The plan of the U.S. Federal Reserve to promote purchases of bonds presents "considerable" risk by increasing capital flows to emerging markets, Nobel Prize-winning economist Joseph Stiglitz said today in Santiago.
"All this liquidity is going to create is not going to re-grow the American economy is going to Asia and other emerging markets, where it is not wanted," said Stiglitz. "Most countries around the world have begun to react. They put on capital controls, interventions in the exchange rate, taxes on these capital flows -. A variety of interventions"
The Fed will buy an additional $ 600 billion of Treasuries through June in a program called quantitative easing two or Queen Elizabeth 2. The program is designed to boost U.S. economic growth, the Fed chairman, Ben S. Bernanke said in an opinion article in the November 3 Washington Post.
The banks invest the money delivered to the Federal Reserve program in the emerging markets of Asia and other economies which have recovered faster than the U.S. and Europe last year's recession, Stiglitz said at an economic seminar in the Chilean capital organized by the Banco de Credito e Inversiones.
The increase in capital flows could cause emerging market currencies to appreciate and could lead to asset bubbles, said.
The net private capital flows to emerging market economies will increase by 42 percent to $ 825 million in 2010 compared with $ 581,000,000,000 in 2009, according to a report in October at the Institute of International Finance, a trade group that represents more than 400 financial institutions.
Regional Response
Brazil in October raised the IOF tax denominated in foreign purchases of debt to 6 percent - three times the level a year ago - to help depreciate the real, which has gained 1.5 percent against the dollar U.S. So far this year.
Finance Minister Guido Mantega, as recently as yesterday, said Brazil is open to take additional measures if necessary.
Countries such as Chile, have chosen not to apply capital controls or intervene in currency markets could suffer an unwanted increase in capital flows, said Stiglitz.
Chile's peso has appreciated 6.6 percent against U.S. dollar in 2010, the seventh best performance among the 26 emerging market currencies tracked by us. The last country to intervene in the market for pesos in 2008, when the central bank bought $ 5,750,000,000 in pre-announced daily auctions of $ 50 million.
The South American country will have to consider intervention in the market weight again and could take into account the implementation of capital control measures, Stiglitz told reporters after his speech.
"Unintentionally, QE2 is leading to a fragmentation of the global financial markets, as each country takes steps to protect themselves," he said during the seminar. "As more and more so, pressure is increasingly those who do not, and finally forced to take some action."
0 comments:
Post a Comment