Friday, November 5, 2010

World Reacts Negatively to QE2, Brazil and Others Prepared to Retaliate

Reactions due to the U.S.' QE2 from around the world.


"There's no point in throwing U.S. dollars from a helicopter," said Finance Minister Guido Mantega, adding that the stimulus to the economy should be accompanied by a reduction in the deficit of public accounts.

"The monetary loosening creates excess liquidity, flooding countries like Brazil, and we must take action. This creates a problem, "said Central Bank President Henrique Meirelles, in a U.S. university.

Financial Times: The statements of authorities show that Brazil is prepared to retaliate against the U.S..


The United States opted for an "uncontrolled printing" of money, and emerging countries will have to contain the influx of capital, according to Xia Bin, the Chinese Central Bank (Bloomberg). He said further that China will defend its interests in this scenario (Deutsche Welle). The local site state-run People's Daily reports that the U.S. decision "forces China to face a choice."


"I do not think the Americans will solve their problems with that, and I believe they will create extra problems for the world. We'll discuss it critically with our American friends, "said German Finance Minister, Wolfgang Schäuble, according to AFP.

South Korea:

The country will evaluate "aggressively" the adoption of controls on capital flows, said Minister of Finance and Strategy (Deutsche Welle).


"The central bank chief confirmed there were discussions with the central banks of countries in the region who are willing to adopt combined measures, if necessary," said Korn Chatikavanij, finance minister of Thailand (Deutsche Welle).


An Indian official told Reuters on condition of anonymity that the U.S. has the right to stimulate its economy, but other countries have the right to pursue their own interests in disputes related to foreign currencies (Deutsche Welle).

The European Central Bank did not join the wave of criticism. Instead, the bank's chairman, Jean-Claude Trichet, said he did not believe the U.S. is trying to devalue its currency. "I believe it is in U.S. interests to have a strong dollar" ("Les Echos"). Right...

Some economists felt that the Bank of Japan would take measures against the Fed's decision, however, the country chose not to change its basic interest rate (currently between 0% and 0.1% per year, which does not stimulate the inflow of dollars into the country).

Based on compilation by O Estado de Sao Paulo.

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