America's Money
Printing is Threat to Global Recovery
"If
U.S. policymakers turn a deaf ear to international criticism over its latest
attempt to stimulate its economy, they risk undermining efforts in other
countries to normalize their own monetary and fiscal policies and achieve a
lasting recovery."
FED Chairman Ben Bernanke: His decision to approve QEII - not the ship but the second massive money printing operation under his watch, has markets on edge.
With oil hitting a two-year
high, gold rallying to an all-time peak, and most global stock and commodities
markets in a sharp upswing, the U.S. Federal Reserve (the FED) has proven its ability
to drive up the world's inflation expectations.
Yet, unfortunately, no one
knows if the FED announcement last Wednesday to purchase $600 billion of
Treasuries has any chance of effectively reviving the sluggish U.S. economy.
Moreover, the second round of quantitative easing, or QE2, has given rise to global
concerns that the move will only increase global economic uncertainty.
Last Friday, Zhou Xiaochuan,
governor of China's central bank, pointed out that the FED's move was "not
likely" to benefit the global economy, because there may be a conflict
between the U.S. dollar's international role and its domestic role.
The FED's move to print more
money may help boost employment and maintain a low inflation rate domestically,
but it will bring a flood of liquidity to the global economy, especially
emerging economies, driving inflation expectations to dangerous levels.
Last week, German Finance
Minister Wolfgang Schaeuble criticized the FED's capital-injection for its
potential to "create extra problems for the world" and cause
"long-term damage."
The German minister noted
that America's huge economic problems shouldn't be tackled with more debt, since
rather than adding more debt, cutting deficits was a priority for all developed
countries.
Posted
by WORLDMEETS.US
Equally worried was Robert
Zoellick, president of the World Bank, who even suggested a modified global
gold standard to steady currency rates.
Admittedly, a return to gold as
an anchor for currency valuations is probably premature, even if gold prices
are more solid than ever. But it is now quite obvious that the international
system cannot afford inaction in the face of America's latest attempt to revive
its economy with the help of its central bank printing presses.
If U.S. policymakers turn a
deaf ear to international criticism over its latest attempt to stimulate its
economy, they risk undermining efforts in other countries to normalize their own
monetary and fiscal policies and achieve a lasting recovery.
Even worse, the phenomenal
inflationary impact that QE2 has already exerted on global markets could be
just the tip of the iceberg. There will undoubtedly be unforeseen consequences to
printing such a large amount of U.S. dollars, the key international reserve
currency widely used in international commodity trading, capital circulation
and financial transactions.
The international community must
make it an issue of serious discussion at the G20 summit in South Korea later
this week. It is necessary to drive home the message that neither one country
or the world as a whole can re-inflate its way out of a crisis as wide and deep
as the one we are all still suffering from.
![[China Daily, People's Republic of China]](http://www.chinadaily.com.cn/opinion/images/attachement/jpg/site1/20101109/00221917e13e0e42d2df01.jpg){kind=link}