China SAFE Official Warns Fed Monetary Policies Are Creating Inflationary Bubbles, Stimulate Global

January 10 2011

China SAFE Official Warns Fed Monetary Policies Are Creating Inflationary Bubbles, Stimulate Global FX Intervention

Liu Wei, a director with China's State Administration of Foreign Exchange, the foreign exchange reserve manager responsible for administering $2.6 trillion in FX reserves, told Caing.com today that "Quantitative easing carried out by the U.S. Federal Reserve could exacerbate global currency interventions, hurt the developed countries and fuel flows of speculative capital into emerging market economies."

Additionally, and contrary to all those who believe that commodity prices have in some cases tripled over the past year based purely on goodwill and not excess money, Wei also said that the Fed's quantitative easing program may have some stimulus impact on the U.S. in the short term, but also that it could add to global inflation pressure and fuel asset bubbles "so that the global economic recovery and growth face greater uncertainty." Pretty much as we have been claiming all along.

Marketnews has more:

The easing could hurt the European economies and other those of other developed countries and add to speculative inflows into the emerging markets.

It could "increase the pressure on currency appreciation in emerging market countries, and increase already-high inflationary pressure.

He said that quantitative easing could "strengthen dollar depreciation expectations in the rest of the world and could force other countries to intervene against currency appreciation, even by depreciating their currencies."

Brazilian Finance Minister Guido Mantega said in an interview published earlier Monday that currency interventions are fueling the risk of a global trade war, singling out the U.S. and China as the chief perpetrators.

Liu also said that China will use a full array of monetary policy tools to counter inflows of speculative "hot money," including the exchange rate, interest rates and the commercial bank deposit reserve requirement.

So basically same old: the Fed pretends its actions are creating jobs (which are part-time at best), while in reality they are creating ever greater inflationary air pockets in places like China, and China is happy to admit that Fed policies are wrong, but does little to actually pop said bubbles except for cosmetic fine-tuning here and there, as it attempts to redirect inflation back to the US, where the final bubble will end up being the worst before popping and making 2007-8 seem like one small dress rehearsal.

Apparently, China is now feeling the inflation heat. I foresee it will either dump some U.S treasuries/bonds or appreciate its Yuan.

Mainstream media channels are bashing hard on Eurozone debt issue. As if entire world has forgotten U.S. current $14.01 Trillions debt and its intention to raise debt ceiling again.

Anybody that take the time to follow the economy have to know that our economic crash was a bubble, neither our government or the fed has done anything to fix the problem, the same bubble that crashed the economy two years ago is still alive and been fed, the differences is that tax payer money was used without shame at the expenses of the working class to keep the wealthiest in the nation from losing that wealth.

That is a concept that many can no grasp, the markets are an illusion the fed is a leech and we the tax payer are nothing than slaves.

China knows this and so many other nations that are linked to US economic illusion.

The only thing that keep US from total collapse is that our money is backed by the oil that we produce and is has been like that since the 70s, because gold is not longer used.

Originally posted by wisdomnotemotion
Apparently, China is now feeling the inflation heat. I foresee it will either dump some U.S treasuries/bonds or appreciate its Yuan.

Mainstream media channels are bashing hard on Eurozone debt issue. As if entire world has forgotten U.S. current $14.01 Trillions debt and its intention to raise debt ceiling again.

edit on 1/10/2011 by wisdomnotemotion because: typo

Bring on the Chinese..

Good to see someone with a head on their shoulders instead of hands in their pockets.

He said that quantitative easing could "strengthen dollar depreciation expectations in the rest of the world and could force other countries to intervene against currency appreciation, even by depreciating their currencies."

Only for those countries tied to USD for oil

I think the Chinese are right.

We're the only nation that can print global currency (USD). The Fed printing money causes inflation (except for goods that are subsidized) for the US. The side effect of the Fed printing money logically is global inflation.