Tuesday, November 9, 2010

Global Backlash Grows

There are more articles coming out today which are describing an increasing backlash against the U.S. decision to pump billions of dollars into the U.S. economy. Apparently the world-wide ramifications of the new U.S. monetary policies are causing great concern.

Fed Global Backlash Grows

Global controversy mounted over the Federal Reserve's decision to pump billions of dollars into the U.S. economy, with President Barack Obama defending the move as China, Russia and the euro zone added to a chorus of criticism.

Germany, which relies heavily on exports, has lectured Washington about its economic policies, which Berlin sees as profligate and damaging. Germany's criticism echoes that from other countries, including Brazil and Japan, which have complained about potential spillover from the Fed's action.

On Monday, China's Vice Finance Minister Zhu Guangyao said the U.S. isn't living up to its responsibility as an issuer of a global reserve currency. The Fed's move doesn't "take into account the effect of this excessive liquidity on emerging-market economies," he said.

The top economic aide to Russian President Dmitry Medvedev said Russia will insist at the G-20 summit that the Fed consult with other countries ahead of major policy decisions.

Luxembourg Prime Minister Jean-Claude Juncker, who is chairman of the euro-zone finance ministers, also weighed in on the Fed move, saying: "I don't think it's a good decision. You're fighting debt with more debt."

Underpinning the debate is a growing sense that the international currency system, which has been based on floating exchange rates for most players for more than 30 years, is wearing out.

That last comment certainly grabbed my attention. "...a growing sense that the international currency system...is wearing out".
We're moving towards a central currency, and these most recent commentaries leading to the upcoming G20 meeting serve to confirm this.

Fed move is indirect currency manipulation: Report

The comments in this article are more ominous:

The US Federal Reserve's decision to pour more money into the economy is a form of indirect currency manipulation that could spark a global collapse, a Chinese state-run newspaper said on Monday.

The Fed last week announced it would spend another 600 billion dollars buying government bonds to kickstart the US recovery, in a radical policy approach known as "quantitative easing".

The move follows a similar cash injection into the struggling US economy worth about 1.5 trillion dollars during the crisis.

"If a trade war is set off, the global economy will face not only a crisis, but very likely a collapse, because it will unavoidably trigger a wave of global trade protectionism and in the end everyone's interests will be harmed."

All of this leads to more speculation as to what is really going on here.

This "manipulation" of the dollar seems highly risky and it most definitely seems to have many other nations very concerned. Perhaps this particular article contains some degree of hyperbole, but seeing phrases such as "global collapse", "trade war", "global economy crisis" and "everyone's interests will be harmed", causes one to pause and reflect.

Somehow, this looks like part of an overall plan. Is this happening in order to pave the way towards a non-dollar reserve currency? Perhaps a plan into a central currency?

I'm not an economist, but the statements made by these representatives from other nations are concerning to say the least.

We'll have to watch this and see where it goes, but it seems that there will be long-term consequences from the actions of the Fed's continual process of printing money and in turn, "manipulating" the currency.

No comments: