND THEN THE PHILOSOPHY-- IT WAS
THOUGHT ONCE UPON A TIME-- I CAN NO LONGER REMEMBER WHY-- BUT
MONETARY POLICY WOULD BE MOST EFFECTIVE IF IT WAS MOST
SECRETIVE. AND THE OF THE TRUTH IS THAT THE
FED NEVER EVEN ANNOUNCED TO THE PUBLIC WHAT DECISION THEY HAD
MADE ABOUT MONETARY POLICY. THE FIRST TIME THAT EVER
HAPPENED WAS IN FEBRUARY OF 1994.
>> Stephen: BEFORE THEN, THE INTEREST RATES WOULD CHANGE
JUST, AND THAT'S HOW WE WOULD FIND OUT?
>> THEY WOULD MAKE A SECRET DECISION, AND YOU TO BE A FED
WATCHER, AND YOU WOULD WATCH THE MONEY SUPPLY NUMBERS.
AND YOU REALLY HAD TO UNDERSTAND HOW WALL STREET WORKED IN ORDER
TO REALIZE THEY HAD CHANGED THE STANCE OF MONETARY POLICY.
MEETINGS ENDED, THEY NEVER EVEN ISSUED A STATEMENT.
>> Stephen: THIS MORNING, YOU CALLED THE RECENT CRYPTO-CRASH
"A LEHMAN MOMENT." OF COURSE A LEHMAN MOMENT, AS I
UNDERSTAND IT, IS WHEN ONE FIRM, OR LARGE ENTITY, ENDS UP BEING A
SENECTED FOR A LARGER MARKET. ARE YOU SAYING SCRIPTO COULD
COLLAPSE BECAUSE OF RECENT CRYPTO FAILURES?
>> I WOULD SAY THE COLLAPSE OF THIS FIRM, FTX, A LEHMAN MOMENT
FOR CRYPTOCURRENCY SECTOR AND HAS HAD CONTAGION.
BUT, FORTUNATELY, THERE HASN'T BEEN MUCH CONTAGION TO THE REAL
ECONOMY. INVESTORS HAVE LOST A LOT OF
MONEY, AND TO ME, THAT POINTS TO THE NEED FOR MUCH MORE
REGULATION OF THIS SECTOR. AND THIS HAPPENED BECAUSE THIS
FIRM WAS OPERATING AT-- MAINLY OUTSIDE THE UNITED STATES --
>> Stephen: WITH NO-- WITH NO OVERSIGHT.
>> WITH NO REAL OVERSIGHT. BUT EVEN IF IT HAD BEEN IN THE
UNITED STATES, THERE ARE REAL GAPS.
THERE'S SOME REGULATORY AUTHORITY, BUT HUGE HOLES.
AND SO THIS IS THE SECTOR WHERE INNOCENT INVESTORS COULD REALLY
LOSE THEIR MONEY. >> Stephen: WELL, LET ME ASK
YOU SOMETHING ABOUT-- LET ME ASK YOU ABOUT CRYPTO: DO YOU-- DOES
CRYPTO MAKE SENSE TO YOU, ON THIS LEVEL?
PEOPLE LIKE RON PAUL WOULD SAY AFTER THE UNITED STATES WENT OFF
THE GOLD STANDARD UNDER 96 KNOW ON, I BELIEVE,s THAT YOU KNOW
WE'RE NOW A FIAT CURRENCY. THINGS ARE WORTH WHAT THEY'RE
WORTH BECAUSE WE SAY IT'S WORTH SOMETHING.
IT'S BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES,
WHATEVER THAT PARTICULAR PHRASE, THAT TERM OF ART MIGHT MINE.
IS CRYPTO, WHERE IEATE A WIDGET THAT SPITS OUT A COIN THAT I
DECLARE A VALUE AND THAT NUMBER OF THOSE SETS A CAPITALIZATION
FOR ALL THAT CRYPTO OUT AND THERE PEOPLE GET INVESTED AND
THAT $20 MILLION PEOPLE SAY THAT'S NOW WORTH $100 MILLION,
AND IT'S ALL CREATING OFFED OUT OF NOTHING.
DOES THAT MAKE SENSE TO YOU? THERE IS NO INHERENT VALUE TO
THE ITEM ITSELF? >> I HAVE BEEN PRETTY SKEPTICAL
SINCE THE OUTSET ABOUT WHAT THE VALUE OF CRYPTO WOULD BE TO THE
REAL ECONOMY. >> Stephen: BECAUSE THE UNITED
STATES HAS A FIAT CURRENCY, IS-- IS THE DOLLAR MAKE ANY MORE
SENSE TO YOU THAN CRYPTO DOES? >> YES, THE DOLLAR MAKES A LOT
OF SENSE TO ME. >> Stephen: WHY?
>> >> BECAUSE IT'S A NATIONAL
CURRENCY THAT'S WELL REGULATED BY THE FEDERAL RESERVE THAT HAS
A CLEAR MANDATE. AND PEOPLE WHO WERE ACCOUNTABLE
TO THE PUBLIC AND TO CONGRESS TO MAINTAIN THE GOALS OF THE FED,
WHICH IS MAXIMUM EMPLOYMENT, AND LOW AND STABLE INFLATION.
>> Stephen: THEY KNOW WHAT THEY'RE TALKING ABOUT.
THEY'VE GOT THE ROBES AND THE GOATS AND EVERYTHING.
>> THEY'VE GOT WHOLE THING. THEY TELL YOU WHAT THEY'RE
DOING. SOMETIMES PEOPLE MISUNDERSTAND,
BUT THEY TALK TO YOU ABOUT WHAT THEY'RE-- WELL, ONE PROBLEM IS
THERE ARE 19 OF THEM AT FULL STRENGTH, AND THEY HAVE SLIGHTLY
DIFFERENT VIEWS AND PEOPLE SOMETIMES FIND IT CONFUSING.
>> Stephen: NOW THAT YOU NO LONGER ARE AT THE FED DO, THEY
CONFUSE YOU?
EVER, AS THE TREASURY SECRETARY? >> NOT ESPECIALLY, BUT --
>> Stephen: WE HAVE TO TAKE A QUICK BREAK.
BUT WHEN WE COME BACK, I WILL ASK SECRETARY YELLEN WHY HER
NAME ISN'T ON OUR MONEY YET. STICK AROUND.