Ben Bernanke refuted the critics of Federal Reserves’s bond buying program and published a lightly hidden attack on China’s scheme of undervaluing its currency.
Fed chairman Bernanke said that a better US economy was in the best interest of global recovery, saying he wasn’t debasing the dollar.
He addressed a press conference in Frankfurt where he described his recent policies to the media. He is currently under fire in many countries, which accuse him of bringing down the dollar to gain on exports.
Critics said the policy would trigger inflation and disturb fuel prices, with the German finance minister calling it “clueless”.
Fed officials are trying to convince the public and the government with Bernanke addressing senators in closed session.
Bernanke cited the inflexible currencies as the main reason behind the unbalanced global growth. But he confessed that the US needed to save more, adding that currency imbalances are generated by the combined behavior of many countries, not just a single currency.
Bernanke said that structural adjustments were needed on both sides, because it would be very difficult for exchange rates to balance by themselves.
IMF managing director said that everyone needed to do more. Bernanke told that the weakening of dollar was due to the economic slowdown.
Citibank analysts also criticized the action saying it looked odd that the bank was weakening its currency as a policy to generate sales. Emerging nations are worried that the decline in dollar’s value could hurt their growth.
But Bernanke held those countries as responsible for their woes saying the trade surpluses and currency undervaluation were the root causes.
Bernanke, although not naming China, criticized the country saying that its currency was inflexible and was hindering the global economy and it could end up destroying it.
Michael Feroli, an economist with JPMorgan Chase in New York, said that the chairman Bernanke’s forceful words were for domestic as well as international critics.
He said that the undervalued currencies will be resolved in coming days and that the economic slowdown in US was partly because of Asian countries.
Ben Bernanke said the slow growth rate, inflation and unemployment was unacceptable and steps were taken to prevent such things in the future.
He said that a new program was necessary for the Fed to implement its new policies.
But the cooperation of the republican senators, who have criticized the Fed before, is still questionable.
