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Why the G20 nations are against the Fed’s efforts to boost the economy

Marketplace Staff Nov 8, 2010
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Why the G20 nations are against the Fed’s efforts to boost the economy

Marketplace Staff Nov 8, 2010
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TEXT OF INTERVIEW

JEREMY HOBSON: Now to global reaction to the Fed’s efforts to boost the economy. As we told you last week the Central Bank is going to buy up $600 billion worth of treasury bonds in order to bring down long term interest rates. Well, as President Obama tours Asia, world leaders are expressing their objections to the Fed’s move.

For more we turn to Julia Coronado, economist at BNP Paribas. She joins us now live. Good morning.

JULIA CORONADO: Good morning.

HOBSON: So, Julia why are these other countries so angry that the Fed is pumping more money into the system? Isn’t this supposed to help the global economy grow?

CORONADO: Well, it certainly is aimed at doing that. But when the Fed adds stimulus to the economy, it weakens the dollar which of course means the currencies of these other nations are appreciating. And given that a lot of them depend on exports for growth, they don’t take that very well.

HOBSON: A lot of people have been talking about whether we’re in a currency war, with all these countries wanting to push their currencies so low to boost exports and get themselves out of the recession. Do you think we are in a war?

CORONADO: I think maybe “war” is too strong a word. But we’re definitely in a currency skirmish. Basically you’ve got global leaders meeting at the G20s later this week, and they’re trying to think about what is the right framework for managing currencies in a world where you don’t have one country being the dominant driver of growth. The U.S. doesn’t have that position any more and we sort of need to rethink exchange rates regimes and so everybody’s positioning in front of that.

HOBSON: Julia Coronado, economist with BNP Paribas, thanks so much.

CORONADO: It’s my pleasure.

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