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
earlier Monday that currency interventions are fueling the risk of a global trade war, singling out the U.S. and China as the chief
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.
edit on 1/10/2011 by wisdomnotemotion because: better remarks