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tv   Bloomberg Markets Balance of Power  Bloomberg  July 10, 2019 12:00pm-1:00pm EDT

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committee back today? if there are none, what is the purpose of having a second system? chair powell: this was based on a proposal from the faster payments tax force, which had broad representation, including the smaller banks that were supportive of this idea. we asked for public comment. we got 400 comment letters or 900. a lot of comment letters. we are in the middle of the decision-making process. in terms of interoperability, it was the community banks who strongly pushed the fed to move forward. interoperability is a good issue. it is a good question. we will need to work to make that happen. at least to the level that it is functional. it may not be perfect, but if we move forward with this, we would be looking at that as a characteristic to achieve. : itesentative riggleman
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goes back to really and see for me. we had our discussions in committee. if there are concerns about resiliency, and that is based on my experience in the private sector, couldn't you address those concerns through the regulatory and supervisory authority that exists in your space? when i was talking about the multiple data centers and the redundant systems, you think resiliency could be something that is a function of what you are doing right now? chair powell: the gentlewoman from massachusetts is recognized. >> thank you, chairman powell for appearing before the committee. the federal reserve can do more to support the needs of hard-working american families. as it stands, working families can wait days at a time to have
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their checks cleared. there can be no room for error. america,ntral bank of the federal reserve has the ability to speed up the process. i want to bring up a report that was issued two years ago. the faster payment task force. the task force called for a payment system in the unit states that is faster, ubiquitous, broadly inclusive, safe, and efficient. 2020 is less than six month away. yes or no, will we have a more faster payment system by then? chair powell: we are not going to be done by 2020. we are getting there. presley: ande enhance competition among providers. do you agree this is an issue of accessibility and quality? chair powell: i do agree with that. that is one of our motivating
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factors. sley: whattive pres the fed like to see a world where we have access to faster payment? chair powell: yes we would. sley: what ise pres -- what is the delay? chair powell: we really do not have authority over the payment system as other central-bank systems do. we convened a group of people. maybe five or six years ago. we said, let's work towards this. saw,hat is the report you that was the last report we issued. >> is trying to better understand this report. ,ave you received any pushback
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particular the credit card industry echo chair powell: -- the credit card industry? chair powell: we are determined to do what we see the right thing as? >> have you received any pushback? chair powell: i have not personally. >> do you agree our country's lack of a real-time system is being exploited by credit card companies like mastercard and visa and also outside of the industry like facebook to create digital currency? chair powell: i would not want to use those terms. people operate in the environment they have. we are trying to create an environment that does have faster payments available. we think that is a better environment. a fastersley: i do see payment system as a public good. the lack of action creates a void in the lives of consumers everywhere. they are increasingly being
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exploited by companies looking to operate as financial institutions without the guardrails. facebook's libra is being trotted as the solution. i struggle to see the -- using pre-existing infrastructure to ensure all people have the ability to safely and securely and with no cost access and move their money 24/7. let's not lose sight of the plot. the chairman is the plot of the american people. i hope to see your organization become reflective of the experiences of everyday americans. the yield back. -- i yield back. rep. waters: the gentleman from wisconsin is recognized for five minutes. representative duffy: on your left-hand corner, welcome. said the colleagues
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president has an permitted harmful economic policies. you said the economy is doing quite well. is that correct? chair powell: i would say the economy has performed reasonably well so far this year. representative duffy: last quarter was 3.7% growth. that is pretty great, isn't it? chair powell: if you take it through the middle of the year, we will have growth probably in the mid-twos. representative duffy: where i come from, we like our real communities to grow as well as our urban committees. the biggest complaint i hear from my employers is they do not have enough labor. they cannot get people into their shops to fill the positions that are open. there are some who will come in and do not want to work. that leads me to immigration. i am not going to go there with you.
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competition for labor. salaries rise when there is competition for labor? chair powell: yes, it is very interesting. we have seen wages moving up. we do here lots of reports like what you just said about labor shortages. we would have expected to see weight is move out more. they are moving up at a healthy level. on average, little more than 3%. you would want a tight labor market to produce solid wages. duffy: business a tight labor market in a tight labor market, if i have a person nicking 12 bucks an hour, but they are worth 15 in our, what you think happened? in economic: theory, they should be earning $15 an hour.
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represented duffy: they will leave that job. everyone is work -- everyone is looking for labor. if a guy is making 15 bucks an hour but maybe only worth 11, what happens? they might get fired, right? or you may automate. worked to pay people the value of the services they provide the company. that especially happens in tight labor market. i know you will not make the point on a $15 minimum wage, but my concern is that if we do not -- if we increase that to high -- that too high, they will lose their jobs. that is my concern. regard to trade, you are not commenting on the policies of the president.
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you look at our long-term horizon. you've mentioned debt. trade, will we have countries that will steal our technology, you have a company that invest $5 billion, and you have someone who steals it from you, and then you come to market with the same product at zero cost versus your 500 million, how do we compete in the long run? or if you have a country that manipulates the currency to make sure we cannot have equilibrium with regard to our trade, how do you deal with countries like but for the policies the president has pushed? chair powell: those are entirely appropriate considerations for those who have responsibility for trade policy. representative duffy: would it continue for the long-term health of the american economy? we are very:
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unusual in that we have this independence to do our jobs. need to stay in our lane. i try hard to not get a hold of things we are not responsible for. i have to say that. representative duffy: someone mentioned corporate greed. we mentioned -- we want to see companies and individuals behave responsibly. we also want them to make a profit. you have an objection to companies and individuals being a prophet? -- chair powell: making a profit? we do have a market-based system. duffy: if they make him much, is that a problem for you? chair powell: it is not for us to judge. dore presented of duffy: support a -- representative duffy: do you support a market economy? chair powell: our economy has been market-based. representative duffy: probably the greatest economy on the
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earth? chair powell: yeah. the gentlewoman from new york is recognized for five minute. representative a casio cortez: thank you for coming in today. the federal reserve mandate, one of the mandates is to maintain price stability and maximum employment. is that fair to say? chair powell: yes. -- a casio cortez representative casio cortez: and without runaway inflation? chair powell: correct. representative oak osseo cortez: in 2014, the federal reserve believed the long run unemployment rate was around 1.4%. it was estimated in 2014 that it was around 4.5%.
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now, the estimate is around 4.2%. what is the current rate today? chair powell: 3.7%. ocasio cortez: what we have previously thought of as far we are currently .xpanding 3.7% unemployment has fallen three full points since 2014. inflation is no higher today than it was five years ago. given these facts, do you think it is possible that the fed's estimates of the lowest sustainable and limit rate may have been too high? chair powell: absolutely. rep. ocasio cortez: so, we overshot in what our long-run unemployment rate is. chair powell: i think we have it is lower than we thought. it is substantially lower than we thought. rep. ocasio-cortez: i have been seeing lately that economists
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are increasingly worried that the idea of a phillips curve, that links unemployment and inflation is no longer describing what is happening in today's economy. have you been considering that? what are your thoughts? chair powell: we spent a great deal of time on that. the connection between black and the economy with a level of unemployment in the economy, it has gotten weaker to the point where it is a faint heartbeat. it is still there. you can see it at state level data. we really have learned that the economy can sustain much lower unemployment than we thought without troubling levels of inflation. i would look at today's level of unemployment as well within the range of potential estimates, of plausible estimates of what the natural rate of unemployment is. rep. ocasio-cortez: why do we think we are seeing this decoupling that we had seen decades ago? chair powell: one reason is just
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that inflation expectations are so settled that -- that is what whenink drives inflation, unemployment went way up, you did not see inflation go down. you do not see inflation reacting to unemployment because inflation seems to be anchored. rep. ocasio-cortez: you think that could have implications in terms of policymaking, that there is perhaps room for increased tolerance for policies that have historically been thought to drive or increase inflation? one of the arguments about minimum-wage or other policies that directly target middle-class americans is that they could drive inflation. do you think that could -- that decoupling is something we should consider in modern policy considerations? chair powell: i would not want to get into the minimum-wage discussion directly, but we have
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learned that downward pressure on inflation around the globe is stronger than we had thought. you see countries all over the world not getting, being below their inflation targets. when i was young, they were always above. now, they are below. we are still below our target. rep. ocasio-cortez: i have one last question. suggested thatd in the event of a recession or contraction, we would like to see more fiscal policy that supports monetary policy. can you further articulate what some of those fiscal options and considerations should be in terms of specific options we shoul consider? ? chair powell: i was referring to a specific downturn. it would be important fiscal policy come into play. there are automatic stabilizers that happen.
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things were done in addition at the beginning of the financial crisis in terms of spending increases that helped to replace the demand that had been lost in the private sector. something like that. those are things i would reserve for severe downturn. rep. ocasio-cortez: thank you very much. chair powell: thank you. rep. waters: the gentleman from kentucky is not recognized for five minute. >> will come back to the committee. allow me to say i appreciate my colleague from new york recognizing the strong trump economy has now produced inflation challenging the credibility of the phillips curve. appreciatespecially the improved communications with congress about the direction of monetary policy. i want to take up this issue of that independence. so much has been made in the criticism of fed policy in
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recent months. quantitative -- his criticism of quantitative tightening. many committees -- many members of the committee on the side of the aisle sized your predecessor -- overly accommodative so-called quantitative easing. a necessary and constructive part of oversight and simply part of holding the fed accountable. compromisesow what that independence as you and other government were given 14 provision that a makes you removable only for cause. you agree or disagree? chair powell: i would say it this way. we are completely and totally focused on carrying out our jobs. nothing will distract us from that.
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accountability does lie with this committee and the other committee on the senate side. you have oversight over us. in our system of government, it is congress. rep. barr: my only point is that criticism from the congress or the president does not compromise your independence. that the economist arthur lepper said the fed does not set interest rates. it follows interest rates. i thought this was interesting in light of low, long-term rates and the inverted yield curve. has this case for lowering the rate strengthened because it is following rates? chair powell: i did not see that comment. i cannot react to it. i would not say it that way. our focus is on real economy values. maximum employment and stable prices. we use our monetary poles to
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achieve that. we know our policy works through financial conditions. they do matter for us. what really matters is if there are big changes in financial conditions and they are sustained. rep. barr: where are we today in terms of the fed funds rate to the neutral right -- neutral rate. chair powell: we can only estimate the neutral rate. have comeof that down. we published the medians in our summary. we published the medians of the committee. that number has come down by 50 basis points said september. -- points since september. it would be about half a percent real. it was 3% in september. we are always learning about the natural rate of unemployment and the neutral rate of interest.
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it is estimated within uncertainty bounds. rep. barr: i have been critical of previous fed policy that i would characterize as overly improvisational. as you forecast where fed policy is going and talk about in your testimony the case for a more accommodative policy, that argument is strengthening. i appreciate that. i think it is habituating the markets as opposed to surprises. that is important for the stability of our system. you obviously site in your testimony, uncertainties in trade development as one of the reasons why the case for a more accommodative policy has strengthened in recent months. what would passage by the congress of usmca, and enactment of usmca, due in terms of the overall economic outlook in the
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trajectory of monetary policy? chair powell: it would remove uncertainty about our trade policy with mexico. that would be a positive thing. i would not comment on the merits. i would say the passage would remove uncertainty. that would help in the current environment. rep. barr: i have one final question. you had responded to my question about the surcharge. he said the proposal to simple five capital requirements for banking firms by integrating test results into cap requirements, where are we on that? chair powell: moving forward. working on it. rep. barr: high-yield back. -- i yelled back. rep. waters: the gentlewoman from virginia is recognized. >> thank you for joining us. do you think the u.s. should go back to the gold standard? couldpowell: this
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feasibly be considered commenting on a particular nominee. i would not do that. i want to make sure this is not interpreted in that way. no, i do not think that would be a good idea. congress would have to pass a law. that law would say our job with monetary policy is to manage the level of the dollar, stabilize the dollar price of gold. we would then not be looking at maximum employment or stable prices. third -- there have been plenty of times in recent history where the price of gold has sent signals that would be negative. i do not think that is something that would be attractive. no other country uses it. >> because it is much more volatile? chair powell: it is really that it is not -- you have assigned us the job of -- two direct
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economy employment. maximum employment and stabilize prices. stabilizeolicy could the price of gold. we would not care if it went up or down. that would not be our job anymore. -- present of weston: representative weston: -- chair powell: this is why every country in the world abandoned the gold standard some decades ago. reluctance to go back to the gold standard is something have in common with the ceos of the globally systemic important banks. it is worth noting that last week, the president nominated judy shelton for a seat on the fed. she is similar to ghost -- the of his other would-be nominees. i assume from your earlier answer that you do not share
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that view. chair powell: i would never comment on the views -- we do not play a role in the nomination process. it is up to the president and the senate. we are on the sidelines. aboutexton: my concerns ms. sheldon are not just her questionable views about monetary policy. she also seems to be a political opportunist who thinks low rates are bad under democratic presidents and good under republican presidents. concern whenon looking into the nomination and confirmation of this candidate. i want to talk framing about that. there's been a lot of questions about it. in particular, the debt ceiling. on monday, the bipartisan policy center predicted the u.s. treasury could run out of money by early september if congress does not raise the debt ceiling. that is because the government
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brought in far less in corporate tax revenues than was predicted as a result of the tax cut. as you -- spending is only one side of the ledger. we need to look at the revenue. there is a possibility the u.s. could default on its debt. what would the failure to raise the debt ceiling mean for the economy? chair powell: it is essential congress raise the debt ceiling in, -- in a timely way so the u.s. continues to pay all of its any other du outcomee. is unthinkable. ceiling will debt be raised in a timely fashion. rep. wexton: what would it mean for the economy and interest rates if we failed to do so? chair powell: it would be very uncertain territory if the united states would be to stop paying its bills. i would not be able to capture
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the range of possible negative outcomes. the loss of confidence in our ability to run our fiscal house. a lot of uncertainty. i think it is beyond contemplating that. rep. wexton: and yet, we must contemplate it, mr. chairman. thank you. i want to encourage leadership on both sides of the aisle in both chambers of congress cannot wait until the last minute to raise the ceiling. fromwaters: the gentleman texas is not recognized for five minutes. >> the board has done a great deal of work with regard to foreign banking regulations. i am concerned there is a lack of harmonization's across jurisdictions. i want to make sure you are firmsg to ensure our u.s.
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are not disadvantaged in the foreign marketplace. here, weell: i think want to give national treatment, equal treatment to foreign institutions. we fully expect and anticipate we will get that in foreign jurisdictions. that is why we give it here. we want foreign institutions to do business here and lend capital to people. that helps our economy. we went our institutions to take part in foreign economies. many banks work across international lines. it is essential that there be fair treatment for non-native banks around the world. rep. gooden: i appreciate that stance. in your written testimony, you mentioned trade tensions and slowed global growth to threats of the u.s. economy. between tees and the debt
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theing -- between these in debt ceiling, what would you say are your biggest concerns? chair powell: i think the most important thing is what we have been calling the crosscurrents, which are the trade tensions and concerns over slowing global growth around the world. those are interrelated. there is a box in our report that i recommend about global growth and manufacturing and investment. that is something we are seeing around the world. that is the thing that weighs on our outlook. we see week manufacturing. the consumer part of the economy is doing very well. that is where the weakness is. the other things are concerned. i would put those at the top of the list along with low-inflation. concern. that is the other half of our mandate.
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rep. gooden: putting all that together, where do you see us going on a scale of one to 10, how would you rate where we are with respect to an economy? one being bad. 10 being great. chair powell: i do not think i will give you an actual grade. we are in the 11th year of this expansion. that is a first since we began to keep records. we are at 3.7% unemployment. that is a 50 year low. we have been there for 15 months. there is no reason that cannot continue. we are committed to using our tools to ensure it does continue. this expansionut is now reaching groups that had not been reached in the fast -- the past few years. all the more reason why it is important we keep the expansion going. rep. gooden: i thank you.
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i yield my time back. >> thank you for convening the hearing. thank you for being here and for your thoughtful testimony. you and the rest of the board of governors have a very monumental task. you have made some good decisions. i'm heartened to see you are maintaining their independence and not allowing yourself to be bullied. let me just put a couple things on the record. we have had a lot of discussion about the cbo report and minimum-wage. i want to add something else. there has been some discussion about losses. we need to consider the fact that raising the wage will elevate 27 million low-wage workers. . need to be concerned about the fact that so many people are
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living out the poverty level. a lot of those folks live in my state of north carolina. when we look at the fact that we ,re going to raise people up when we look at this $15 we keep hearing about, i have done the math on it. on.me move a question about unemployment and inequality. black unemployment. the overall unemployment rate is 4%. in employment rate for on them -- for african-americans is in this recent bureau of labor statistic report. it almost doubles the unemployment rate for whites. these unemployment rates have been following since 2011.
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if any analysis does the federal reserve do to evaluate the degree to which economic inequality affects the african-american on employment rate? chair powell: affects the african-american unemployment rate? neighborure of our markets, african-american unemployment has often run at double. it comes down faster when times are good. it goes up twice as fast. a good future of our implement market. >> what more do you think could be done to ensure unemployment among minority groups gets as low as white unemployment? what role can the federal reserve play in reducing these disparities? chair powell: the tools we have, there is a box in the monetary policy report that talks about
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-- it is by different levels of education -- it does talk about the disparate outcomes for people. do, its of what we can goes back to taking seriously the job you have given us, which is maximum employment. we are seeing in these type markets, communities including african american communities that are being reached by the jobs market that they have not felt ever. certainly a long time ago when we had 3.7% unemployment. it was the late 1960's. which you and i can member. not everyone here can. >> i am a baby boomer. our member that. -- i remember that. what is supposed to come out of the monetary policy review that heaven earlier this -- earlier last month -- the monetary policy review that happened
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earlier last month? chair powell: there may be changes. we are just into the phase of taking a close look. we are looking at the question, are there ways we can change our canuk -- our tool box that enable us to better serve the public? rates are so much lower. we are closer to zero. we have less room to cut. are there ways -- people have been thinking about this problem for more than 20 years. we went to get the best thinking and come out with the best way to search public. that discussion lies ahead of us. >> thank you for your service and thank you for not allowing yourself to be bullied. i think that is really important in terms of the job you are doing. the yield back my time.
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-- i yield back my time. mr. williams. the gentleman from texas is recognized for five minute. thankentative williams: you for being here today. inm a small business owner mainstreet america. i wanted to reiterate my past statements about interest rates. even the slightest changes can have significant impacts on the economy. we are never a time when interest rates were 20% and the principal balance was relatively low. and, when a new car cost $6,000 in the 1970's. now, the same vehicle can be $60,000. slight increases to the interest .ate can crush businesses . i wanted to commend you for
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having a good pulse on the economy and making the appropriate interest rate adjustment. before i begin, i wanted to make sure nothing has changed since you last came before the committee. capitalist ora have you undergone a drastic change, and now believe socialism would be a better economic system? chair powell: no drastic change. rep. williams: thank you. the stressyou stated test risks becoming a compliant exercise. you said that banks will need to be ready for expected and unexpected risks. you understand the importance of these tests to ensure our financial system is really -- is resilient. do you believe these stress easierave been made since we took over? how do they compare in scale electives to the 2008 financial
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crisis? chair powell: i do not believe we have made them easier. we have the intention of having them evolve. we have done nine cycles. there is a risk that if we do not continue to adapt to the markets and institutions in the state of the economy, that they will become stale. you come back in another 10 years, and they are not a fighter. they have been -- not a factor. they have been maybe the most successful regulatory innovation since the financial crisis. even the banks would agree. we continue to be strong going forward. rep. williams: in february, i asked you about the labor force participation rate even though there are over 7 million job openings. it is hard to hire people right now. you mentioned some fighters keeping the number around 63%. theome figures keeping
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number around safety 3%. we must deal with these figures in congress. have you noticed any vectors improving and getting more people back in the workforce since you were last here? labor force: participation rates have held up pretty well. there is a declining trend due to aging. it is where it was in late 2013. that is a big gain against the trend. more anecdotally, we are hearing folks who live and work in low and moderate income communities. there are companies coming in and one workers and are going to look through some of the problematic things people may have had in their lives and hire them anyway. we think that is healthy. if you have a tight labor
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market, it could last for quite a long time. that is what you are going to get. we do think that is a relatively new development and a positive one. rep. williams: according to the most recent monetary policy report, consumer spending was down in the first quarter. it appears to have ticked up. we have seen it pick up. what factors do see contributing to the turnaround? chair powell: it is strong job creation, weight is moving up. -- wages giving up. tight labor market. workers say jobs are plentiful. businesses say they cannot find workers. that is a world where the worker and family is feeling -- people are quitting their jobs. it is a world where people are feeling good about the economy, relatively. rep. williams: when you have more jobs and workers, there is a tendency to drive up wages. thank you for your service.
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i appreciate you being here today. rep. waters: the gentlewoman from pennsylvania is now recognized for five minutes. you for your expertise, your service, and for explaining things to us. i learn a lot when i hear you speak. examine a little more closely, some of the things you talked about. the consumer side looking strong. the business side weakening. what are some of the triggers to the weakening on the business side. chart, tradethe policy, uncertainty. you said there is no question that uncertainty is elevated. what are some of the things creating the uncertainty? what were the impact be on the economy? the place where uncertainty is showing up is
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business investment. investments.ke they have to work for a longer time. when they become uncertain about the future, they may decide to wait before they build something or by setting. they may hold off. we are seeing business fixed investment was very strong through 2017 and most of 2018. it has slowed down. we do connect that. there is no perfect way to identify these things. we do connect that to trade policy uncertainty and uncertainty about global growth. what specifically in trade policy do you think is connected to that pulling back on investment? chair powell: the people who are responsible for trade, and that is not us, we do not criticize them, we have a broad series of trade discussion going on. if you are a manufacturing company in our economy of any size, the chance is good your
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supply chain goes across national borders. .anada, mexico, china the supply chain is part of the way you do business. you assume it is working. when the supply chain is called into question, and we hear this a lot from businesses. back, and you have less certainty about how this is going to work. many companies have changed your supply chain away from china -- away from china. i think that uncertainty is something -- i would not want to suggest that is a criticism of those who are conducting policy. we do not have a policy for evaluating that. rep. dean: i appreciate your independence there. i hearing the same thing on the ground from my businesses in montgomery and berks county, pennsylvania.
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the punitive tariff policy is driving their conservatism in their own areas. let me shift to something else you talked about. i care deeply about gun violence and the opioid crisis. could you talk about the opioid crisis and or gun violence? one of the more recent report on violence says gun violence in this country costs are economy somewhere in the area of $230 billion a year. i know you are not involved in gun policy or the opioid crisis policy, but through your lens, what are you seeing? what can we in congress learn about how we could minimize or reduce the economic impact? chair powell: i can probably do a little better to talk about opioids. there has been some great research by the labor economist alan krueger, who sadly passed
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away last year. if you take prime age men who are out of the labor force, and extorted a percentage of them, i think the number was 44%, they are taking some kind of painkiller. it is a big number of people that are on opioids. and for the most part, missing from the labor force. we all want the u.s. economy to grow faster and be larger. we went prosperity to be shared. here are people in the prime working years who were on opioids. it is a national crisis. people are working on it. it is out there. it is a human tragedy. it is also an economic motivation to get these people into the labor force where they can lead healthy lives. rep. dean: i appreciate that in terms of direct cost of labor. if you think about the number, 72,000 people a year dying of
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overdose, think of the loss or economic impact to the community and to their children and elsewhere. i thank you for your work. i always learn something from you. gentleman frome oklahoma. mr. lucas is recognized for five years -- for five minutes. representative lucas: thank you being -- thank you for being here today. we have discussed many times, the nature of my district. it is capital-intensive. fed and thethe treasury takes has a big impact on my constituency. i am very sensitive about fed actions because my part of the world suffered the most at the end of the 1920's and 1930's. before. before we became sophisticated in how we handled these policies. you are the fourth chairman who
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has appeared since i have been a member. there are just a handful of us who go back to mr. greenspan. i found you to be jazz upfront and straight foot -- to be as upfront and straightforward as someone can be in your situation. that is impressive compared to the things in the past. i have also learned to try to focus on things that matter to my people back home that would make a difference to them even if it appears to be done in the weeds. i have a suspicion you know where we are going with this question. i have been raising the issue of inter-affiliate margin for five years. while regulators agreed the interaffiliate initial margin requirements are to be addressed, we have not yet be given any indication of timing. when in congress can we expect some action, chairman?
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chair powell: i wish i could be here to give you perfect clarity on that. neither am i completely empty handed. i know this is a subject of active interagency discussion. i am hopeful those will be fruitful. rep. lucas: you know i would reiterate that the u.s. is the only g20 to impose these margin requirements. this has created what i fear is an unlevel playing field. it is time we come to focus. my second respectful question, last month, the committee on banking supervision agreed to provide an offset for client cleared initial margin under the leverage ratio. commissionern cftc supports this. i am looking forward to the fed and other regulators implementing this revision. can you give me a sense about the timeline? chair powell: i will have to come back to you. rep. lucas: fair enough, mr.
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chair. you are following in the fine traditions dating back to mr. greenspan. i say that respectfully. one final question. perp -- voicee my my concern about the sacra proposal. can congress -- fear, threatens to undermine congressional users and would deter from engaging in risk management activities. i suspect you are aware of these concerns. i hope we will see them addressed. just noting from my perspective again as a member of congress in the third district of oklahoma, the food we produce, the energy resources needse this kind of waste management tools because of the sheer
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capital-intensive nature of the business. i appreciate you very much. chair powell: that last one, you are probably aware, it is out for comment after a lot of work. rep. lucas: progress, mr. chair. i like that. rep. waters: the gentlewoman from texas. garcia: thank you -- representative garcia: it looks like we are at the end of the tunnel. i just wanted to focus a little bit on the widening income inequality gap we have been talking about. i wanted to follow up on your answers to mr. lawson. seen thethat we have gains of the past decade accruing to the upper income groups and passing the middle and lower income groups. can you expand on the long-term systematic risks that such
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inequality would introduced in the economy? if it continues in the present course? the history has been that people have generally been able to progress through time and be economically better off than their predecessors. abouts how people think -- have thought about life in our system. the data show that is less and less true. it is true for fewer than it used to be. that is not good. we went prosperity to be spread as -- we want prosperity to be spread as broadly as it can. we want there to be probably -- we want there to be progress for as many as we can. we went mobility. we want the outcomes to be fair. if you do not have that, you ask, what is the cost of it? i think the costs are big.
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that would include a loss of faith in our institutions to deliver that. it is a very important problem to address. ande lots of businesses people coming around to that view who were not thinking that way five years ago. you hear a lot of discussion about this in the business community. they see it in terms of good employees. also in terms of people to buy their products. this is a national problem. rep. garcia: what happens to the bottom? it is not as simple as have and have not. if it is shifting, and the goal is always to move up, what happens to the bottom? do you track and look at the poverty rates? you look at the lower income -- theand the people people who are paycheck-to-paycheck? rep. garcia: we do.
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lots of economists outside the fed -- rep. garcia: i did not see any data on poverty rates. your book talks about the inflation rate. the unemployment rate. what is the bottom we can reach in terms of poverty rate? rep. garcia: -- chair powell: i do not have a number for you. you probably saw the box that talked about desperate labor market outcomes for people with a lot of education and people with less education. rep. garcia: what do you find is unacceptable in terms of a poverty rate? before it skews everything else. chair powell: any positive number. haveoal should be to not poverty. what is an acceptable number? in our country, no amount of poverty should be acceptable. i know we have a lot of poverty.
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rep. garcia: that would be my go to. the president wants to change the poverty line and how we index it to the cpi. there is a proposed rule change. some people would rather pretend there is no poverty. or that they have done something to reduce poverty and changing the rules on how to calculate it. that does not get us anywhere. i just wondered if you have looked at that proposal and whether you favor it or disfavor? chair powell: i have not looked at it. i would not have an opinion. rep. garcia: do you agree with me that the goal should be zero? something that i have worked with my entire life. the minimum wage increase would be a step in that direction and another -- and a number of other initiatives i hope to get through congress. i appreciate your time. chair powell: thank you.
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fromwaters: the gentleman minnesota, mr. phillips, is recognized for five minutes. illips: my first question, why is the u.s. dollar the world reserve currency? u.s. dollar ishe the world reserve currency -- tends to be one. if you are the country with the largest economy, the rule of law , and relatively, open to commerce, a trading nation, you can be that. there tends to be one reserve currency. it is not infinite. the pound was the reserve currency for many years. now, the dollar has been for some time. rep. phillips: what do you
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consider risks to that changing? chair powell: it is a very long run thing. it is a fairly stable equilibrium. what currency out there would compete with the dollar? seeeuro -- it is hard to the dollar not being the reserve currency for quite some time. there can be multiple reserve currencies. there could be an equilibrium where there are two or three. that would be fine. right now, it is the dollar. i do not see that under threat right now. in the long run, it will come down to fiscal sustainability. it will come down to maintaining our rule of law and democratic institutions and prosperity and being a relatively open trading nations. -- trading nation. rep. phillips: you talk about concerns relative to our rising debt. would that be a concern relative to the u.s. dollar? chair powell: in the long run.
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rep. phillips: when you contemplate rate changes, how much weight you give to the ongoing strength of current economic data versus the forward-looking weakness implied by the inverted yield curve? monetaryell: i think policy is always about the outlook. you have to take into account the current position of the economy. it is very strong, low unemployment. relative priced ability. we are always about looking forward. monetary policy works with a lag. you ask about the yield curve. that is something we do look at. there.s a message in it is not a single thing that is a dominant financial condition. there are many things we look at in financial markets. that is certainly one. rep. phillips: lastly, you
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believe the federal reserve has the requisite tools to fulfill its mandate without assistance of fiscal policy? mentioned, weas i do have the tools we have, and we will use them aggressively. as i mentioned, in severe downturn, there comes a time when fiscal policy support is necessary and appropriate. one of those times was during the global financial crisis during the great recession. fiscal policy is very powerful. it is important to have. for the most part, the fed can handle countercyclical policy. in a steep downturn, there will always be a important role for fiscal policy. rep. phillips: is the authorization -- with appy helpful or not it -- would that be helpful or not at this time? chair powell: we are not really looking at that. we will have plenty of
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treasuries to buy if it comes to that. if it comes to assets, there will be no shortage of u.s. treasury security. you are referring to the fact that other banks have the ability to buy equity p it is not an authority we are seeking or think that we need. rep. phillips: thank you, mr. chairman. you so, now.thank we have the gentleman from california. we are trying to honor your 1:00 time we agreed upon. we are running a few minutes over. we have mr. sherman. would you -- sherman: i thank the chairwoman and the chairman for their indulgence. i have watched republicans come here and condemn the fed for overly loose money and condemn
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you for quantitative easing. pushing inave been the other direction. it is interesting to see -- i think one of our colleagues said the republicans seem to be favor loose moneyor of only when there is a republican president. you have not hit your 2% inflation goal. we talked earlier. it should be your two and a half percent inflation goal. low, weemployment is have not have the big wage increases. you have told us wages have inflation,by 1% over which does not make up for 30 years of negative or stagnant country forin this those without a college degree. on trade, i have seen a reverse role in another way. democrats voted against --
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now that trump is flailing at the trade deficit, i hear an occasional democrat saying we should ignore the trade deficit. i don't think that flailing or ignoring is the right approach. i know there has been significant discussion about the currencies. -- cryptocurrencies. an attempt, ies hope unsuccessful, to transfer power from the united states government to sanctions evaders, tax evaders, and drug dealers. importance,ng the as the chairman indicated, of the united states dollar as the reserve entry currency. we have an, i know executive from facebook him to join us, but ultimately it is time to bring mark zuckerberg here. he is the one that has made billions of dollars out of us

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