Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Welcome to our TV audience and ready audience worldwide here
Speaker 2: in the Treasure Department with Secretary Jenna Yellen. Great to
Speaker 2: be with you, and there's a lot I hope to cover,
Speaker 2: and I wonder if we could begin first with your
Speaker 2: work on the world stage. We can start with Ukraine,
Speaker 2: and something that Bloomberg reported overnight is that you and
Speaker 2: the administration are considering new sanctions on Russian oil, perhaps
Speaker 2: looking at Russian oil exports, at these shadow tankers that
Speaker 2: the Russian government has. I guess, first of all, I
Speaker 2: wonder if you can confirm that those conversations, those discussions
Speaker 2: are underway.
Speaker 3: Well, let me say we never preview sanctions, and we've
Speaker 3: constantly been tightening our sanctions on Russia. Our overall aim
Speaker 3: is to impair Russia's ability to continue conducting this brutal war,
Speaker 3: to try to deny it the military equipment it needs
Speaker 3: to be able to do that, and taken a variety
Speaker 3: of steps to do it. But we have been focused
Speaker 3: since the outset on Russian oil revenue. It's a critical
Speaker 3: component of the Russian budget, and we've been looking for
Speaker 3: creative ways to try to reduce Russia's revenue. One of
Speaker 3: the most creative policy making things that I've been involved
Speaker 3: at during my career occurred here in Treasury when we
Speaker 3: were able to devise away and convince our allies to
Speaker 3: join us in this imposing a price cap on Russian oil,
Speaker 3: which was a way of avoiding price spikes when the
Speaker 3: war started for oil and actually succeeded in keeping Russian
Speaker 3: oil flowing into the market. So we continue to look.
Speaker 3: Of course, over time, while these sanctions have been effective,
Speaker 3: Russia has invested a lot its own fleet of ships
Speaker 3: to carry its own oil.
Speaker 1: We cut it off.
Speaker 3: From allied ships new insurance that have been costly to
Speaker 3: Russia to have to make those investments. Now, what's unusual
Speaker 3: about this moment is that the oil market seems to
Speaker 3: be well supplied.
Speaker 1: Prices are relatively cheap.
Speaker 3: Prices are relatively low. Global demand is down, and there
Speaker 3: really has been an increase in supply. American firms have
Speaker 3: stepped up, we have vastly expanded oil production. OPEC countries
Speaker 3: like Saudi Arabia have excess capacity at this time. So
Speaker 3: the global oil market is softer, and that create it's
Speaker 3: possibly an opportunity to take some further action.
Speaker 1: We're talking at it.
Speaker 2: You talk about creative policy making, and so visa the Ukraine.
Speaker 2: There was a moment this week when you dispersed twenty
Speaker 2: billion dollars to Ukraine a loan and they'll be paid
Speaker 2: for with interest on frozen Russian assets. So another creative
Speaker 2: piece of policy making that you've been involved with. We're
Speaker 2: at this moment where I think there are a lot
Speaker 2: of questions about what policies can remain in place, and
Speaker 2: I wonder when you look at that in particular, are
Speaker 2: you confident that under a new administration that program can
Speaker 2: continue in perpetuity.
Speaker 3: Well, we have worked with if you're talking about the
Speaker 3: so called ER loans, Extraordinary Acceleration loans, We've now transferred
Speaker 3: twenty billion dollars, which is the United States contribution to
Speaker 3: this loan package, to the World Bank, to a financial
Speaker 3: intermediary phone, and that was set up to channel these
Speaker 3: moneies over time in coordination with our allies to Ukraine
Speaker 3: as as it's needed. So and as you mentioned importantly,
Speaker 3: this is not using US taxpayer resources. These loans will
Speaker 3: be paid off over time by the extraordinary or windfall
Speaker 3: revenues that are being earned in Europe at Euroclear on
Speaker 3: the Russian assets that are being frozen there. So Russia
Speaker 3: is really helping with this to pay Ukraine to you know,
Speaker 3: help it, help it fight the war. So I feel
Speaker 3: confident that this is something that can stay in place.
Speaker 3: And what what we're really trying to do is to
Speaker 3: strengthen Ukraine's situation, its ability to defend itself and hopefully
Speaker 3: at some point to come to the table to bargain
Speaker 3: with Russia for a just piece. We want to strengthen
Speaker 3: its ability to have the equipment it needs, to have
Speaker 3: the money it needs to continue to finance schooling and
Speaker 3: emergency services to its people, and to put it in
Speaker 3: the best possible situation to support a lasting and just peace.
Speaker 2: Let me pivot to China, and this has been a relationship.
Speaker 2: I think you've invested a lot of time and energy
Speaker 2: and kind of rebuilding a conduitive communication between Washington and Beijing.
Speaker 2: You have deputies right now heading to China for meetings
Speaker 2: with their counterparts, meetings taking place in South Africa as well. Reportedly,
Speaker 2: there is concern about what would happen if that relationship,
Speaker 2: the US China relationship were to return to the place
Speaker 2: it was in when you took office now four years ago.
Speaker 1: How much does that concern you?
Speaker 2: What would the consequences of that be if the efforts
Speaker 2: that you've put in to rehabilitate that relationship go to
Speaker 2: the wayside.
Speaker 3: So I do think it's important to have ongoing communications
Speaker 3: at all levels, from the President and she talking to
Speaker 3: senior US officials to staff that need to communicate. Just
Speaker 3: having open channels of communication is valuable and I believe
Speaker 3: it will be seen as continuing to offer value. These
Speaker 3: are channels by which we can make clear what we're
Speaker 3: unhappy about, where our concerns are, and why we have them. Well,
Speaker 3: we have significant concerns about Russia's economic policies that we
Speaker 3: discuss in these channels. It's also the case that we
Speaker 3: have shared global interests, whether it's in climate change, combating pandemics,
Speaker 3: dealing with potential financial disruptions that could affect global financial markets.
Speaker 3: We're also using these channels to build trust, in channels
Speaker 3: for cooperation so that we can work together where our
Speaker 3: interests coincide. So there's no question that we have serious concerns,
Speaker 3: both from a national security point of view and a
Speaker 3: broader economic view with China's behavior, but nevertheless is the
Speaker 3: two largest economies in the world. It's critical to have
Speaker 3: open channels of communication. It helps avoid misunderstandings. We've used
Speaker 3: these channels when we've taken action like export controls or
Speaker 3: our recent outbound investment restrictions to explain what we're trying
Speaker 3: to accomplish, to avoid misunderstandings that can worsen the relationship needlessly.
Speaker 2: You have a particular insight into what makes your counterparts tick.
Speaker 2: I imagine through those conversations that you've had and so
Speaker 2: we've seen the present left talk about large universal punitive tariffs.
Speaker 2: Do you have any insight into how they might respond
Speaker 2: if they are threatened with something like that.
Speaker 3: Well, I really don't want to make a forecast. Many countries,
Speaker 3: when they're faced withlateral actions of that sort look for
Speaker 3: ways to retaliate, and my guess would be that they
Speaker 3: would do that. We have in areas of concern where
Speaker 3: I've expressed repeatedly concerns with over capacity that is developed
Speaker 3: in Chinese advanced manufacturing industries and clean energy semiconductors in
Speaker 3: the like. We think it reflects active large subsidies that
Speaker 3: are flooding the world with exports and threatened to drive
Speaker 3: our firms out of business and areas that we think
Speaker 3: are critical to our own future. We've put in place tariffs.
Speaker 3: Now it's their strategic They affected eighteen billion dollars worth
Speaker 3: of trade, certainly not all of our trade with China,
Speaker 3: and we did it to make sure that China's actions
Speaker 3: don't undermine our own plans to support these sectors. But
Speaker 3: broad based tariffs, almost all economists agree that what they
Speaker 3: will do is hurt us by raising prices, possibly substantially,
Speaker 3: and making it more expensive for firms that need puts
Speaker 3: from China to be able to acquire them, and harm
Speaker 3: more competitiveness of firms that rely on those imports. So
Speaker 3: we've taken this strategic approach, focusing narrowly and a broad
Speaker 3: based approach. I have serious concerns with as most economists do.
Speaker 2: There's been a lot of talk about the dollar, the
Speaker 2: safety of the dollar as a global reserve currency, and
Speaker 2: I wonder if that's something that you think American should
Speaker 2: be preoccupied with. It's something that we hear about from
Speaker 2: the President elect and his team. Something else they've floated
Speaker 2: is perhaps the opportunity for a successor of the Plaza
Speaker 2: Cords there could be, as it's been put a mar Lago,
Speaker 2: a cord where you could get the US together with
Speaker 2: Europe and China and Japan maybe talk about domestic production, how.
Speaker 1: Narrow trade deficits.
Speaker 2: Is there an appetite or an opportunity for that, and
Speaker 2: is this something that you think most Americans should.
Speaker 1: Be worried about.
Speaker 3: Well, you started by asking me about I think the
Speaker 3: reserves take that served role of the dollar, and the
Speaker 3: use of the dollar in global transactions and financial markets
Speaker 3: and in trade is underpinned by a very strong US
Speaker 3: economy with deep and liquid capital markets, the role of
Speaker 3: treasuries as the safest asset in the world, the role
Speaker 3: of law, a well managed economy with low inflation and
Speaker 3: solid macroeconomic policy. And when you think about what other
Speaker 3: currencies could possibly replace the dollar, the list is short.
Speaker 3: Possibly there is no currency that at this point could
Speaker 3: possibly rival the dollar. So I do think it's advantageous
Speaker 3: to the United States that the dollar is used as
Speaker 3: the reserve currency. But I don't see the dollar under threat,
Speaker 3: and so an agreement that could affect the value of
Speaker 3: the dollar. You know, the policy that our administration has
Speaker 3: articulated is that major countries should have the value of
Speaker 3: their currencies determined in world markets. So intervention might be
Speaker 3: appropriate on occasion to counter extreme volatility, but we believe
Speaker 3: that it's best for markets.
Speaker 1: To determine the value of the dollar, and.
Speaker 3: There hasn't been any intervention in foreign exchange markets. I
Speaker 3: think it should stay that way now. We do issue
Speaker 3: a foreign exchange report twice a year. We are not
Speaker 3: approving of countries that attempt to manipulate their own currencies
Speaker 3: to try to gain a competitive advantage. And we're very
Speaker 3: attentive and reacts strongly when we see countries manipulating their
Speaker 3: currency to try to retain an advantage. And of course
Speaker 3: we work with our other countries routinely to discuss coordination
Speaker 3: of macroeconomic policies to make sure what we all do
Speaker 3: translates into success for as many countries as possible in
Speaker 3: the global economy.
Speaker 2: Ask your last question just about the fiscal outlook. The
Speaker 2: person that Donald Trump is named as your presumpted successor,
Speaker 2: Scott doesn't to suggested that he wants to cut the
Speaker 2: deficit in half by twenty twenty eight. Is that necessary?
Speaker 2: Is that even possible? I guess what I'm asking more
Speaker 2: broadly is how worried are you about the fiscal outlook
Speaker 2: at this point in time.
Speaker 3: Well, I am concerned about the fiscal outlook, and I
Speaker 3: believe the deficit reduction is necessary to keep us on
Speaker 3: a sustainable fiscal core. Now. President Biden signed into law
Speaker 3: a trillion dollars of deficit reduction over the next ten years.
Speaker 3: He did that in the agreement to raise the debt ceiling.
Speaker 3: And our budget proposes an additional three trillion dollars of
Speaker 3: deficit reduction over ten years, and I think that's necessary
Speaker 3: to make sure that our fiscal path is sustainable. Now,
Speaker 3: Congress hasn't really done anything to, you know, beyond what
Speaker 3: I've mentioned, to improve the fiscal outlook, and I think
Speaker 3: that's a shame. I'm disappointed in that, and I think
Speaker 3: Congress needs to work hard on that. There is a
Speaker 3: threat going forward that many of the provisions on the
Speaker 3: individual tax side of the Job's Job Cuts and Tech
Speaker 3: JCTA enacted by the Trump administration in Congress in twenty seventeen,
Speaker 3: they will sunset at the end of next year, and
Speaker 3: many Republicans have expressed a desire to keep all those
Speaker 3: provisions in place. Cbo said, that will cost five trillion
Speaker 3: dollars over ten years. So that really is and so
Speaker 3: that would be a blow in a situation where I
Speaker 3: believe an additional three trillion, that not doing the five
Speaker 3: trillion and three trillion more is necessary, and if the
Speaker 3: provisions are just extended, this will be a serious blow
Speaker 3: without finding ways to.
Speaker 1: Pay for them.
Speaker 3: We proposed a lot of pay for us that we
Speaker 3: think would fairly ask corporations, wealthy individuals to pay their
Speaker 3: fair share. We've negotiated an international tax agreement that would
Speaker 3: create a level playing field worldwide for multinationals. The United
Speaker 3: States has not yet joined, although many other countries have,
Speaker 3: and that would be a revenue raising measure that I
Speaker 3: think would be very valuable, and there is certainly more
Speaker 3: so I do hope that the new administration and Congress will,
Speaker 3: if they extend features of JCTA, find ways to pay
Speaker 3: for what they do, and also make sure that the
Speaker 3: benefits go not to the wealthiest individuals but to middle
Speaker 3: class families.
Speaker 1: Then Secretary, thank you very much. Thank you