Saturday, 28 March 2015

Yellen Just Inadvertently Admitted the US$ Is No Longer Money

Yesterday, Fed chairwoman Janet Yellen made a statement with far-reaching consequences way beyond what she probably recognises. During the Q&A following a speech she claimed that "cash is not a very convenient store of value", which
directly implies that the US dollar is not "money"! 
How come? For the simple reason that one key feature of "money" is its ability to function as a store of value. To function as a store of value, money need to at least maintain its purchasing power over time. And Yellen, the supposed "guardian" of the US dollar, just admitted the dollar lacks this very feature. A statement which of course is absolutely correct, thanks to the massive monetary expansion since the Fed was established more than 100 years ago.