Federal Reserve Chair Jerome Powell testified in front of the House Financial Services Committee on Wednesday morning and is set to testify once more on Thursday in front of the Senate Banking Committee. Powell spoke on the Fed's target inflation goal of 2% and why he believes the central bank needs time to review more inflation data before cutting interest rates.
Senator Cynthia Lummis (R-WY), who sits on the Senate Banking Committee, joins Yahoo Finance to discuss what she plans to ask Powell, from quantitative easing to the effect of inflation on individuals. The senator also discusses regulations on bitcoin.
While Lummis is pushing for a regulatory framework for the cryptocurrency, she feels it is becoming a safer investment for consumers: "I do think that bitcoin's going to be fine. The eleven exchange-traded funds that were approved earlier this year, including by some of the longest names in financial services that are very stable, are going to bring people into the bitcoin exchange-traded fund that will finally have a comfort level that that's a place that they can get involved in bitcoin that doesn't make them uncomfortable. The other thing that's going happen with bitcoin is it's going to go through halving in April, which means half as many bitcoins will be produced every ten minutes so the scarcity that's built into the protocol for bitcoin is going to start kicking in its ability to go up in price because we're going to have a more hardened asset."
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JULIE HYMAN: Well, Federal Reserve Chair Jerome Powell testifying in front of the House Financial Services Committee today, kicking off two days of congressional testimony. The word from Powell is that continuing progress on inflation, quote, "is not assured," but the central bank is still expecting to cut rates later this year.
Joining us now. Senator Cynthia Lummis of Wyoming. She serves on the Senate Banking Committee. Powell is going to be in front of that committee tomorrow. Senator Lummis, thank you so much, first of all, for being here. We really appreciate it.
CYNTHIA LUMMIS: My pleasure.
JULIE HYMAN: And so I would start with just I'm curious what you want to know from Jay Powell tomorrow when you get the chance to question him.
CYNTHIA LUMMIS: Well, I'd like to visit with him about a couple of things. One is about quantitative easing. Of course, we've seen that as the Fed has printed more and more money, that it has helped drive up inflation. And now they're saying that they're not ready to reduce rates, because inflation is still an issue.
And I want to know what, in the long term quantitative easing looks like. And if they were to do quantitative tightening, would Wall Street balk? And how do we get back to some sort of equilibrium with regard to how much money we have circulating in our system?
I'd also like to visit with him just about how much individuals are affected by this inflation, because even though the economic indicators that the Fed looks like are different from what happens to the consumer, the everyday consumer is paying way more for gasoline, for groceries, for natural gas, for rent. And so the Federal Reserve can tout all day long that the economy's getting better, we're not going to have a recession, that we'll be able to cut rates at some point. But if the American people don't see that, they continue to lose buying power compared to their paychecks.
So when will the reduction in inflation that the Fed sees hit the everyday consumer? When will it affect grocery prices, gasoline prices, rent, and the things that people buy every day? The everyday consumer is not sharing in what the Fed sees as an improving economy.
JOSH LIPTON: And Senator Lummis, it's great to see you. I want to switch gears here a bit to another topic, Senator. We had SkyBridge founder Anthony Scaramucci on with us this week. And he thinks that Bitcoin would be better off under another Biden term. Take a listen, Senator, to what he had to say.
ANTHONY SCARAMUCCI: Mr. Trump is going to lose this election, Joe Biden will get re-elected. And that will be generally good for the markets, which are at an all-time high, I might point out, during the Biden administration. But it'll also be very good for bitcoiners, because you may not like the regulation coming out, but at least there's a predictable process to the law.
JOSH LIPTON: And Senator, you heard Mr. Scaramucci there, a bitcoin bull if there ever was one. What do you make of his comments there?
CYNTHIA LUMMIS: Well, I disagree with them that there is a understood regulatory framework. Right now, there's not. What I hear from the industry is the lack of a regulatory framework means that they are regulated by enforcement actions that include penalties.
I think that the industry would rather have Congress legislate on this, so they have a clear regulatory framework going forward. And that only comes through legislation. It doesn't come through enforcement action. Now I do think that Bitcoin is going to be fine. The 11 exchange traded funds that were approved earlier this year, including by some of the longest names in financial services that are very stable, are going to bring people into the bitcoin exchange traded fund that will finally have a comfort level, that that's a place that they can get involved in bitcoin that doesn't make them uncomfortable.
Then the other thing that's going to happen with bitcoin is it's going to go through a halving in April, which means half as many bitcoin will be produced every 10 minutes. So the scarcity that's built into the protocol for bitcoin is going to start kicking in its ability to go up in price, because we're going to have a more hardened asset. The more people that are in bitcoin, the more hard, meaning secure, that asset gets.
And it's just going to drive up the price. So I disagree with Mr. Scaramucci that we really have a well-understood regulatory framework. That's why Senator Kyrsten Gillibrand and I continue to push for the Lummis-Gillibrand Financial Innovation Act.
JULIE HYMAN: What do you think is sort of the most urgent thing that needs to be enacted in terms of that crypto regulation? I mean, you're talking about Bitcoin, Ether, which are the more established coins, if you will. I mean, but at the same time that we've seen this recent crypto rally, you see stuff like Dogwifhat, I believe is what it's called, is one of the other altcoins that's seeing a rally here. Do you think that there needs to be more guardrails around some of those altcoins?
CYNTHIA LUMMIS: Absolutely. There are thousands of altcoins. And they are alt, meaning they are alternatives that don't have a clear regulatory framework. A number of them are securities. They're not commodities like Bitcoin is. So if you know something is a commodity, like Bitcoin, it would be regulated by the Commodity Futures Training Commission.
But some of those that have the incidence of a security should be regulated by the SEC. And we don't have that regulatory framework to clarify which is which. So some of these altcoins, for people who think maybe Bitcoin is synonymous with cryptocurrency, and it's not. The only thing that you can clearly put your money in right now and know that it's a good store of value and a solid means of exchange going forward is Bitcoin. A lot of these other altcoins are highly speculative. And so we need consumer protection here. And we don't have it.
JOSH LIPTON: Senator, I want to get you out here on this. I'm just curious, Senator, do you-- do you think we might see a spot Ethereum ETF this year? I mean, let's be honest, it took a lawsuit for to get Chairman Gensler to approve a spot Bitcoin ETF. Do you think we might see a spot Ethereum ETF?
CYNTHIA LUMMIS: You know, I don't know. I think it was so much more logical to do a Bitcoin ETF FIRST because the fundamentals of Bitcoin and their protocol are so well understood. They're so secure that the Bitcoin ETF made sense to me.
With regard to Ethereum, it might take a little more time to make sure that it has some of the same clear fundamental safety measures for in terms of consumer protection that Bitcoin has. So what that might take a longer investigatory effort by the SEC. And I don't know if that could be accomplished before the end of the year.
JOSH LIPTON: Senator, thank you so much for joining the show today. We appreciate your time and your insight.
CYNTHIA LUMMIS: Yes, my pleasure. Nice to see you.