Detractors--such as Germany, Japan, and China--say that the Fed's plan to lower interest rates by buying $600 billion in government debt, which they view as a deliberate move to devalue the dollar, will flood the world markets with speculative money and make trade imbalances even worse. They would prefer that the U.S. reduce its budget deficit by cutting spending and raising taxes, not by trying to increase GDP growth--and create jobs--by pouring cheap dollars into the global markets.
Several countries had already begun taking measures to relieve upward pressure on their currencies to gain an advantage in trade and boost exports to counteract soft domestic demand. This had ignited a currency war over the past several months, and with QE2, that war could intensify. In the article, Standard & Poor's chief economist David Wyss answers a series of questions about his views on the G20 meeting and what he thinks might happen next.
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Media Contact:
Mimi Barker, New York (1) 212-438-5054, [email protected]
Analyst Contacts:
David Wyss, New York (1) 212-438-4952