It is never good when another country called its financial policy disoriented. It is particularly bad if that other country is one of the major world economies, and also happens to be right.
"With all due respect, disoriented United States is policy," said recently, the Minister of finance German Wolfgang Schaeuble referring to the Federal Reserve's decision to pull $ 600 million in our stagnant economy.(1)
The Fed can create so much money as you like, but the US economy is currently unable to productively to put that money to work.Through the establishment of near-zero interest rates, the Fed has established that money in this country has no real.Le value we give to the banks to nothing, and banks lend to the Treasury of the United States torn deficit for almost nothing. The result is a benefit granted to banks, but no incentive to provide money for creative entrepreneurs or expanding enterprises.
Intervention of the Federal Reserve $ 600 million will be more efficient this stupidity for the Court to the intermediarios.No there will be no need for banks buy Treasury values for the next eight months.Plans of the Federal Reserve to buy, by itself, almost as much debt as Treasury plans to sell at that session. Banks will be just sit there useless, not be has able to attract deposits with rates near zero (negative rates for many depositors,) when considering the rates and willing to risk to make loans to companies in a weak economy while regulators are concerned about the financial soundness of banks.
The idea behind banking is capitalized, strong institutions that can attract a reasonable interest rate deposits and still make a profit by lending money to superior, yet reasonable rates to borrowers solventes.Es depositor a great sistema.Deberíamos to prove it.
Instead, let's flood in developing nations that offer the best potential returns of investment, with cheap dollars. The South African Finance Minister Pravin Gordhan warned that "developing countries including South Africa, are the worst part of the decision to open its doors flood without due consideration of the consequences of other Nations."(2) These consequences include asset bubbles, inflation and the painful currency turns.
Governor of Brazil Central Bank, Henrique Meirelles, told reporters that "excess liquidity in the United States is already creating problems in other countries."Brazil currency, the real has increased 39 percent compared to the dollar since the beginning of 2009, interfering with the country's export market.
The Group of 20 Summit in South Korea this week gave President Obama chance to defend United States policy, but is not an easy single defender.El policy really convincing argument that he could offer is that by 2012 this country could choose more responsible officials and get itself back on track. It is no wonder that the message was not the President wanted entregar.En instead, planned to concentrate on drums support to move bad policy: current account surplus and deficits at 4 per cent of gross domestic product of capping.
This proposal, first Treasury Secretary Timothy Geithner, last month has allowed the Chinese themselves cast as players wise and responsible while brazenly manipulating its currency in order to keep it attached to the exterior the Cui Tiankai Unidos.China States dollar Vice Minister said at a news briefing "course, hope to see more balanced current accounts."But we believe that it would not be a good approach to bring this matter and to focus all over it."The artificial creation of a numerical target cannot but remind us of the days of planned economies".
The proposal to close the imbalances account simply underscores the fact that the United States not has able to bring you buy abroad in any kind of reasonable relationship for what it is able to sell in the extranjero.En place of actually working to achieve this balance through the internal policy, we want to impose the financial discipline that we lack in the rest of the world.
United States is the hub of the global economy.We buy more stuff than anyone else, we do more things than anyone else and produce currency that everyone else is used as a direct or indirect reference.If the United States is unable to adopt responsible financial policies, the rest of the world will have to break ties or the risk of being torn down as recipients of the American economy.
The world is losing confidence in our common sense financial. only this week, Dagong China credit-rating agency cut its rating on the AA US government debt to +.If Obama cannot resolve problems of this country in forums such as the G-20 Summit, foreigners will have little choice but do what you can to mitigate the impact that might have our mismanagement in their countries.
The first thing that other countries will have to do to isolate themselves from economic policy U.S. failing is to stop lending money to a country that thinks you can shake prosperity by creating gobs of money in cash of the nada.Como mature bonuses, we will be unable to refinance them through the issuance of new paper to foreign buyers.
The Fed has sworn not to "monetize" debt through the purchase of bonds that cash can only be sold in other places, but will have to do exactly that to avoid predeterminado.El dollar are likely zambullen.Es that soar commodity prices and inflation in the United States.Other countries will begin to demand that we pay for their products using currencies which still have valor.Todavía will be able to get oil from the Middle East and Italian leather shoes, but only when we can scrape together the EUR, yuan or Swiss francs which the market will require payment.
The end result will be much worse than just live a recession. and this future recession, the Government may not request borrow money to provide benefits of prolonged unemployment or other relief programmes.
Schaeuble was exactly right when he called the American financial policy "clueless".the fact that the rest of the world is beginning to see this is, in fact, a track of what is ahead for América.Aquí is another clue: It won't be pretty.
Sources:
Yahoo News: Global Anger Swells in the Fed actions
BBC News: Bernanke fed defends his new economic recovery plan
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