As ECB Frets About A Rate Hike, Bernanke Defends Easy Money Policy, Blames China
In yet another very unsurprising event, Ben Bernanke was speaking at the Banque de France Financial Stability Review Launch Event, where per his prepared remarks he once again defended easy money policies so critical at keeping the S&P a few thousand points above fair value over the past two years. Making it once again clear that Bernanke has no clue about how economics works, the Chairsatan was quoted as saying that “The rest of the world has an interest in the U.S. recovery that my policies are spurring.” Of course by pursuing his ZLB/ZIRP policies (see, we can name drop too), the Fed is doing nothing but exporting inflation to those countries least capable of handling it, which tends to lead to such inevitable events as government overthrows and revolutions.
The Fed’s scribe at the WSJ has more:
[Bernanke] said policy makers abroad have plenty of tools to fight inflation and asset bubbles themselves, including allowing their exchange rates to adjust higher to prevent overheating. Mr. Bernanke also said surging growth in developing economies, spurred in part by their own economic policies, were causing trouble for America.
“Spillovers can go both ways,” he said. “Resurgent demand in the emerging markets has contributed significantly to the sharp recent run-up in global commodity prices.”
G-20 leaders last gathered in Korea in early November, just a few days after the Fed announced its plan to purchase $600 billion in Treasury bonds. The bond-buying program is known as quantitative easing and is meant to hold down long-term interest rates, push investors into riskier assets and stimulate growth. Fed officials faced criticism at the Korea meeting, particularly from China and Germany, for stoking inflation and trying to push down the dollar, a reaction that caught Fed officials off guard and miffed Mr. Bernanke.
He said the fast-growing developing economies could use “exchange rate adjustment, monetary and fiscal policies, and macroprudential measures” to cool their own overheating.
The reference to exchange rates seemed directed at China, though Mr. Bernanke didn’t refer to China by name in his comments. Instead, he said countries with large trade imbalances need to “allow their exchange rates to better reflect market fundamentals and increase their efforts to substitute domestic demand for exports.”
Mr. Bernanke’s reference to macroprudential measures referred to efforts to strengthen global financial regulation.
The U.S., meantime, needs to put its own fiscal policy on a more sustainable path, he said, referring to the need to shrink the federal budget deficit.
In other words, in another evident confusion of cause and effect, Bernanke blames inflation on hot money flows in and out of given regions, and completely ignores that said money flows tend to originate at his very own printer, and are conceived by those (read 20 Primary Dealers) who have unfettered access to the Fed’s infinite liquidity (soon that Venn Diagram will be expanded to include everyone, but not before those in the smaller version have used up all existing liquidity to buy all non-dilutable asset limit up for the current monetary regime).