in a conversation on the state of u.s. economy and the global impact in monetary policy. janet yellen and former fed chairman ben bernanke, alan greenspan and paul volcker will share their thoughts at the international house here in new york. i want to bring in chris, economist at bank of tokyo. you have had the privilege of meeting all four fed chairman. what are your thoughts? chris: it is pretty remarkable. whostart with volcker wanted to keep inflation low. now we had janet yellen at the end he wants to boost inflation. it is quite interesting. very, very different styles from all four. almost humorously you can say is this an intervention? the former fed chair, one chairman, they want to talk to janet and say what you doing in terms of your policy right now. it will be quite remarkable. the only thing, the teaser by

james gorman at morgan stanley said it was going to be about leadership tonight. not so much what is the fed going to do at the meeting? what can we learn from these fed chairman about their policies and how they shaped u.s. economic policy, but their thinking and how they built and -- consensus with other members of the fed? chris: that will be interesting. volcker ran into some issues with the committee at one time where some of the people were voting against him. it is extraordinarily difficult. i remember what yellen said. i asked her one time, these people are saying this about policy and this. she goes, what can i tell you? we don't always sing is a chorus the same song, the same tune. jobhas done a pretty good given that she's only been on the job two years. she seems to be quite a strong chair. mark: it was interesting because

what i heard this event was going to take place and you and i were going to be up here, the one thing of wanted to try to get your thoughts on -- i am more interested in ben bernanke. as a student of u.s. economic history, in particular a fierce student of the great depression, his legacy was built on the fact he was not going to let this country go through another great depression. he was firm and that. we will do what we have to do to prop up this economy. was met bye message the president of international house about taking with the punch bowl for the party really gets going. chris: they are still trying to get and primed the pump here to try to get things going. certainly. he ruled the room, bernanke.

he brought them through an almost apocalypse and saved the economy from depression. mark: chris, thank you so much for -- we see these image of u.s. monetary giants. janet yellen, ben bernanke, paul volcker, and joining the via video link is alan greenspan. or is teresa kerry -- for read sick area. >> i would say the u.s. economy is made -- has major minutes progress in recovering from the damage from the financial crisis. slowly but surely the labor market is healing. for well over a year we have averaged about 225,000 jobs a month. the unemployment rate now stands at 5%. to ourcoming close assigned congressional goal of maximum employment.

which my colleagues here, paul and alan, spent much of their time as chair bringing inflation down from unacceptably high levels for a number of years. it has been running under 2%. we are focused on moving it up to 2%. we think that it is probably transitory influences, mainly declining oil prices and the strong dollar that is responsible for pulling inflation below the 2% level we think is most desirable. i think we are making progress there is well. economy on a solid course. not a bubble economy. carefully to look at evidence of potential financial

instability that might be brewing and some of the hallmarks of that clearly overvalued asset prices, high leverage, rising leverage, and rapid credit growth. we are certainly don't see those imbalances. although interest rates are low and that is something that can behavior, ield would not describe this as a bubble economy. we have relatively weak global growth but the u.s. economy has been doing well. domestic strength has been propelling us forward in spite of the fact we are suffering a drag from the global economy. >> let me ask you about one of those statistics you cited. the unemployment rate. there are many people you say the actual unemployment rate is not 5%. it is much higher. there are people that say it's in the 20 per -- 20's.

do you think the unappointed rate is accurately reflecting the reality? chairwoman yellen: there are different concepts of unemployment. the measure i cited that is 5% is the most commonly used measure to judge the labor market. there are broader definitions. for example one definition that counts discouraged workers and those who are working part-time but one full-time jobs can find it. that is quite a bit higher. is closer to 9%. broader definitions count more people who baby underemployed are always higher. any metric you look at shows broad improvement in the labor market. part-time involuntary higher than one

would expect given where the standard unemployment rate is. there i see some additional slack for improvement that we could have to suggest that the 5% under states the state of the economy. whatever measure of the labor market you look at, and i go beyond unemployment measures to many other different kinds of measures of labor market functioning, really suggests a labor market that is drastically improved. >> i think that for most ordinary people, they must wonder. the federal reserve has all this power over the economy. -- have a mandate to provide the keep inflation under check but also to see that the people are employed.

why not take extraordinary measures to help boost employment, health even wage growth so that people's wages rise? you mentioned the federal reserve set a target at about 2% for inflation. that is not a ceiling, it's a target. why not take incredibly aggressive measures and maybe you overshoot the target by a little bit? you have undershot the target for seven years now. i think people might wonder why not try to do something that would actually have ordinary -- help ordinary working people? yellen:an ellen: -- we take both parts of it very seriously. we have had very aggressive monetary policies over the last six or seven years. when you contemplate the fact that it was december of 2008,

over seven years ago that we took the short-term overnight interest rate essentially down to zero. and then engaged in very large ,cale asset purchases communications, forward guidance policies to provide more stimulus. we have done a great deal to foster a more rapid recovery. anticipatecolleagues that unemployment will actually dip somewhat below levels now with the policies we have in place that they would see as sustainable in the longer run. they do see some overshooting in that sense. we are not shooting for a target that is in excess of 2%. , evennflation running

abstracting from energy prices below the 2% objective, a path like that serves both of our goals. namely strong employment, putting people back to work. gettinging, moving up, greater experience. at also inflation moving into faster pace that 50%. we do not seek to consciously overshoot our 2% objective, but it is also the case. 2% is our goal, not the ceiling. we do envision some path similar to what you described. >> in december you raised rates. many people, including paul krugman, martin wolf, there he distinguished economic commentators felt it was a mistake. in retrospect, was a mistake? : i don'tn yellen regard it as a mistake.

it feels like the economy had -- towardsubstantial our goal. [laughter] >> i think alan greenspan was registering agreement with that. [laughter] met in chairwoman, if you could begin again. we sit at twolen: fundsia to boost the rate. it led to the december decision. one was he wanted to see substantial progress in the labor market. we felt that have been satisfied. we also recognizing that inflation was running below 1% or 2% objective. it wanted to feel reasonably confident that inflation would

move up over the medium-term back to 2%. we all felt i think those conditions were satisfied in december and justify taking a step. is not on anyy preset course. also every three months my colleagues and i sit out our individual projections both of what we anticipate for the economy and also going along with that what we think is a monetary policy path that would be appropriate. we set out projections like that that gives a suggestion of where people think the economy is going. we tried to make very clear there is not a preset course of rate increases. we will watch very carefully what is happening in the economy

and adjust policy as appropriate. we will -- we have taken one step. the u.s. economy has continued to progress in a satisfactory way. we have continued to see good job performance. some evidence of inflation moving up. that was our expectation when we raised rates in december. we indicated we thought the path of rate increases would be gradual. that remains our best guess and expectation. that if the economy continues on the path it is on a recovery, that further rate increases will be justified but for a variety of reasons, particularly a set of headwinds and the legacy of the financial crisis that we suffered, and weak global growth and a strong dollar that is the level that, that

of rates that is sometimes called the neutral rate, the short-term rates that would neither be particularly stimulating the economy or holding it back. that level of mutual rates is quite low. -- neutral rates is quite low. yes, there is accommodation in the monetary policy that we have. but we think a gradual path of rate increases will be appropriate and stand ready to adjust what we do depending on how our views of the economy evolves. i think we remain on a reasonable path. i don't think this december was a mistake. >> the dollar has an weakening. is that a positive trend or a negative one? chairwoman yellen: we don't have a goal for the dollar. what we are looking at is the economy as a whole. paths forkely

inflation and employment to achieve our goals. and financial conditions, broadly speaking. the state of financial conditions impacts our forecast for economic variables. the dollar is one of those. i would call it art of financial -- part of financial conditions along with long-term interest rates, equity prices, other asset prices, credit markets, spreads. thes the case that appreciation of the dollar that we have seen over the last year and have, along with slower global growth has created a drag on the u.s. economy in the sense that our net exports have been holding back growth.

but u.s. consumer spending has been strong enough to offset that. we look at the balance between those two things. accounthat balance into the u.s. economy is moving forward. i think financial conditions are forecasted and taking everything into account. the prospects for continued growth and progress in the labor market and inflation look good. >> one of the regional fed chairs made a speech very recently in which he said the big banks need to be broken up. do they? chairwoman yellen: we have been very focused since the financial crisis and the dodd frank act has directed us to pay attention and try to put in place policies that will deal with too big to fail. share his concern with too big to fail.

i feel more positive on the progress we have made. first of all, we have put in place policies with supervision and regulation. this has greatly enhanced the safety and soundness of the banking system. we have more capital, higher-quality capital, more liquidity. we do rigorous stress tests and or supervision. i think the all the failure of large financial institutions is lower. we are also dealing with the issue of how would we resolve such an institution if one were to fail? i think we have also made considerable progress there as well. we are working internationally with other countries.

we have identified strategies that could be successful in resolving a company. we have asked the firms to produce living wills that would address a number of areas that could be problematic in the resolution. for example under the bankruptcy code or title 2. i think the firms are working and on the living wills simplifying their structure and identifying resolution strategies. we have recently passed a rule that will require them to hold in addition to a substantial amount of capital enough long-term debt that if the company were to encounter distress, there would be essentially resources that could in a resolution to capitalize the company.

i think we have made considerable progress. i certainly have not derived at the conclusion that my colleague has. i am pleased with where things are going. >> one more question before i opened it up to a larger conversation. lawrence summers, who some thought was one of the contenders for the job you hold, says that there is no question that bernie sanders is right on one central point. which is the financial industry has too much influence over the structure and governance of the federal reserve. you think that is true? chairwoman yellen: i do not think it is true. are charged by congress with regulating financial institutions. we take that mission seriously and are tough supervisors and regulators. to bankers on a

regular basis. and weactually required have bodies like the federal advisory council that jamie korman has served on over me for regularly to exchange views and understand the perspectives of bankers. but we are very focused on regulating and supervising the banking system in a way that will achieve congress' goals. can i askn bernanke, you about something i suspect if i asked janet yellen she would be even more evasive than she has been in the last few minutes. which is entirely when you are supposed to do and i respect and admire it. [laughter] yearsevery seven or eight

there was a recession, both globally and the united states. that is roughly how long these recoveries last. we are about seven years since the last recovery. statistically we are due for a recession. my question is, and nobody has ever been able to predict these. the fed -- the cbo has not. traditionally the federal reserve cut interest rates by about 3%. 300 basis points. what is it going to do now given that there are not 300 points to cut? chairman bernanke: it's an excellent question. let me say first that as janet pointed out there is no sense in which expansion dies of old age. the risk of recession is more or less constant every year. 10%-50%. -- 10%-15%. just because we have been in

this case seven years of recovery does not mean we are due for another recession at all. we are facing, and i agree with a lot of what janet's analysis, we are facing risks and developments globally. growth is only modest which is also a problem. domestic u.s. economy is moving forward. households are pretty strong financially speaking. the housing sectors continue to expand and so on. i do see any particular reason to think a recession is any more likely in 20 18 than it was in 2015 or 2014. that being said it is true that if a recession where to begin in the next year or two would be starting from a lower level of short-term interest rates. the extent to which the fed could cut would be less. my reaction to that is a couple of things. one is that there are some other tools.

one of the things we learned over the last decade is that central banks to have a set of tools besides cutting short-term interest rates. for example there is communication for guidance which it be helpful in easing policy. we did quantitative easing. it was helpful. there are other tools as well. we are seeing experiments globally in japan and in europe. there are other tools. the fed in particular is not out of ammunition. that being said i think that we have learned it's a mistake to put all the burden on the central banks and monetary policy. a more balanced policy with a greater fiscal component or for a broader set of policies would no doubt work, even in a situation where central banks were pushed to the limit. we do have a range of policies we can use. i do think it's unfortunate that not just the united states but around the world central banks and carried so much of the burden.

i think we have the wrong impression that only central banks can respond to downturns. >> expand on that. i you saying you think that there has been too much of an emphasis on austerity and that governments should spend more money to boost the economy? chairman bernanke: under appropriate circumstances, yes. between sequestration of budget cuts and tax increases and the like they congressional budget office estimated in that year that fiscal policy was taking 1.5 percentage points of growth off of what have been the case. it was something we cannot afford. at certain times -- i'm not saying the government should always be spending. i think we are at longer-term fiscal sustainability. it's very important. at certain times, particularly in a recession when the central bank is out of ammunition, the fiscal policy does of april to play. >> alan greenspan, may i ask if you agree with ben bernanke that

this is a moment at which governments around the world, particularly in the western world should be spending the money? chairman bernanke: usps hypothetical. -- you asked me a hypothetical. [laughter] >> if there is another recession, which presumably at some point there will be. in order to combat that recession should governments spend more money? --irman greenspan: [laughter] no, in fact that make the major problem that exists is essentially productivity growth over across the spectrum of all economies has been under 1% for the last five years. ec, in thee in the

united states. i think a major problem as i see gdps how do we create growth rate which enables us to get all the values that we get productivity? effectively times of expansion in the labor force? janet has accurately pointed out the labor force is our slack in employment is gradually dissipating. the unemployment rate is kind resell level soon -- with the can do groups

issue of productivity, then we have no major advance in the future. see is ahat the data i slowdown pretty much across the globe. the fact that capital investment pretty much everywhere has slowed down to significant extent as a percent of gdp. it has entered radically lower than it has been as far -- thus far. be -- ition should agree that monetary policy fundamentally a physical problem. spending money only increases the debt. data has shown

facing with the demographics we have in this country is a major expansion of debt under existing policy. i think unless you address that issue we will have problems that are not going to get resolved. i agree with janet that -- and everyone else that if there is a bubble, just not a major problem. i doubt very much ever recession is going to -- i think it is funded only -- fundamentally finish of economic growth over the long run. what do you think the economy looks like in this conversation fundamentally? chairman volcker: i agree with everybody. [laughter] i of play little historic perspective. we used to have recessions before had a federal reserve.

there were other factors at work in the economy that tends to produce ups and downs. i would not worry too much about the present situation. >> you don't think we're in a bubble economy. chairman volcker: i don't think we are in a bubble economy but there are aspects of the financial world that are overextended and tends to be conducting unduly risky activities. making liquid investments. we are all to germany to productivity or real investment. an increasing risk in the economy. -- you said you thought the last financial sector innovation that actually added productivity to the economy was the atm. do you still feel that way? >> [laughter] chairman volcker: there may be some others, but i

can't remember. ben bernanke, when you took over the federal reserve, it had about -- you had assets of about $900 billion. you ramped that up to about $4 trillion. $4 trillion. there are a lot of people, as you know, on the right, who look at that with horror, and say, "how will that end?" how will you unwind that asset portfolio? chairman bernanke: fortunately, i don't have to do it. >> [laughter] mediaan bernanke: the advanced a lot of very uninformed views on this subject. for example, if you went back a few years and listened to media, congressman, a variety of media -- congressmen, variety of

media, they will call this "dollar collapse -- they said this would cause dollar collapse, bubbles, and none of that has happened. -- maybe they were not by themselves efficient, but they were helpful. they helped our economy recover. our economy is, even though it is not perfect, it certainly has made a lot of progress in monetary policy has helped there. and many, if not all, of the things that some people were afraid of -- poor people were not afraid of -- have not come to pass. that is simply a fact. in terms of the unwinding, it actually is a very straightforward process at this point. the fed has been very clear, and we discussed this when i was there as well, at some point, and the fed statement makes this very clear -- at some point, the fed will simply stop reinvesting securities as they mature, step --k, and say, for now on from now on, we are going to let things mature. of years, it will

just go down. in the end, all we have to show for it is, over the last five years, from those securities, besides the fact that they helped our economy recover, the fed has sent profits to the billion, which0 has reduced the burden on the taxpayer by $500 billion approximately. it has been a pretty successful policy and one where the role-o has already been planned. i don't think it's going to be terribly problematic. the size of the balance sheet is roughly the same as other major central banks, like the european central bank and the bank of england. the main counterexample is the bank of japan, where relative gdp, the assets held by the bank of japan are three times the size of the fed's. so, it's obvious that many of the concerns people had have simply not manifested. i have to say that those policies are panaceas -- not to

say that those policies are panaceas. but many of those concerns have not come to pass. fareed: it's worth pointing out that, japan, with three times the size of the balance sheet, has not experienced hyperinflation or the devaluation of its currency. chairman bernanke: they would like a bit more inflation, i think, then they have now. fareed: since you have to run this operation, are you comfortable with what he said? >> [laughter] chair yellen: we have laid out a strategy for how we will wind down our balance sheet. we have made clear we want, eventually, a substantially smaller balance sheet. and at the present time we hold a large quantity of mortgage-backed securities, fannie and freddie, mortgage-backed securities. eventually, we would like to go ryck to an all-treasu portfolio, but we will do it in a manner that ben just

explained. we have shown -- the move in december showed we have the tools and ability to successfully manage short-term interest rates. we moved them up not a lot, but 25 basis points. that occurred smoothly, in spite of the fact that we had this very large balance sheet. so, we have tools to tighten monetary policy as we think is appropriate for the economy. you know,ld like to, get a little bit further underway in terms of moving short-term interest rates toward more normal levels before we let -- follow the strategy ben outlined of allowing assets to run off our balance sheets. if we do have another adverse shocks if there is a recession, ifwould -- adverse shock, there is a recession, we would

wait to start the process of having assets roll off our balance sheet until short-term rates are a little bit higher. the economy has gone to a point where that is appropriate. that creates a little more scope for us to cut interest rates if we need to. but it has all gone quite smoothly. i completely agree with ben. there are a lot of fears around this. i think people didn't really understand the economics of this properly. nothing terrible -- none of these terrible things have happened. fareed: let me switch gears a little and just ask you all about what it's like to have this much concentrated power. alan greenspan, when you were running the federal reserve, people would sometimes described your performance there as "god on a good day." [laughter] fareed: i think senator john mccain said that his strategy to succeed you was to have a dummy made up of alan greenspan and

put him in the federal regime -- reserve chair like "weekend that bernie -- "weekend at bernie's." at wall street, they would celebrate her birthday with cakes and things like that. did that go to your head? >> [laughter] no, but iteenspan: sure enough embarrassed me. i very much appreciated that. fareed: [laughter] i got pasteenspan: the embarrassment very easily. areed: paul volcker, you had slightly different situation. you were hung in effigy when you raise interest rates, because people thought that you had single-handedly plunged the american economy into a recession. how difficult was it to deal with that? chairman volcker: i thought they were cheering me.

to answer your basic question, you have aboard, public, you have reserve bank presidents. you can't quite do exactly what you want without a lot of people being encouraged to agree with you, and someone sometimes disagreed, so it's not quite so absolute as you suggest. but, look, i always get asked this question about the farmers circling the federal reserve and so forth. we would not have survived without public support. people thought there was a big problem, and they didn't know all the answers, but people were unhappy with malaise. the inflation going -- inflation rate going up a couple percent every quarter. they were unhappy. they give us some rope to hang ourselves. us some rope to hang ourselves. >> [laughter] --eed: did you feel like

because inflation was very high, you raised rates to break the back of inflation. did you worry that you would run out of time, that the public would lose patience? chairman volcker: we had a longer peter then -- longer period than i would have anticipated. did i worry? i worried all the time. the floor of the federal reserve office, it shows where i was walking all the time. is that still there? fareed: ben bernanke, when you adopted your extraordinary measures to save the american economy through this global recession and crisis, you faced a lot of people from what was, in a sense, your own party. you were appointed by a republican president. you had republican congressmen, republican senators. you had a republican governor of texas saying that you were engaging in treason.

how did that make you feel? >> [laughter] it did notrnanke: make me happy. you described the job as powerful. i think more of the responsibility side. we had very huge responsibilities, all of us, in different contexts, different events to try to use the power of the federal reserve, along with our colleagues and the staff. it's a wonderful institution. it's not a single-person organization. there are a lot of people working together. we had tremendous responsibilities to try to address these terrible risks. i think it is a good thing that, the federaln, reserve does have some independence and some room to operate, so that, you know -- their critics can say with -- the critics can say what they wanted to say, but we could do what we needed, as long as we could maintain the broad support. and that was our strategy. so, you know, i didn't take the job for adulation.

certainly if i had, it would not have worked. really, there was no alternative to doing what has to be done, in your best judgment, to try to address whatever problem you see. fareed: and then there is the issue of communication. how do you communicate the views you want? , atwant to communicate, but the same time, you want to leave things -- you want to get yourself room to maneuver. alan greenspan, i recall once in a senate hearing, i think it was, the senator said, "i think i heard you say clearly --" i said itid, "if clearly, senator, i must have missed open." -- misspoken." were you trying to be deliberately incomprehensible at times? [laughter] thought --

chairman greenspan: i thought i had succeeded marvelously. fareed: is that part of the goal, that you don't want to say something too definitive? because that constrains you? chairman greenspan: i think the real problem is that monetary policy is very largely economic forecasting, and our ability to forecast is significantly limited. and we have to keep the context of what we say in the context of what we know. and this is a very serious problem that has always existed, and i think janet has mentioned she is confronting this all the time. and the four of us have had to live through all of that. so, how do you convey what you know and what is clear without going into the area of forecasting beyond our knowledge?

fareed: you have a reputation, just work habits -- you have a reputation of being very prepared. i read in one of the profiles that you always get to the airport so early that you are the first person on a plane. how does that translate into the way you approach this job? chair yellen: i think that's a lifelong habit that is probably accurate about me. prepared, like ben, in managing, for example, the fomc, we have a very thorough process in the run-up to meetings, of trying to prepare materials that will generate useful, productive discussions, that will reach closure over time on complicated matters. regularly with my

colleagues to try to understand their points of view. fareed: alan greenspan is right. there is a lot of uncertainty. no matter how much you prepare, do you think that there is some level of just intuition? i think that's absolutely true. i don't disagree in any way with what alan said. but i think ben and i encountered a very unusual situation when, at the end of 2008, short-term interest rates came down to 0%, and we still felt the need to add accommodation. and we had to think about what provide do that would more accommodation. we focused on longer-term interest rates. they were still several hundred basis points -- there did seem to be scope to move those down.

and since one of the factors that influence his long-term interest rates is the public's expectations for how short-term interest rates will move over time, we needed to think a lot about how to appropriately ourunicate to the public expectation that we would be keeping short-term interest rates at rock-bottom levels for a very long time. so, communication became a tool of policy and probably the most along tool that we had, with asset purchases, that we could use in a situation where we really had no scope to move short-term rates. so, we experimented over time. at one point, we said -- i think it was in 2011 that we didn't --

2011, we said that we didn't expect to raise midterm rates until 2013. we pushed that date out. then we became more inventive in trying to provide some conditions, which we said that we could not raising rates -- see raising rates until the unemployment rate had declined at least to 6.5%, but we fought very hard about how to communicate as clearly as we told to shake expectations -- to shape expectations. that was a policy tool in and of itself. fareed: one more question to paul volcker, then i want to open it up to all of you. the one person who isn't here, william chesney martin, the great fed chairman from the role ofonce defined the the federal reserve chairman. he said, "i'm the guy who is meant to take the punch bowl away just when the party has begun." meaning, "as soon as the economy

starts growing, i've got to raise rates." you have tended to adopt that approach when you were fed chairman. do you feel some of your successes put vodka in the punch bowl? [laughter] i watched aller: my successes with great awe. fareed: that is a very diplomatic answer. [laughter] fareed: all right. i think we have questions from the floor. the lights are not great. here they are. if you introduce yourself and ask your question, i hope it is brief. [laughter] >> i am a student from turkey. i'm at the columbia journalism school. my question is about the fed's responsibility with regards to the international economy. when the fed takes a decision, it can have drastic effects in other countries, especially through the foreign exchange rates. what is the fed's responsibility

with regard to minimizing blundersonal economic in other countries? fareed: let me ask alan greenspan to take this. there is this dual function. you faced it when you were in your term. are you the central banker of the united states, or are you the central banker of the world? in 1998, does the russian default, long-term capital explodes, you cut rates -- it may have been the right thing for the world economy, but the u.s. economy was growing at 6% at that point. was it the right thing for the u.s. economy? how did you resolve that tension? chairman greenspan: at the time, indeed i think even now, you cannot associate -- dissociate what's happening in the united states from the rest of the world. particularly since the late 1990's, we had a situation in which, if we did not endeavor

to stem some of the problems that were going on elsewhere, it would be just a matter of time before it impacted the united states. so, even though, statutorily and legally, we are responsible only for the monetary policy of the would beates, it foolish to believe that we can act in an isolated manner from the rest of the world. there is no way that can happen, and especially in recent years, where the integration, globally, has been so extraordinary. so, i don't make that distinction. you faceadam chairman, the opposite situation, where you had the central banker of india, who has publicly criticized the fed, saying you are not taking into account the effect that your policies are having on us. chair yellen: well, we do look very carefully and try to minimize adverse spillovers where possible of our policies.

one thing we can do that tends to minimize volatility around policy changes is to communicate as clearly as we can how we are framing policy to attempt to avoid surprises. and we meet regularly with other central bankers to make sure that we are explaining how we are thinking about policy. we do have a domestic mandate. we recognize how important the influences are from the global economy.o the u.s. we recognize that if we impact foreign countries, that will in turn impact us. so, that is a key part of our analysis, but when the u.s. is doing well, when the u.s. is growing, when our job market is good and we are growing in a healthy way, it tends to be a plus for the global economy, and

i think they have experienced it that way. fareed: thanks. >> i study economics at columbia. theuestion would be, andtical clout of the fed the political affiliation of that governors was highlighted in the clinton campaign recently. --question would be, as appointments be more political? ben, do you want to take that? i think you had 30 senators vote against your confirmation, which was the highest ever. janet, you had roughly 30 people vote against you. as the fed become roughly more politicized -- has the fed become roughly more politicized? chairman bernanke: i sit here

next to fed -- two paul volcker -- next to paul volcker. the fed is always trying to do the right thing. the writing is not what everybody always agrees on. i understand why -- the right thing is not what everybody always agrees on. i understand why there is political pressure. obviously, they were very unhappy with the economy a few years ago. i think all the fed can do is try to do the right thing for the economy and hope that a better economy will make people, you know, more open. and also to be asked transparent as possible. i felt one of the important goals -- we talked about communication. is to the purposes explain why you are doing when are doing and hope that people who are paying careful attention will understand and appreciate the decisions you have taken and why you are taking them. a commentolcker:

about congressional reactions. i didn't have any votes against me when i was first appointed. when i was reappointed, i had a perfect situation. 12 right-wing republicans were against me, and 12 left wing democrats were against me, so i figured i was in pretty good terms. [laughter] >> i am a third-year phd student. reserve announcements are usually conditional statements. should the fed be more discreet in its announcements in order to avoid ambiguity that might have caused high volatility events? record -- how is this reconciled? fareed: ben, i have to ask you to answer this, since the man who created the taper can from tantrum is you.

it's trueernanke: that you have to keep things relatively simple. if there are too many conditional parts of your statement, sometimes it can be less well understood. in the case of the taper tantrum, if you go back and see what we said, it was very straightforward. we said what we thought we were going to do, and we ended up doing that. also, the effects on the u.s. economy were pretty much nil. the u.s. economy continued to recover and there were essentially note discernible effects of the bond market volatili -- no discernible effects of the bond market volatility on the u.s. economy. communication is very difficult. it's much harder than the textbooks would suggest, if i may say so. but it is still important to be clear and to communicate. as janet understands as well and

as alan was saying, because we can only make conditional statements, essentially, because we have to respond to what's happening in the economy, there's really no way to avoid that kind of conditionality, or what is called the independence, as you talk about policy -- called data dependence, as you talk about policy. >> i want to follow up on the question about new cash kari -- neil cash kari -- about kashkari's recent statement. how would you handle this? of --o you think fareed: the question is maybe how can this guy, who is a regional fed governor, make a speech that seems to contradict what you are saying?

chair yellen: when congress decided on the structure of the federal reserve, i think they purposely chose a decentralized structure with reserve banks and president of reserve banks who would be able to take independent views. now, on regulation and supervision, the responsibility is invested in the board of governors, where as the presidents do but dissipate in -- monetary policy decisions do participate in our monetary policy decisions. they all participate on topics of interest to them that they think are important, and we have encouraged that in the federal reserve system, that people have different interests and , andrent points of view that diversity of opinion is a positive attribute. we don't want to fall into .roupthink

it is within his purview to look at these issues. >> thank you. i am a university teacher in china and currently a visiting scholar at the columbia teaching school. my question is relating to china. seeing that, in recent years, the chinese renminbi has become more important in mobile commerce -- for example, the new establishment of the asian infrastructure investment bank. it has been invested in by the imf as a currency with a special drawing right. what are your comments on the rising challenges of the rmb to the dominant position of the u.s. dollar?

how do you make changes in the monetary policy to maintain the dominant position of your dollar? fareed: maybe i will ask each of you to very quickly comment. the question is, will china's currency -- is china's currency likely to be, let's say in the next 15 years, the single greatest challenge to the reserve currency status of the dollar -- that the dollar currently holds? alan, you want to start us off? chairman greenspan: well, i think that china has made extraordinary progress and, indeed, it's fairly evident that this stage they are on -- that the yuan is getting close to being a floating currency. gotten yuan has not yet to a point where it is accepted internationally. and the total amount of holdings of you on -- of yuan in

international reserves privately is really very small, so they have a long way to go, and i don't see the yuan as a significant threat to the dollar, as yet. if, obviously, it could be, it changes its overall structure, which is doing -- it is doing very slowly. fareed: paul, do you have any thoughts? chairman volcker: i'm not sure i understand all this business about a threat to the dollar. what are they threatening? the dollar will be an interesting international currency so long as we pay attention to stability at home and we don't follow fareed zakaria's advice of increasing the inflation rate, and all that kind of -- >> [laughter] chairman volcker: china is very big. how many years ahead are you looking? 20 years ahead? it's going to be a lot bigger than the united states.

it's going to be 20 years ahead in economy as well as population if you look that far ahead. if the rmb becomes an international currency, it probably will reflect an opening of the chinese economy, which would probably be good for the world. i don't see why it's going to hurt us? fareed: but there are people who say the united states derives significant privileges from having the dollar as the reserve currency. chairman greenspan: i don't think that's -- chairman bernanke: i don't think that's at all true. there are modest benefits. well.are costs as the chinese have taken this as a very big symbolic issue. the actual economic implications of it being in the special drawing rights basket are not very large, but they have been treating it as a very important symbolic step. to the extent that these symbolic steps motivate china to open their markets and reform their financial markets, increase liquidity, improve regulation and the like, these are only positive things. these are not things we should be worried about. fareed: is this something -- is

there anything you can say? chair yellen: i think my colleagues have covered it. fareed: inscrutable, as is appropriate. this is an absolutely fascinating conversation and a great honor for all of us, for international house, for everyone here, for everyone watching. thank you so much. >> [applause] mark: you have been watching an extraordinary conference at the international house you're in new york. reads a car you -- farid zakaria zakaria, he was the host of this fascinating conversation between janet yellen, ben bernanke, paul volcker, and alan greenspan. an economist at bank of tokyo mitsubishiaseen joining me for the hour. we sat here in a