The Sydney Morning Herald

Global anger mounts at ‘clueless’ Fed actions
The Sydney Morning Herald

Global anger at a fresh round of liquidity injections into the US economy swelled on Friday as Germany called the move « clueless » and emerging nations protested that it will wreak havoc on them.

Chinese Vice-Foreign Minister Cui Tiankai, who is China’s chief G20 negotiator, told a news briefing that he was also worried at the prospect of a flood of money pouring into global markets in search of higher yields. « They owe us some explanation, » Cui said. « I’ve seen much concern about the impact of this policy on financial stability in other countries. »

A « common theme » is emerging that « excess liquidity in the US is creating problems in other countries, » Brazil’s Central Bank Governor Henrique Meirelles told reporters in Chicago. Policymakers from the world’s new economic powerhouses in Latin America and Asia have said they would consider fresh steps to curb capital inflows after the Fed’s move.

Resentment abroad stems from worry that Fed pump-priming will hasten the US dollar’s slide and cause their currencies to shoot up in value, setting the stage for asset bubbles and making a future burst of inflation more likely.

« With all due respect, US policy is clueless, » German Finance Minister Wolfgang Schaeuble told a conference. « (The problem) is not a shortage of liquidity. It’s not that the Americans haven’t pumped enough liquidity into the market, and now to say let’s pump more into the market is not going to solve their problems. »