CEPD chief blasts US Fed for selfish quantitative easing

The China Post news staff

TAIPEI, Taiwan — It’s quite irresponsible for the U.S. Federal Reserve to continually implement quantitative easing (QE) regardless of the great consequential pressure on the appreciation of Asian currencies and on the inflation of commodity prices, Christina Liu, chairwoman of the Cabinet-level Council for Economic Planning and Development (CEPD) said yesterday.

Liu made the remarks at the Economic Committee meeting of the Legislative Yuan when asked by lawmakers to comment on the recent statement by Ben Bernanke, chairman of the U.S. Federal Reserve, saying that the Fed is likely to implement a further round of quantitative easing (QE3) to increase supply of money to increase the excess reserves of the banking system plagued by the global financial crisis.

In the statement, Bernanke noted that when the Fed considers quantitative easing, it can only consider whether the policy is in the interest of the U.S. and cannot consider whether the policy will affect other countries. Liu criticized Bernanke as being “really out of line.”

“I feel it’s an irresponsible practice for the Fed to launch quantitative easing without considering the impact on other countries, given the fact that the greenback still serves as the reserve money of the world,” she stated. “Such a practice is like the U.S. dumping gasoline into other countries, and then setting a fire on it, and then saying ‘it’s none of my business,’” Liu continued.

If the Fed exercises QE3, the resulting massive amount of hot money would flow into other countries, especially those in Asia, thus triggering the appreciation of Asian currencies and inflationary pressure on their commodity prices. To counter, Liu said, the central banks in Asia should join hands to take common capital control measures to prevent regional currencies from appreciating sharply, instead of allowing market mechanisms to determine the fluctuations of the currencies. The CEPD chief continued that Japan is more likely to lead the joint capital control action than mainland China in this regard. She told lawmakers that if the Fed’s QE3 policy is put into practice, the New Taiwan dollar will be unable to go against the trend of appreciation, lest local commodity prices suffer great inflationary pressure. Liu said the government is well prepared for countering a massive inflow of international hot money. “After hot money enters Taiwan, it will find proper outlets. What counts most now is for the government to prevent such money from speculating in the currency market. In this regard, both the Central Bank and the Ministry of Finance have readied a set of countermeasures against speculative money, and they are studying new methods to curb the influx of hot money,” she added. Basically, Liu continued, Asian countries usually don’t welcome international hot money, and Taiwan’s measures designed to counter such money have been widely recognized as correct during international forums discussing practices adopted by Asian countries to cope with hot money.