Former U.S. Treasury Secretary Janet Yellen said U.S. President Donald Trump’s administration’s policy of imposing tariffs calls into question the reliability of government bonds as a pillar of the global financial system.
Yellen, who stepped down in January after Trump took office, recalled in an interview with CNBC that from an investor’s perspective last week, the rise in yields on Treasury bonds , which have always been “safe,” meant a decline in demand.
The dollar also fell. Earlier, analysts noted that Treasury bonds were beginning to behave like “risky” assets that investors sell off during turbulent times.
Yellen believes this means that “investors are beginning to shun dollar assets, which calls into question the reliability of U.S. Treasuries, the foundation of the global financial system.”
The former Treasury Secretary also stressed that she believes the current situation is not a destruction of the financial system and a depletion of market liquidity, but rather a loss of confidence in US economic policies.
Yellen, who previously headed the U.S. Federal Reserve System, added that the tariffs created a “particularly complicated” situation because the Fed’s job is to fight inflation, and tariffs will spur inflation.
