Surprise! Rest of World Not Happy With Fed Pumping $600 Billion Into US Economy

Think you're unhappy with the decline of the US dollar? Imagine being another country we owe money to.

There was a time when parsing monetary policy was for nerds. No more.

Last week's move by the Federal Reserve to pump $600 billion dollars into the U.S. economy has provoked worry (and anger) from Berlin to Brasilia and beyond — just as U.S. President Barack Obama and other world leaders meet in Seoul for the G20 summit.

In brief remarks ahead of their meeting Thursday in Seoul, Obama and China's President Hu Jintao made no mention of the currency dispute between the two countries, or of the controversial QE2 decision.

Questions remain. Will the "Night of the Living Fed's" quantitative easing provoke a global currency war? Will it lead to the collapse of the dollar? Will it strangle Chinese and German exports? Or will it work to shore up the U.S. economy, still the world's largest and most important economic force?

QE2 | Global Economy | Federal Reserve

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US Headed for an Inflationary Death Spiral?

The Fed continues to devalue the dollar, with the likelihood that hyperinflation will result getting more likely every day. Hope you'll like you $1000 cup of coffee next year!

It seems the Fed has given up on the idea that the country can build a viable and stable economy through the conventional means. Instead, our central bank has resorted to once again growing GDP and increasing employment by the creation of asset bubbles. This is a dangerous game that no one, least of all the Fed, knows how to play.

We learned this past Wednesday that the FOMC decided to increase its purchases of longer-dated Treasuries by $600 billion within the next eight months. That means the Fed is on course to fund about 75% of our annual deficit! Such figures are the stock in trade of banana republics. While most of the rest of the world is fighting inflation and strengthening their currencies, we are doing everything in our power to end the dollar’s status as the world’s reserve.

Canada, China, India, Brazil, and Australia have all recently taken steps to raise interest rates and/or curtail bank lending. Compare that to the US, which has left interest rates at near-zero for almost two years. While other central bankers are tamping down expansionary rhetoric, Fed Chairman Bernanke is on record saying that he will do everything in his power to push up inflation (which he considers too low) and dilute the dollar. Foreign central banks and other investors may soon reconsider their plans to park cash in dollar-denominated assets. In fact, there has been a series of angry statements from top economic policymakers in Beijing, Berlin, Moscow, and Sao Paolo that show rising discontent with Washington.

An Inflationary Death Spiral - Michael Pento - Pento's Page - Forbes


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Wall Street Journal - The Fed: Dump the Dollar, Save the Economy

Yeah, but what if they dump BOTH the dollar and the economy? What then geniuses?

The Federal Reserve is launching a renewed effort to shore up the U.S. economy, but in the process, the value of the dollar could be a casualty.

While most individual investors in the U.S. pay little attention to the ups and downs of the world's currencies, moves in this $4-trillion-per-day market both reflect and shape trends in stocks, bonds and commodities. Should a weaker dollar be in the cards, that could help key U.S. stock-market sectors, such as technology, lift commodity prices such as gold and oil, and provide a profit tailwind for U.S. investors who put money overseas, especially in emerging markets. But a weaker dollar, taken in the context of the Fed's efforts to stimulate the economy, could ultimately push inflation higher -- a bad outcome for investors now flocking to bonds.

"There are massive ramifications everywhere you look," says James Swanson, chief investment strategist at MFS Investment Management.

The Fed: Dump the Dollar, Save the Economy - WSJ.com

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